Research  Articles

This study presents a comprehensive analysis and comparison of material and energy efficiency performances and their rebound effects, providing insights into their implications for sustainability and climate change policies. Using Stochastic Frontier Analysis (SFA), we examine material and energy efficiency scores and rebound effects in the European Union (EU) member countries and their major trading partners from 1995 to 2019. Our findings reveal several key insights. Firstly, developed EU countries and affluent trading partners exhibit higher material and energy efficiency scores, while less developed members and partners rank lower. The study highlights the potential implications of the EU's Carbon Border Adjustment Mechanism (CBAM) for low-efficiency trading partners, which may face substantial penalties and be incentivized to take significant steps to enhance material and energy efficiency. Secondly, a positive correlation is observed between efficiency improvements and rebound effects, suggesting that policymakers should take the rebound issue seriously. Thirdly, while energy efficiency scores are relatively higher, material efficiency performances are lower and improving over the years. Finally, the rebound effects of energy efficiency exceed those of material efficiency, implying that energy reduction potentials are largely offset. Therefore, prioritizing material consumption for environmental sustainability becomes crucial due to the significant potential for improvement with lower rebound effects.

This study argues that improvements in material productivity might pave the way for a substantial reduction in emissions when adopted alongside energy productivity policies. We, therefore, compare the convergence pattern of material productivity with that of energy productivity from the mitigation perspective. To this end, we apply (un)conditional beta, stochastic and club convergence tests to energy and material productivity data for the EU28 countries. From the methodological perspective, (i) we employ both cross-section and panel data estimators to test (un)conditional beta-convergence; (ii) to test stochastic convergence, we use the newly-developed transformed Lagrange Multiplier (LM) and Residual Augmented Least Squares LM (RALSLM) unit root tests allowing for structural breaks in data; (iii) for club convergence analysis, we use the log-t test and endogenous data-driven algorithm proposed by Phillips and Sul (PS) (2007). While the estimated parameters find conditional beta-convergence in energy productivity, they do not produce convincing evidence for material productivity. The unit root test results show the existence of stochastic convergence in both variables. The club convergence results reveal that there are six and five clubs for energy and material productivity, respectively. This means that although multiple equilibria exist for both variables of interest, material productivity seems to display a more homogeneous structure compared to energy productivity. According to our findings, we conclude that material productivity seems to have a greater potential for further reductions in emissions once policies are directly targeted for efficient use of material, which can enable the EU to achieve to become carbon-neutral by 2050.

This study investigates the main driving forces behind material use of the EU in the case of heterogeneity between member states with paying special attention to the comparison of domestic material consumption (DMC) with material footprint (MF). To this end, we first classify countries into several clubs based on time-varying behavior of two material use indicators and analyse the degree of heterogeneity between the EU countries. Secondly, we identify main driving forces behind DMC and MF changes using the logarithmic mean Divisia index (LMDI) decomposition analysis and explore the specific characteristics of material use for each club. The empirical results suggest that (i) the EU member states do not converge to a unique steady state level and there are multiple equilibria for both indicators. However, the number of clubs for per capita DMC is greater than per capita MF; (ii) the increase in material use due to the income effect is the largest, followed by the population effect. While the structural effect has an inhibiting effect for both DMC and MF, the material intensity effect differs depending on the indicator used; (iii) the magnitude of effects significantly varies between clubs. Our findings indicate the requirement of consumption-based climate mitigation tools. In this regard, carbon border adjustment and/or consumption charges on material use could be effective market-based instruments.

Materials are of great importance as they are fundamentally integrated into many different critical topics, including green transition, technological progress, industrial emissions, and supply chains. Therefore, the amount of materials we demand and employ in the production process or how efficiently we use them become highly crucial. In this paper, we study the emerging role of materials with a special focus on the key role of material efficiency (ME) in climate mitigation. To this end, we empirically investigate the main determinant of material demand and evaluate the ME performance in the European Union (EU) countries over the period of 1995–2019 based on a four-component Stochastic Frontier Analysis (SFA) panel data approach that separates unobserved country effects from persistent and transient inefficiency. We obtain the following outcomes. First, material demand function estimates reveal that economic growth and energy consumption are the main drivers of domestic material consumption, highlighting the need for promoting sustainable energy and economic growth. Second, although the SFA-based ME scores significantly vary across countries, transient inefficiency is the main source of overall inefficiency for most countries, suggesting that there is considerable potential for improvement in ME. While Finland, Sweden, Denmark, Bulgaria, Cyprus, France, and Slovenia improve their ME performance over time, the ME score of some other countries, such as Ireland, Portugal, Italy, Spain, and the Slovak Republic reveal an opposite outcome. Third, the results show that material intensity is not always a good proxy for ME.

