Skip to main content

The environmental Kuznets curve after 25 years

Journal of Bioeconomics volume 19, pages 7–28 (2017)Cite this article

Abstract

The environmental Kuznets curve (EKC) has been the dominant approach among economists to modeling aggregate pollution emissions and ambient concentrations over the last quarter century. Despite this, the EKC was criticized almost from the start and decomposition approaches have been more popular in other disciplines working on global climate change. More recently, convergence approaches to modeling emissions have become popular. This paper reviews the history of the EKC and alternative approaches. Applying an approach that synthesizes the EKC and convergence approaches, I show that convergence is important for explaining both pollution emissions and concentrations. On the other hand, economic growth has a strong positive effect on carbon dioxide, sulfur dioxide, and industrial greenhouse gas (GHG) emissions, but weaker effects on non-industrial GHG emissions and concentrations of particulates. Negative time effects are important for sulfur and industrial and non-industrial GHG emissions. Even for particulate concentrations, economic growth only reduces pollution at very high income levels. Future research should focus on developing and testing alternative theoretical models and investigating the non-growth drivers of pollution reduction.

This is a preview of subscription content, access via your institution.

Access options

Buy single article

Instant access to the full article PDF.

USD 39.95

Price includes VAT (USA)
Tax calculation will be finalised during checkout.

Fig. 1
Fig. 2

Notes

  1. As discussed below, this does not actually seem to be an important factor in explaining reductions in emissions intensities in developed countries.

  2. Under additive preferences \(\phi =1/\eta \). Under non-homotheticity a more complex expression determines whether there is an EKC or not. Homotheticity implies that the ratio of the marginal utility of consumption and the marginal utility of environmental quality is a function of the ratio of consumption and environmental quality alone.

  3. This conflicts with actual evidence on policies in developing countries (Dasgupta et al. 2002; Stern and Jotzo 2010; Zhao et al. 2013).

  4. This is despite the findings of Sala-i-Martin et al. (2004) and Rockey and Temple (2016) that initial GDP should be included in a growth regression. In the sample of 136 countries used by Anjum et al. (2014) and discussed in Sect. 4, below, the R\(^{2}\) for a regression of the growth rate of GDP per capita from 1971 to 2010 on log GDP per capita in 1971 has an R\(^{2}\) of 0.0025.

  5. As the cross-sectional dimension of a panel increases relative to its time series dimension, the regression coefficient estimators become increasingly “classical” and the spurious regression problem diminishes. However, most EKC studies do not have a sufficiently large cross-sectional dimension to allow researchers to ignore cointegration (Entorf 1997).

  6. By negative time effect, I mean that emissions fall over time, ceteris paribus.

  7. Sanchez and Stern (2016) use the mean of log GDP per capita over the period rather than initial GDP per capita and initial emissions intensity rather than initial emissions.

  8. This is, of course, also a test that the growth rate of emissions (or concentrations) intensity declines with rising income per capita or the declining CEIG hypothesis (Stefanski 2013; Chen 2016).

  9. For details of the data sources and coefficient estimates for the controls, please see the original papers. Other variables can be considered and some of these were tested such as regional dummies, which are emphasized by Rockey and Temple (2016) in the growth regression context. We did not find that the latter had systematically significant effects.

References

  • Aldy, J. E. (2005). An environmental Kuznets curve analysis of U.S. state-level carbon dioxide emissions. Journal of Environment and Development, 14, 48–72.

    Article  Google Scholar 

  • Aldy, J. E. (2006). Per capita carbon dioxide emissions: Convergence or divergence? Environmental and Resource Economics, 33(4), 533–555.

    Article  Google Scholar 

  • Anjum, Z., Burke, P. J., Gerlagh, R., & Stern, D. I. (2014). Modeling the emissions-income relationship using long-run growth rates. CCEP Working Papers, 1403.

  • Antweiler, W., Copeland, B. R., & Taylor, M. S. (2001). Is free trade good for the environment? American Economic Review, 91, 877–908.

