Convergence in OPEC Carbon Dioxide Emissions: Evidence from New Panel Stationarity Tests with Factors and Breaks

Abstract Convergence in per capita emissions occurs when countries with higher initial levels of per capita emissions experience lower emission growth than countries with lower initial levels of per capita emissions. The recent literature adopts the notion of stochastic convergence, which implies that per capita emissions tend to converge to a stationary level over time. The empirical literature on emissions convergence has yielded mixed results. We present new panel stationarity tests that account for cross-correlations and structural breaks. These new tests are more general than previous tests for stochastic convergence. Using annual data for 13 OPEC countries and 18 non-OPEC oil-producing countries from 1960 to 2016, we find less evidence of stochastic convergence than previous studies. The absence of convergence in per capita emissions across countries could hinder the acceptance of climate agreements based on the allocation of per capita emissions obligations. Policy actions to address emissions growth are also discussed.