Energy use–GDP deterministic cointegration: progress towards EU-15 Kyoto targets

Abstract

This article examines whether the energy consumption–GDP relationship is in long-term equilibrium for EU-15 countries. Unlike many previous works, we apply a nonlinear unit root test introduced by Kapetanios et al. (2003a) and extended by Chong et al. (2008) that identifies not only deterministic cointegration, but also the stronger concept of stochastic cointegration. The results yield a clear pattern: Austria, Denmark, Italy, the Netherlands, Portugal and Spain must achieve greater emissions reductions between 2009 and 2012 to reach their respective Kyoto targets.