Analysing the ecological footprint in EU-5 countries under a scenario of carbon neutrality: Evidence from newly developed sharp and smooth structural breaks in unit root testing

Abstract

This paper examines the resistance to shocks (economic, political, outbreaks etc.) of the ecological footprint in EU-5 countries over the period 1961-2016. The aim of the study is to determine whether the ecological footprint tends to return to the average with advanced econometric analysis. Efforts to move towards carbon neutrality, which increased after the Paris Agreement, are important for the countries in our analysis. To achieve our aim, we primarily used traditional and one-break unit root tests, followed by the novel SOR unit root test, which considers both sharp and smooth breaks to achieve robust results. The econometric findings show that EF and its six components (i.e., carbon, cropland, grazing land, forest, built-up land and fishing grounds) all contain unit root except the built-up land footprint for Spain and the grazing land and forest footprint for the United Kingdom. Our study provides policymakers with important information for implementing policies to reduce environmental pollution and achieve the target of carbon neutrality.

Keywords: Carbon neutrality; EU-5 countries; Ecological footprint; Sharp and smooth breaks; Stationary.