The Environmental Kuznets Curve (EKC) hypothesis has become a widely used framework for the investigation of the income-environment nexus. However, the literature in this field is biased toward the reliance on production-based carbon dioxide (CO2) emissions (PBE) as a proxy for environmental degradation. This production perspective ignores the carbon emissions embedded in trade, which are estimated to make up approximately a quarter of total global emissions. Therefore, the carbon leakage issue makes consumption-based CO2 emissions (CBE) accounting vital for better understanding the relationship between income and carbon emissions. In this study, we comparatively investigate the EKC pattern based on both PBE and CBE for a sample of 85 countries over the period between 1990 and 2020. In doing so, we investigate whether different emission accounting methods have an impact on the EKC pattern and examine how this impact differs depending on whether the countries are net importers or exporters of emissions embedded in trade. To this end, we first endogenously classify countries based on the club convergence approach proposed by Phillips & Sul and obtain country groups such as those that are net exporters or importers of CO2 emissions. Using the system generalized method of moments (SGMM) estimator, we test the validity of the EKC hypothesis in the second step and identify the main driving forces behind the changes in PBE and CBE for each convergent club by controlling the effect of trade and urbanization. Therefore, for the first time, we compare the EKC hypothesis based on both PBE and CBE for a large sample of countries that are endogenously divided into different groups, and investigate the potential impact of alternative emission accounting approaches and the status of being net exporters or importers of CO2 emissions on the EKC pattern. The findings support the different patterns for PBE and CBE: while the EKC hypothesis is supported for both PBE and CBE for countries that are net importers of emissions, neither PBE nor CBE show an inverted U-shaped relationship with income for countries that are net exporters of emissions. These results strongly support the need for coordination in policies to reduce CO2 emissions between importers and exporters of hydrocarbons and energy-intensive goods.

Many studies in the literature examine the income inequality-environment nexus at the country level. In this paper, we argue that the impact of inequality on sectoral emissions might vary and should be examined by considering sectoral-level differences. We focus on 28 OECD economies and use DOLSMG, BA-OLS, and CUP-FM estimators. Our findings reveal that a cointegration relationship exists among the series in the long run, indicating that both income and income inequality are crucial factors in sectoral emissions. The estimates show that a 1% increase in the Gini index leads to an increase in emissions from the power and building sectors by about 1.4%. On the other hand, a 1% rise in the Gini index positively contributes to the environment in the transport, other industrial combustion, and other sectors by about 0.05%, 0.05%, and 0.02%, respectively. Policies aimed at reducing carbon emissions should be designed at the sectoral level.

This study investigates the nexus between CO2 emissions and ICTs for a large sample of countries. We cover 93 countries over the period 1995–2016 and use three different variables as a proxy for ICTs, i.e., individuals using the internet, fixed telephone subscriptions, and mobile cellular subscriptions. From the methodological viewpoint, we first classify countries using an endogenous data-driven algorithm based on the transitional behavior of CO2 emissions and obtain country groups with low, middle, and high per capita CO2 emissions. After checking the long-run cointegration between CO2 emissions and its determinants in the second step, we thirdly estimate the parameters using three different mean group estimators by controlling the effect of globalization on the environment. The results confirm the presence of cointegration among the variables. Besides, information technology has a statistically significant and positive impact on CO2 emissions. However, this effect does not depend on the per capita CO2 emissions level of countries. The impact of globalization on CO2 emissions is statistically significant and negative in countries with high and middle per capita emissions. While income per capita is one of the most important determinants of CO2 emissions for all country clubs, the estimated coefficients of the population are found to be statistically insignificant. Based on these empirical findings, further policy implications for ICTs, CO2 emissions, globalization, and economic growth are discussed.

