The Environmental Kuznets Curve and CO2 Emissions Under Policy Uncertainty in G7 Countries

This study examines the Environmental Kuznets Curve (EKC) relationship between per capita CO2 emissions and GDP per capita in G7 countries in the presence of uncertainty using 1960–2022 panel data. Our results confirm the existence of an EKC relationship for CO2 emissions in G7 countries. Furthermore, we find evidence that uncertainty may contribute to lower carbon emissions, as higher uncertainty is associated with lower levels of investment and capital accumulation, with negative implications for long-term growth, although favorable effects on emissions may result. This tradeoff suggests that while investment is critical for economic growth, it is also imperative that growth is environmentally sustainable and inclusive. Finally, this study estimates an income turning point of $47,843.73 in 2023 prices to decouple the CO2 emissions from GDP per capita; this level of income is an attainable level of GDP per capita for all but two G7 countries.