    Article  Google Scholar 

  • Arrow, K., Bolin, B., Costanza, R., Dasgupta, P., Folke, C., Holling, C. S., Jansson, B-O., Levin, S., Mäler, K.-G., Perrings, C., & Pimentel, D. (1995). Economic growth, carrying capacity, and the environment. Science, 268, 520–521.

  • Azomahou, T., Laisney, F., & Van Nguyen, P. (2006). Economic development and \({\rm CO}_{2}\) emissions: A nonparametric panel approach. Journal of Public Economics, 90(6–7), 1347–1363.

    Article  Google Scholar 

  • Beckerman, W. (1992). Economic growth and the environment: Whose growth? Whose environment? World Development, 20, 481–496.

    Article  Google Scholar 

  • Blanco, G., Gerlagh, R., Suh, S., Barrett, J., de Coninck, H., Diaz Morejon, C. F., Mathur, R., Nakicenovic, N., Ahenkorah, A. O., Pan, J., Pathak, H., Rice, J., Richels, R., Smith, S. J., Stern, D. I., Toth, F. L., & Zhou, P. (2014). Drivers, trends and mitigation. In Edenhofer, O., R. Pichs-Madruga, Y. Sokona, E. Farahani, S. Kadner, K. Seyboth, A. Adler, I. Baum, S. Brunner, P. Eickemeier, B. Kriemann, J. Savolainen, S. Schlömer, C. von Stechow, T. Zwickel, & J. C. Minx (Eds.), Climate change 2014: Mitigation of climate change. contribution of Working Group III to the fifth assessment report of the intergovernmental panel on climate change. Cambridge UK: Cambridge University Press.

  • Boden, T. A., Marland, G., & Andres, R. J., (2013). Global, regional, and national fossil-fuel \(CO_{2}\) Emissions. Oak Ridge, TN: Carbon Dioxide Information Analysis Center, Oak Ridge National Laboratory, U.S. Department of Energy.

  • Brock, W. A., & Taylor, M. S. (2010). The green Solow model. Journal of Economic Growth, 15, 127–153.

    Article  Google Scholar 

  • Burke, P. J., Shahiduzzaman, M., & Stern, D. I. (2015). Carbon dioxide emissions in the short run: The rate and sources of economic growth matter. Global Environmental Change, 33, 109–121.

    Article  Google Scholar 

  • Carson, R. T. (2010). The environmental Kuznets curve: Seeking empirical regularity and theoretical structure. Review of Environmental Economics and Policy, 4(1), 3–23.

    Article  Google Scholar 

  • Carson, R. T., Jeon, Y., & McCubbin, D. R. (1997). The relationship between air pollution and emissions: U.S. data. Environment and Development Economics, 2, 433–450.

  • Chen, W.-J. (2016). Is the Green Solow Model valid for \({\rm CO}_{2}\) emissions in the European Union? Environmental and Resource Economics. doi:10.1007/s10640-015-9975-0.

  • Chow, G. C., & Li, J. (2014). Environmental Kuznets curve: Conclusive econometric evidence for \({\rm CO}_{2}\). Pacific Economic Review, 19(1), 1–7.

    Article  Google Scholar 

  • Clarke, L., Jiang, K., Akimoto, K., Babiker, M., Blanford, G., Fisher-Vanden, K., Hourcade, J.-C., Krey, V., Kriegler, E., Löschel, A., McCollum, D., Paltsev, S., Rose, S., Shukla, P. R., Tavoni, M., van der Zwaan, B. C. C., & van Vuuren, D. P. (2014). Assessing Transformation Pathways. In Edenhofer, O., R. Pichs-Madruga, Y. Sokona, E. Farahani, S. Kadner, K. Seyboth, A. Adler, I. Baum, S. Brunner, P. Eickemeier, B. Kriemann, J. Savolainen, S. Schlömer, C. von Stechow, T. Zwickel, & J. C. Minx (Eds.), Climate change 2014: Mitigation of climate change. contribution of Working Group III to the fifth assessment report of the intergovernmental panel on climate change. Cambridge, UK: Cambridge University Press.

