Abstract
This study establishes the existence of a pattern of behavior, between economic growth and environmental degradation, consistent with the environmental Kuznets curve (EKC) hypothesis for 17 Organization for Economic Cooperation and Development (OECD) countries between 1990 and 2012. Based on this EKC pattern, it shows that energy regulation measures help reduce per capita greenhouse gas (GHG) emissions. To validate this hypothesis, we also add the explanatory variables: renewable energy promotion, energy innovation processes, and the suppression effect of income level on the contribution of renewable energy sources to total energy consumption. It aims to be a tool for decision-making regarding energy policy. This paper provides a two-stage econometric analysis of instrumental variables with the aim of correcting the existence of endogeneity in the variable GDP per capita, verifying that the instrumental variables used in this research are appropriate for our aim. To this end, it first makes a methodological contribution before incorporating additional variables associated with environmental air pollution into the EKC hypothesis and showing how they positively affect the explanation of the correction in the GHG emission levels. This study concludes that air pollution will not disappear on its own as economic growth increases. Therefore, it is necessary to promote energy regulation measures to reduce environmental pollution.
Similar content being viewed by others
Notes
Since the Club of Rome was founded, a recurring economic problem has been the relationship between economic growth and public concern for environmental issues. The empirical EKC model is a popular means of analyzing the relationship between economic growth and environmental pollution. There is currently a large body of literature on EKCs (Grossman and Krueger 1991; Selden and Song 1994; Hilton and Levinson 1998).
IPPC (2013): CO2 is by far the main contributor to anthropogenic GHG emissions (CO2 accounts for 76.6 % of GHGs: 56.6 % is from fossil fuels, 17.3 % from deforestation, and 2.8 % from other sources).
Both instruments (AGEDR it and INFLAT it ) are plausible and applicable to GDPpc it (Lin and Liscow 2013) as they are sensibly reliable and correlated with GDPpc it without affecting the quality of environmental pollution levels (GHGpc it ).
Autocorrelation corrections are included when there is a problem as a result of the simultaneity bias introduced by reverse causality between GDPpc it and GHGpc it .
The estimation of the turning points for the cubic model used the following formulation (Diao et al. 2009):
$$ Xj=\frac{-{\beta}_2 \pm \sqrt{\beta_2^2-3{\beta}_1{\beta}_3}}{3{\beta}_3},\forall j=1,2 $$(14)To estimate the turning points, it is necessary to make a change in the coefficient \( {\widehat{\beta}}_1 \) since the breaking point where the function reaches the maximum and minimum value depends on PRENEW. When the PRENEW variable appears in the moderate model GDPpc, it will affect the coefficient of the first grade. Consequently, in the coefficient \( {\widehat{\beta}}_1^{*}={\widehat{\beta}}_1+{\widehat{\beta}}_6*\operatorname{PRENEW} \)), PRENEW takes as its median value (23.24), justified by the asymmetric distribution of that variable. Therefore, the model’s breaking points have to be estimated from a \( {\widehat{\beta}}_1^{*}=\left(4.12\operatorname{E}-07+1.18\operatorname{E}-09*23.24\right)=4.4\operatorname{E}07 \) coefficient.
References
Acaravci SK, Ozturk I, Acaravci A (2009) Financial development and economic growth: literature survey and empirical evidence from sub-Saharan African countries. SAJEMS 12(1):11–27
Agostini L, Padilla J (2010) La promoción de las energías renovables: La experiencia española, Electricidad Verde: Energías Renovables y Sistema Eléctrico, pp 517–541
Aguinis H (2004) Regression analysis for categorical moderators. Guilford, New York
Alfranca O (2009) Regulación ambiental e innovación. Clm.economía: Revista económica de Castilla - La Mancha 15:9–31
Andreoni J, Levinson A (1998) The simple analytics of the environmental Kuznets curve. NBER Working Paper 6739
Andreoni J, Levinson A (2001) The simple analytics of the environmental Kuznets curve. J Public Econ 80:269–286
Anwar S, Sun S (2011) Financial development, foreign investment and economic growth in Malaysia. J Asian Econ 22(4):335–342
Arrow K, Bolín B, Constanza R, Dasgupta P, Folke C, Holling C, Jansson B, Levin S, Mäler K, Perrings C, Pimentel D (1995) Economic growth carrying capacity, and the environment. Science 268:520–521
