Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractFocussing on the prime example of CO 2 emissions, we discuss several important theoretical and econometric problems that arise when studying environmental Kuznets curves (EKCs).The dominant theoretical approach is given by integrated assessment modelling, which consists of economic models that are combined with environmental impactmodels. We critically evaluate the aggregation, model dynamics and calibration aspects and their implications for the validity of the results. We then turn to a discussion of several important econometric problems that go almost unnoticed in the literature. The most fundamental problems relate to nonlinear transformations of nonstationary regressors and, in a nonstationary panel context, to neglected cross-sectional dependence. We discuss the implications of these two major and some minor problems that arise in the econometric analysis of Kuznets curves. Our discussion shows that EKC modelling as performed to date is subject to major drawbacks at both the theoretical and the econometric level. KeywordsCarbon Kuznets curve, integrated assessment models, regressions with integrated variables, nonstationary panels JEL Classification Q20, C12, C13 CommentsWe gratefully appreciate the helpful comments of two anonymous reviewers and the editor, which have led to substantial improvements of the paper. Furthermore, the comments of Gregor Bäurle, Robert Kunst, Klaus Neusser, and Reto Tanner are gratefully acknowledged. We thank Benito Müller for providing the data used in this study and for discussions on the topic. The usual disclaimer applies.

Economic analyses of the greenhouse effect are typically carried out within the framework of computable general equilibrium models which represent the climate system by simple two box proxies based upon the pioneering work of Nordhaus. Since errors in predicting the carbon budget can imply high costs, there is some need to include more sophisticated climate models into the economics of global climate change. This paper presents a non-linear pulse representation of the process-based and data-validated Bern carbon model. Compared to the Nordhaus approach this leads to different results with respect to optimal climate policy and atmospheric carbon dioxide concentration. In particular, our results suggest that economic studies which use a Nordhaus representation of the climate system are biased towards high carbon emission and low abatement levels.

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