  • Cole, M. (2004). Trade, the pollution haven hypothesis and environmental Kuznets Curve: Examining the linkages. Ecological Economics, 48, 71–81.

    Article  Google Scholar 

  • Copeland, B. R., & Taylor, M. S. (2004). Trade, growth, and the environment. Journal of Economic Literature, 42, 7–71.

    Article  Google Scholar 

  • Daly, H. E. (1993). The perils of free trade. Scientific American, 269, 50–57.

    Article  Google Scholar 

  • Dasgupta, S., Laplante, B., Wang, H., & Wheeler, D. (2002). Confronting the environmental Kuznets curve. Journal of Economic Perspectives, 16, 147–168.

    Article  Google Scholar 

  • Dobes, L., Jotzo, F., & Stern, D. I. (2014). The economics of global climate change: A historical literature review. Review of Economics, 65, 281–320.

    Article  Google Scholar 

  • Durlauf, S. N., Johnson, P. A., & Temple, J. R. W. (2005). Growth econometrics. In P. Aghion & S. N. Durlauf (Eds.), Handbook of economic growth (Vol. 1A, pp. 555–677). Amsterdam: North Holland.

    Google Scholar 

  • Ehrlich, P. R., & Holdren, J. P. (1971). Impact of population growth. Science, 171(3977), 1212–1217.

    Article  Google Scholar 

  • Entorf, H. (1997). Random walks with drifts: Nonsense regression and spurious fixed-effect estimation. Journal of Econometrics, 80(2), 287–296.

    Article  Google Scholar 

  • Evans, P. (1996). Using cross-country variances to evaluate growth theories. Journal of Economic Dynamics and Control, 20(6–7), 1027–1049.

    Article  Google Scholar 

  • Evans, P., & Karras, G. (1996). Convergence revisited. Journal of Monetary Economics, 37(2), 249–265.

    Article  Google Scholar 

  • Ezcurra, R. (2007). Is there cross-country convergence in carbon dioxide emissions? Energy Policy, 35, 1363–1372.

    Article  Google Scholar 

  • Feenstra, R. C., Inklaar, R., & Timmer, M. P. (2015). The next generation of the Penn World Table. American Economic Review, 105(10), 3150–3182.

    Article  Google Scholar 

  • Figueroa, E., & Pasten, R. (2015). Beyond additive preferences: Economic behavior and the income pollution path. Resource and Energy Economics, 41, 91–102.

    Article  Google Scholar 

  • Frank, R. H., Jennings, S., & Bernanke, B. S. (2012). Principles of microeconomics. North Ryde: McGraw-Hill.

    Google Scholar 

  • Fredriksson, P. G., & Wollscheid, J. R. (2015). Legal origins and climate change policies in former colonies. Environmental and Resource Economics, 62, 309–327.

    Article  Google Scholar 

  • Friedman, M. (1992). Do old fallacies ever die? Journal of Economic Literature, 30(4), 2129–2132.

    Google Scholar 

  • Grossman, G. M. & Krueger, A. B. (1991). Environmental impacts of a North American Free Trade Agreement. NBER Working Papers, 3914.

  • Harbaugh, W., Levinson, A., & Wilson, D. (2002). Re-examining the empirical evidence for an environmental Kuznets curve. Review of Economics and Statistics, 84(3), 541–551.

    Article  Google Scholar 

  • Herrerias, M. J. (2013). The environmental convergence hypothesis: Carbon dioxide emissions according to the source of energy. Energy Policy, 61, 1140–1150.

    Article  Google Scholar 

  • Hilton, F. G. H., & Levinson, A. M. (1998). Factoring the environmental Kuznets curve: Evidence from automotive lead emissions. Journal of Environmental Economics and Management, 35, 126–141.

    Article  Google Scholar 

  • Holtz-Eakin, D., & Selden, T. M. (1995). Stoking the fires? \({\rm CO}_{2}\) emissions and economic growth. Journal of Public Economics, 57(1), 85–101.

    Article  Google Scholar 

  • Jones, L. E., & Manuelli, R. E. (2001). Endogenous policy choice: The case of pollution and growth. Review of Economic Dynamics, 4, 369–405.