The share of emissions from materials has dramatically increased over the last decades and is projected to rise in the coming years. Therefore, understanding the environmental effect of materials becomes highly crucial, especially from the climate mitigation perspective. However, its effect on emissions is often overlooked and more attention is heavily paid to the energy-related policies. In this study, to address this shortcoming, we investigate the role of materials on the decoupling of carbon-dioxide emissions (CO2) from economic growth and compare it with the role of energy use in the world's top-19 emitting countries for the 1990–2019 period. Methodologically, using the logarithmic mean divisia index (LMDI) approach, we first decompose CO2 emissions into four effects based on the two different model specifications (materials and energy models). We secondly determine the impact decoupling status and efforts of countries with two different approaches: Tapio-based decoupling elasticity (TAPIO) and decoupling effort index (DEI). Our LMDI and TAPIO results show that material and energy-related efficiency effects have an inhibitory factor. However, the carbon intensity of materials has not contributed to CO2 emissions reduction and impact decoupling as much as the carbon intensity of energy has. DEI results indicate that while developed countries make relatively good progress towards decoupling, particularly after the Paris Agreement, developing countries need to further improve their mitigation efforts. Designing and implementing some policies only centering energy/material intensity or carbon intensity of energy might not be sufficient to achieve the decoupling. Both energy- and material-related strategies should be considered in harmony.

This study investigates the existence of convergence in public-expenditures and its nine different sub-categories to reveal regional disparities in Turkey. To this end, we employ a club convergence analysis proposed by Phillips and Sul (in Econometrica 75(6):1771–1855, 2007) for 81 provinces of Turkey over the period between 2004 and 2018. The findings show that (i) except for social and environmental protection expenditures, total public expenditures and its seven sub-categories have multiple equilibria; (ii) there are major disparities across regions, especially between the eastern and western regions; (iii) spendings on education, health, and economic affairs expenditures might pose serious challenges for long-term development; (iv) expenditures on defense and economic affairs are the most important components of multiple equilibria found in total public expenditures. The existence of club convergence and the distribution of provinces across clubs propose some important policies which might help policymakers to reduce regional disparities amongst provinces.

The purpose of this study is to examine whether the elasticity of substitution (ES) varies between developed and developing countries. The author derives the growth regressions from the Solow model under the constant elasticity of substitution production function by using the first-order Taylor series expansion and estimate them for each country group classified based on time-varying behavior of income per worker using the data-driven algorithm. The ES is not unitary and varies among country groups. Developed countries generally have a higher ES than developing countries. For the first time, the author uses the first-order Taylor series expansion to linearize the steady-state value of income per worker, as the author considers this approach to be relatively more straight-forward and tractable. Furthermore, the author estimates the equations using both cross-section and panel data techniques and employs the data-driven algorithm proposed by Phillips and Sul (2007) to classify countries.

This study argues that improving material efficiency should be seriously considered as a mitigation policy objective alongside energy efficiency in order to meet the net-zero carbon targets and climate mitigation policies should be designed at the industry level based on the industry-specific needs and peculiarities. Therefore, by highlighting the emerging role of material use in greenhouse gas emission mitigation, this paper aims to investigate the degree of substitution between inputs for South Korea at the industry level, with a particular focus on substitution/complementarity possibilities between energy and materials. To this end, we make use of the Asia KLEMS database covering a wide range of industries and estimate translog cost share equations using Zellner’s seemingly unrelated regression to compute price elasticities. We consider two models derived from translog cost function, i.e. the static and dynamic. The empirical results provide important insights about how industry-specific material demand reduction policies could help to reduce emissions and improve resource efficiency when integrated with energy efficiency.

A growing number of studies empirically investigate the nexus between CO2 emissions and technological progress in the existing literature. However, these studies largely ignore sectoral-level differences. We argue that as the contribution of different sectors to carbon emissions are not equal, the environmental impact of technological progress might vary across sectors. The main purpose of this paper is to fill this research gap for the transport sector. To this end, we specifically focus on the EU15 countries over the period between 1977 and 2015. In order to empirically analyze this link, we use the Mean Group, Common Correlated Effects Mean Group, and the Augmented Mean Group estimators. Unlike the earlier country-level empirical studies, our findings reveal that environmental technologies have a statistically insignificant positive effect on CO2 emissions from the transport sector. Moreover, while economic growth and energy consumption lead to more pollution, the effect of urbanization on emissions is not statistically significant. It is recommended that the policymakers of EU15 countries should pay special attention to the transport sector for becoming a carbon-neutral economy by 2050.

