Environmental Kuznet’s curve for India: Evidence from tests for cointegration with unknown structuralbreaks

This study revisits the cointegrating relationship between carbon emission, energy use, economic activity and trade openness for India using threshold cointegration tests with a view to testing the environmental Kuznet’s curve hypothesis in the presence of possible regime shift in long run relationship of the variables for the period 1971 to 2008. The article confirms the existence of ‘regime-shift’ or ‘threshold’ cointegration among the variables and environmental Kuznet’s curve for India. It challenges previous empirical works for India which fail to establish cointegrating relationship among these variables and explains its logical and econometric reasons. The study finds that the carbon emission is highly elastic with respect to real per capita income and energy use in India. This finding is critical and warns successful design and execution of energy and environmental policy framework which would pave the low carbon sustainable growth path inIndia.

► Cointegration between carbon emission, energy use, economic activity and trade openness examined.
► ARDL bounds tests reject cointegrartion.
► Threshold cointegration with two structural breaks confirms cointegration.
► Study also confirms existence of environmental Kuznet’s curve forIndia.