    Article  Google Scholar 

  • Kaika, D., & Zervas, E. (2013). The environmental Kuznets curve (EKC) theory. Part B: Critical issues. Energy Policy, 62, 1403–1411.

    Article  Google Scholar 

  • Kander, A., Jiborn, M., Moran, D. D., & Wiedmann, T. O. (2015). National greenhouse-gas accounting for effective climate policy on international trade. Nature Climate Change, 5, 431–435.

    Article  Google Scholar 

  • Kijima, M., Nishide, K., & Ohyama, A. (2010). Economic models for the environmental Kuznets curve: A survey. Journal of Economic Dynamics and Control, 34, 1187–1201.

    Article  Google Scholar 

  • Lefohn, A. S., Husar, J. D., & Husar, R. B. (1999). Estimating historical anthropogenic global sulfur emission patterns for the period 1850–1990. Atmospheric Environment, 33, 3435–3444.

    Article  Google Scholar 

  • Levinson, A. (2010). Offshoring pollution: Is the United States increasingly importing polluting goods? Review of Environmental Economics and Policy, 4(1), 63–83.

    Article  Google Scholar 

  • Lopez, R. E., & Yoon, S. W. (2014). Pollution-income dynamics. Economics Letters, 124(3), 504–507.

    Article  Google Scholar 

  • McPherson, M. A., & Nieswiadomy, M. L. (2005). Environmental Kuznets curve: Threatened species and spatial effects. Ecological Economics, 55(3), 395–407.

    Article  Google Scholar 

  • Norman, C. S. (2009). Rule of law and the resource curse: Abundance versus intensity. Environmental and Resource Economics, 43, 183–207.

    Article  Google Scholar 

  • Ordás Criado, C., Valente, S., & Stengos, T. (2011). Growth and pollution convergence: Theory and evidence. Journal of Environmental Economics and Management, 62, 199–214.

    Article  Google Scholar 

  • Panayotou, T. (1993). Empirical tests and policy analysis of environmental degradation at different stages of economic development. Working Paper, Technology and Employment Programme, International Labour Office, Geneva, WP238.

  • Panayotou, T. (1997). Demystifying the environmental Kuznets curve: Turning a black box into a policy tool. Environment and Development Economics, 2, 465–484.

    Article  Google Scholar 

  • Pasten, R., & Figueroa, E. (2012). The environmental Kuznets curve: A survey of the theoretical literature. International Review of Environmental and Resource Economics, 6, 195–224.

    Article  Google Scholar 

  • Perman, R., & Stern, D. I. (2003). Evidence from panel unit root and cointegration tests that the environmental Kuznets curve does not exist. Australian Journal of Agricultural and Resource Economics, 47, 325–347.

    Article  Google Scholar 

  • Peters, G. P., & Hertwich, E. G. (2008). \({\rm CO}_{2}\) embodied in international trade with implications for global climate policy. Environmental Science and Technology, 42(5), 1401–1407.

    Article  Google Scholar 

  • Pettersson, F., Maddison, D., Acar, S., & Söderholm, P. (2013). Convergence of carbon dioxide emissions: A review of the literature. International Review of Environmental and Resource Economics, 7, 141–178.

    Article  Google Scholar 

  • Quah, D. (1993). Galton’s fallacy and the tests of the convergence hypothesis. Scandinavian Journal of Economics, 95(4), 427–443.

    Article  Google Scholar 

  • Raupach, M. R., Marland, G., Ciais, P., Le Quéré, C., Canadell, J. G., Klepper, G., et al. (2007). Global and regional drivers of accelerating \({\rm CO}_{2}\) emissions. Proceedings of the National Academy of Sciences, 104(24), 10288–10293.