This paper investigates income convergence using different convergence concepts and methodologies for 72 countries over the period between 1960 and 2010. This study applies beta (β), sigma, stochastic and club convergence approaches. For β-convergence analysis, it derives the cross-country growth regressions of the Solow growth model under the basic and augmented Cobb–Douglass (CD) production functions and estimates them using cross-section and panel data estimators. While it employs both the widely used coefficient of variation and recently developed weak s-convergence approaches for s-convergence, it applies three different unit root tests for stochastic convergence. To test club convergence, it estimates the log-t regression. The results reveal that (1) there exists conditional β-convergence, meaning that poorer countries grow faster than richer countries; (2) income per worker is not (weakly) sigma-converging, and cross-sectional variation does not tend to fall over the years; (3) stochastic convergence is not found and (4) countries in the sample do not converge to the unique equilibrium, and there exist five distinctive convergence clubs. The results clearly show that heavily relying on one of the convergence techniques might lead researchers to obtain misleading results regarding the existence of convergence. Therefore, to draw reliable inferences, the results should be checked using different convergence concepts and methodologies.  Contrary to the previous literature, which is generally restricted to testing the existence of absolute and conditional β-convergence between countries, to the best of the author’s knowledge, this is the first study to consider and compare all originally and recently developed fundamental concepts of convergence altogether. Besides, it uses the Penn World Table (PWT) 9.1 and extends the period to 2010. From this point of view, this study is believed to provide the most up-to-date empirical evidence.

Recent studies investigating convergence in energy consumption at the sectoral level within a country suggest that aggregate energy consumption could mask considerable differential impacts that might be observed at the sectoral level. This study aims to contribute and complement the existing convergence literature with an attempt to analyze sectoral convergence in energy consumption from the developing country perspective. To this end, we choose Turkey as a developing country and employ both the conventional unit root tests and the residual augmented least squares-Lagrange multiplier (RALS-LM) methodology to investigate stochastic conditional convergence in per capita energy consumption at the sectoral level. Our findings suggest some interesting outcomes that could be relevant from the sectoral energy consumption perspectives for developing countries. While energy consumption in Turkey shows a trending upward, the leading sectors of industry and transport energy consumption per capita diverge from the mean consumption and, therefore, lead to further increases in energy consumption and energy-related emissions. Moreover, agriculture and the other sector, whose consumption per capita values are below the mean, converge towards the mean. Overall, Turkish sectoral energy consumption trends follow developing countries’ patterns, and the empirical findings suggest that this trend is worrying from the sustainability perspective.

This paper investigates the elasticity of substitution between four inputs—capital, labor, energy, and material—with the translog cost approach for a wide range of industries in Germany by incorporating the slow adjustment process in factor substitution. To this end, we take advantage of EU KLEMS database covering a wide range of industries and consider two models. The first is the static model, in which instantaneous and complete substitution adjustments are assumed. The other model, referred to as dynamic, takes into account the slow adjustment process and applies this to the cost share equations which are estimated using Zellner’s seemingly unrelated regression. The empirical results suggest that (i) the dynamic models have greater explanatory power than the static models; (ii) the production process at the national or industry level in Germany is mainly characterized by a complementarity or weak substitutability between energy and other inputs, which limits German government’s ability to reduce energy use through factor substitution; (iii) among four factor prices, energy demand seems to be more sensitive to changes in the price of material, followed by labor. Hence, an increase in energy prices can be efficient to some extent in order to reduce energy use; (iv) there is a substantial industry heterogeneity in Germany in terms of both input substitution and its adjustment process. Therefore, strategies to mitigate CO2 emissions through input substitution channel should be designed at the industry level based on the industry-specific needs and peculiarities. It is because well-designed comprehensive policies that consider different structures of industries could help to achieve a carbon-neutral economy for Germany.

Much of the existing research analyses on emissions and climate policy are dominantly based on emissions data provided by production-based accounting (PBA) system. However, PBA provides an incomplete picture of driving forces behind these emission changes and impact of global trade on emissions, simply by neglecting the environmental impacts of consumption. To remedy this problem, several studies propose to consider national emissions calculated by consumption-based accounting (CBA) systems in greenhouse gas (GHG) assessments for progress and comparisons among the countries. In this article, we question the relevance of PBA’s dominance. To this end, we, firstly, try to assess and compare PBA with CBA adopted in greenhouse gas emissions accounting systems in climate change debates on several issues and to discuss the policy implications of the choice of approach. Secondly, we investigate the convergence patterns in production-based and consumption-based emissions in 35 Annex B countries for the period between 1990 and 2015. This study, for the first time, puts all these arguments together and discusses possible outcomes of convergence analysis by employing both the production- and consumption-based CO2 per capita emissions data. The empirical results found some important conclusions which challenge most of the existing CO2 convergence studies.

