The effect of Rio Convention and other structural breaks on long-run economic development-CO2 relationships

Abstract This paper assesses the effect of the 1992 United Nations Rio Convention on Environment and Development and other unknown structural time breaks on the long-run carbon dioxide—economic development relationship for different groups of advanced countries. By taking into account the possible size distortion of standard unit roots tests and allowing nonlinearities in the trend function, we provide evidence suggesting that the time-series are nonlinear trend stationary. From this result, we then develop our analysis without moving to cointegration or first-differencing, and using an interrupted time-series approach, we identify three patterns in the dynamics of carbon dioxide: one is market-led, one is market- and policy-led, and one is more development-oriented.