    Article  Google Scholar 

  • Riahi, K., van Vuuren, D. P., Kriegler, E., Edmonds, J., O’Neill, B. C., Fujimori, S., Bauer, N., Calvin, K., Dellink, R., Fricko, O., Lutz, W., Popp, A., Crespo-Cuaresma, J., Samir, K. C., Leimbach, M., Jiang, L., Kram, T., Rao, S., Emmerling, J., Ebi, K., Hasegawa, T., Havlik, P., Humpenöder, F., Alelui Da Silva, L., Smith, S., Stehfest, E., Bosetti, V., Eom, J., Gernaat, D., Masui, T., Rogelj, J., Strefler, J., Drouet, L., Krey, V., Luderer, G., Harmsen, M., Takahashi, K., Baumstark, L., Doelman, J. C., Kainuma, M., Klimont, Z., Marangoni, G., Lotze-Campen, H., Obersteiner, M., Tabeau, A., & Tavoni, M. (2016). The Shared Socioeconomic Pathways and their energy, land use, and greenhouse gas emissions implications: An overview. Global Environmental Change. doi:10.1016/j.gloenvcha.2016.05.009.

  • Rockey, J., & Temple, J. (2016). Growth econometrics for agnostics and true believers. European Economic Review, 81, 86–102.

    Article  Google Scholar 

  • Sala-i-Martin, X., Doppelhofer, G., & Miller, R. I. (2004). Determinants of long-term growth: A Bayesian averaging of classical estimates (BACE) approach. American Economic Review, 94(4), 813–835.

    Article  Google Scholar 

  • Sanchez, L. F., & Stern, D. I. (2016). Drivers of industrial and non-industrial greenhouse gas emissions. Ecological Economics, 124, 17–24.

    Article  Google Scholar 

  • Selden, T. M., & Song, D. (1994). Environmental quality and development: Is there a Kuznets curve for air pollution? Journal of Environmental Economics and Environmental Management, 27, 147–162.

    Article  Google Scholar 

  • Shafik, N. (1994). Economic development and environmental quality: An econometric analysis. Oxford Economic Papers, 46, 757–773.

    Article  Google Scholar 

  • Smith, S. J., van Ardenne, J., Klimont, Z., Andres, R. J., Volke, A., & Delgado, Arias S. (2011). Anthropogenic sulfur dioxide emissions: 1850–2005. Atmospheric Chemistry and Physics, 11, 1101–1116.

    Article  Google Scholar 

  • Solow, R. M. (1956). A contribution to the theory of economic growth. Quarterly Journal of Economics, 70, 65–94.

    Article  Google Scholar 

  • Stefanski, R. (2013). On the mechanics of the ‘Green Solow Model’. OxCarre Research Paper, 47.

  • Stern, D. I. (1998). Progress on the environmental Kuznets curve? Environment and Development Economics, 3, 173–196.

    Article  Google Scholar 

  • Stern, D. I. (2002). Explaining changes in global sulfur emissions: An econometric decomposition approach. Ecological Economics, 42, 201–220.

    Article  Google Scholar 

  • Stern, D. I. (2004). The rise and fall of the environmental Kuznets curve. World Development, 32(8), 1419–1439.

    Article  Google Scholar 

  • Stern, D. I. (2007). The effect of NAFTA on energy and environmental efficiency in Mexico. Policy Studies Journal, 35(2), 291–322.

    Article  Google Scholar 

  • Stern, D. I. (2010). Between estimates of the emissions-income elasticity. Ecological Economics, 69, 2173–2182.

    Article  Google Scholar 

  • Stern, D. I., & Common, M. S. (2001). Is there an environmental Kuznets curve for sulfur? Journal of Environmental Economics and Environmental Management, 41, 162–178.

    Article  Google Scholar 

  • Stern, D. I., Common, M. S., & Barbier, E. B. (1996). Economic growth and environmental degradation: The environmental Kuznets curve and sustainable development. World Development, 24, 1151–1160.

    Article  Google Scholar 

  • Stern, D. I., & Jotzo, F. (2010). How ambitious are China and India’s emissions intensity targets? Energy Policy, 38(11), 6776–6783.

    Article  Google Scholar 

  • Stern, D. I., & Van Dijk, J. (2016). Economic growth and global particulate pollutant concentrations. CCEP Working Papers 1604.

