CO2 Emissions, Financial Development, Trade, and Income in North America: A Spatial Panel Data Approach

The current study attempts to explore the determinants of CO2 emissions per capita considering spatial effects for a panel of 21 North American countries. The results corroborate the existence of spatial dependence in per capita carbon dioxide emissions and its determinants. Adverse environmental spillover effects are found for all hypothesized determinants while per capita income showed a positive impact. Furthermore, the existence of environmental Kuznets curve hypothesis is proven with a turning point of 15,665 constant U.S. dollar per capita income, and 6 of the 21 investigated countries are found at the second stage of an inverted U-shaped relationship. An inverted U-shaped relationship between trade openness and carbon dioxide emissions per capita has also been found. Financial market development (foreign direct investment) seems to have monotonic positive (negative) effects.