Book Chapters

Income inequality and environmental degradation are two growing threats that received significant attention from the international community at the onset of the twenty-first century. While growing concerns about income inequality have become dominant in science, policy, and society since the 1980s, environmental deterioration has been significantly accelerating since the 1950s in most countries worldwide. In this regard, the question of whether these two crises are linked becomes highly important from the environmental policy perspective as the balance of power between the poor and the rich determines the level of environmental degradation. However, despite many different theoretical and empirical studies, a clear consensus regarding the relationship between these two challenges has not yet been reached. The main objective of this chapter is to review and discuss the theoretical and empirical explanations linking income inequality and environmental deterioration by addressing some key issues. To this end, we seek to answer the following questions: how does the distribution of income affect the environment? Does environmental quality have an impact on income inequality? How should environmental policies be designed to tackle both of these challenges?

As many countries set out net-zero emission targets after the Glasgow Climate Meeting (COP26), green energy transition become more viable. However, such an ambitious energy transition will require an enormous amount of some materials that are scarce on earth and available only in specific countries. Therefore, Critical Raw Materials (CRMs) have emerged as one of the most highlighted topics in academic research and environmental policy decision-making over the last decade. As countries continue to demand more of such critical materials for further economic development, this topic is expected to play a key role across the globe in the next decades not only in climate change mitigation or green transition issues, but also in many areas from supply chain management to modern technological progress. In this regard, it is now considered that this multifaceted topic significantly affects the current material demand trends, and therefore might create some risks to be addressed and require prioritizing some environmental policies. This chapter seeks to understand the crucial role of CRMs in the clean energy transition. For that purpose, we first review and discuss the role of the CRMs in energy transition and the main risks and challenges associated with CRMs, i.e. supply, technological and environmental risks that could affect the transition to clean energy and circular economy. In the second step, we evaluate the key policy instruments that could be employed to address these risks with a special focus on material efficiency strategies.

Short Articles

This paper investigates the regional disparity of financial inclusion (FI) and its determinants in Turkey from 2004 to 2020. To this end, we first construct an FI index using the principal component analysis. Then, based on the club convergence approach, we test the existence of convergence to show regional disparities in FI. Finally, we examine the main determinants of provincial disparity using ordered logit models. The convergence results strongly reject the full-panel convergence, 15 indicating a regional disparity in FI. Furthermore, our analyses reveal that financial inclusion positively correlates with population, income, and income inequality, while unemployment hinders inclusion. Overall, our results imply that policies focusing on digital financial services, increasing financial literacy, and reducing unemployment should significantly diminish regional disparities and improve FI.

Replication Articles

Strazicich and List (Are CO2 Emission Levels Converging among Industrial Countries? Environmental and Resource Economics 2003; 24: 263–271) examine whether CO2 emissions converge among the twenty-one industrial countries from 1960 to 1997. This study replicates their main results and performs a similar analysis on a more recent dataset and a new econometric method. Their findings are confirmed to a large extent.

Book Reviews

Liberty has two important components: the state and society. It is, however, neither granted by just the state nor just the society. It rather emerges and flourishes only when both of them coexist and balance each other out. In The Narrow Corridor: States, Societies, and the Fate of Liberty, Acemoglu and Robinson discuss this state-society relationship and its importance to achieving liberty. To this end, they provide a comprehensive framework to address the questions of where liberty comes from, why only some societies are able to achieve liberty, while others are not, and what the possible outcomes of liberty are especially in terms of prosperity. The main argument of the authors is that both state and society should be strong and run together as the evolution of the state-society relationship over time is directly connected to the emergence of liberty, and an imbalance between them is detrimental to it. A strong state is required to resolve conflicts by enforcing laws, guarantee the rights of its citizens, and provide public services. A strong and vigilant society, in turn, acts collectively, participates in politics, and con-trols the state to promote liberty. For that purpose, they build a new theory about liberty and support their ideas by providing examples from world history, including China in the 1950s, the Nazi regime in Germany, recent conflicts in the Middle East, state-building efforts of Athenians and Americans, and experiences of many Latin American countries.