  • Stokey, N. L. (1998). Are there limits to growth? International Economic Review, 39(1), 1–31.

    Article  Google Scholar 

  • Strazicich, M. C., & List, J. A. (2003). Are \({\rm CO}_{2}\) emission levels converging among industrial countries? Environmental and Resource Economics, 24(3), 263–271.

    Article  Google Scholar 

  • Suri, V., & Chapman, D. (1998). Economic growth, trade and the energy: Implications for the environmental Kuznets curve. Ecological Economics, 25, 195–208.

    Article  Google Scholar 

  • Torras, M., & Boyce, J. K. (1998). Income, inequality, and pollution: A reassessment of the environmental Kuznets curve. Ecological Economics, 25, 147–160.

    Article  Google Scholar 

  • Tsurumi, T., & Managi, S. (2015). Environmental Kuznets curve: Economic growth and emission reduction. In S. Managi (Ed.), The economics of green growth: New indicators for sustainable societies (pp. 49–70). New York: Routledge.

    Google Scholar 

  • Verbeke, T., & de Clerq, M. (2006). The EKC: Some really disturbing Monte Carlo evidence. Environmental Modelling & Software, 21, 1447–1454.

    Article  Google Scholar 

  • Vollebergh, H. R. J., Melenberg, B., & Dijkgraaf, E. (2009). Identifying reduced-form relations with panel data: The case of pollution and income. Journal of Environmental Economics and Management, 58, 27–42.

    Article  Google Scholar 

  • Wagner, M. (2008). The carbon Kuznets curve: A cloudy picture emitted by bad econometrics. Resource and Energy Economics, 30, 388–408.

    Article  Google Scholar 

  • Wagner, M. (2015). The environmental Kuznets curve, cointegration and nonlinearity. Journal of Applied Econometrics, 30(6), 948–967.

    Article  Google Scholar 

  • Westerlund, J., & Basher, S. A. (2008). Testing for convergence in carbon dioxide emissions using a century of panel data. Environmental and Resource Economics, 40, 109–120.

    Article  Google Scholar 

  • World Bank. (1992). World development report 1992: Development and the environment. New York: Oxford University Press.

  • World Commission on Environment and Development. (1987). Our common future. Oxford: Oxford University Press.

  • York, R. (2012). Asymmetric effects of economic growth and decline on \({\rm CO}_{2}\) emissions. Nature Climate Change, 2, 762–764.

    Article  Google Scholar 

  • Zhang, X., Davidson, E. A., Mauzerall, D. L., Searchinger, T. D., Dumas, P., & Shen, Y. (2015). Managing nitrogen for sustainable development. Nature, 528, 51–59.

    Google Scholar 

  • Zhao, Y., Zhang, J., & Nielsen, C. P. (2013). The effects of recent control policies on trends in emissions of anthropogenic atmospheric pollutants and \({\rm CO}_{2}\) in China. Atmospheric Chemistry and Physics, 13, 487–508.

    Article  Google Scholar 

Download references

Acknowledgements

I thank my colleagues and students who collaborated on the empirical studies discussed in this paper: Reyer Gerlagh, Paul Burke, Luis Sanchez, Jeremy van Dijk, and Zeba Anjum. I also thank two anonymous referees for useful comments and Andreas Chai for inviting me to contribute to this special issue and participate in the workshop: ‘Managing the Transition to a Sustainable Economy’ at Griffith University.

Author information

Authors and Affiliations

  1. Crawford School of Public Policy, The Australian National University, 132 Lennox Crossing, Acton, ACT, 2601, Australia

    David I. Stern

Authors
  1. David I. Stern
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to David I. Stern.

Rights and permissions

Reprints and Permissions

About this article

Verify currency and authenticity via CrossMark

Cite this article

Stern, D.I. The environmental Kuznets curve after 25 years. J Bioecon 19, 7–28 (2017). https://doi.org/10.1007/s10818-017-9243-1

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10818-017-9243-1

Keywords

  • Air pollution
  • Economic growth
  • Environmental Kuznets curve
  • Convergence
  • Climate change

JEL Classification

  • Q53
  • Q56