Estimating the environmental Kuznets curve for Spain by considering fuel oil prices (1874–2011)

Abstract

We perform a structural analysis on an environmental Kuznets curve (EKC) for Spain by exploiting long time series (1874–2011) and by using real oil prices as an indicator of variations in fuel energy consumption. This empirical strategy allows us to both, capture the effect of the most pollutant energy on carbon dioxide (CO2) emissions and, at the same time, preclude potential endogeneity problems derived from the direct inclusion of fuel consumption in econometric specification. Knowing the extent to which oil prices affect CO2 emissions has a straightforward application for environmental policy. The dynamics estimates of the long and short-term relationships among CO2, economic growth and oil prices are built through an autoregressive distributed lag (ARDL) model. Our test results support the EKC hypothesis. Moreover, real oil prices are clearly revealed as a valuable indicator of pollutant energy consumption.