Do economic downturns affect air pollution? Evidence from the global financial crisis

Abstract

This paper investigates the impact of the 2008 global financial crisis on CO2 emissions within the Environmental Kuznets Curve hypothesis framework. Using a sample of 68 countries for the period 1960 to 2014, we unveil novel findings according to which the crisis had permanent effects on CO2 emissions. These effects vary by countries' income level. Our findings reveal that the 2008 crisis decreased the turning point for high-income countries and increased the turning points for middle- and low-income countries. Furthermore, we find that the magnitudes in the shifts of the turning points depend on the severity of the crisis. Our results are robust to the inclusion of trade and financial development as additional explanatory variables and to the choice of the crisis inflection year. 2021 Informa UK Limited, trading as Taylor & Francis Group.