Balsalobre D, Álvarez A, Cantos A (2015) Public budgets for energy RD&D and the effects on energy intensity and pollution levels. Environ Sci Pollut Res 22(7):4881–4892
Barrett S, Graddy K (2000) Freedom, growth and the environment. Environ Dev Econ 5:433–456
Bengochea-Morancho A, Martínez I, Morales R (2004) The impact of population change on CO2 emissions: evidence from European countries. EAERE, Budapest
Bergh JC, Van Den JM, Nijkamp P (1994) Dynamic macro modelling and materials balance economic environmental integration for sustainable development. Econ Model 11:283–307
Bovenberg LA, Smulders S (1995) Environmental quality and pollution-augmenting technological change in a two-sector endogenous growth model. J Public Econ 57:369–391
Brock WA, Taylor MS (2004) Economic growth and the environment: a review of theory and empirics. Handbook of economic growth. Estudios de Economía Aplicada 28:1749–1821
Bruno M, Easterly W (1998) Inflation crises and long-run growth. J Monet Econ 41:3–26
Cantos JM, Balsalobre D (2011) Las energías renovables en la Curva de Kuznets Ambiental Una aplicación para España. Estudios de Economía Aplicada 29(2):32
Cantos JM, Balsalobre D (2013) Incidencia del gasto público en I+D+i energético sobre la corrección medioambiental en España. Estudios de Economía Aplicada 31(1):93–126
Collado E (2009) Energía solar fotovoltaica, competitividad y evaluación económica, comparativa y modelos. Tesis doctoral, UNED
Dasgupta P, Maler K (1995) Poverty, institutions, and the environmental resource-base. In: Behrman J, Srinivaan TN (eds) Handbook of development economics, vol 3A. Elsevier Science, Amsterdam (Chapter 39)
Dasgupta S, Laplante B, Wang H, Wheeler D (2002) Confronting the environmental Kuznets curve. J Econ Perspect 16:147–168
de Bruyn SM, Heintz RJ (1999) The environmental Kuznets curve hypothesis. In: van den Bergh JC (ed) Handbook of environmental and resource economics. Edward Elgar, Cheltenham, pp 656–677
Del Río P, Labandeira X, Linares P (2009) La interacción del sistema europeo de comercio de emisiones con otros instrumentos de política. Papeles de Economía Española 121:211–223
Diao X, Zeng S, Tam C, Tam V (2009) EKC analysis for studying economic growth and environmental quality: a case study in China. J Clean Prod 17(5):541–548
Dinda S (2004) Environmental Kuznets curve hypothesis: a survey. Ecol Econ 49:431–455
Dinda S, Dispankor C, Manoranjan P (2000) Air quality and economic growth: an empirical study. Ecol Econ 34:409–423
Ekins P (1997) The Kuznets curve for the environment and economic growth: examining the evidence. Environ Plan 29(5):805–830
EU Commission (2006) Directive 2006/32/EC of the European Parliament and of the Council of 5 April 2006 on energy end-use efficiency and energy services and repealing Council Directive 93/76/EEC
EU Commission (2009) Directive 2009/28/EC of 23 April 2009 on the promotion of the use of energy from renewable sources and amending and subsequently repealing Directives 2001/77/EC and 2003/30/EC. Official Journal of the European Union L 140, 16–47, Brussels
Gradus R, Smulders S (1993) The trade-off between environmental care and long-term growth pollution in three prototype growth models. J Econ 58:25–51
Greene WH (1999) Análisis econométrico, 3rd edn. Prentice Hall, Madrid
Grossman G, Helpman E (1991) Innovation and growth in the global economy. MIT Press, Cambridge
Grossman G, Krueger E (1991) Environmental impacts of a North American free trade agreement. NBER Working Paper 3914
Grossman G, Krueger E (1995) Economic growth and the environment. Q J Econ 110(2):353–377
Halicioglu F (2009) An econometric study of CO2 emissions, energy consumption, income and foreign trade in Turkey. Energy Policy 37:1156–1164
Halkos GE (2003) Environmental Kuznets curve for sulphur: evidence using GMM estimation. Environ Dev Econ 8:581–601
He J, Wang H (2012) Economic structure, development policy and environmental quality: an empirical analysis of environmental Kuznets curves with Chinese municipal data. Ecol Econ 76:49–59
Heerink N, Mulatu A, Bulte E (2001) Income inequality and the environment: aggregation bias in environmental Kuznets curves. Ecol Econ 38(3):359–367
Hettige H, Mani M, Wheeler D (2000) Industrial pollution in economic development: the environmental Kuznets curve revisited. J Dev Econ 62:445–476
Hilton FGH, Levinson AM (1998) Factoring the environmental Kuznets curve: evidence from automotive lead emissions. J Environ Econ Manag 35:126–141
IPPC (2013) The physical science basis. Contribution of the Working Group I to Fifth Assessment Report of Intergovernmental Panel on Climate Change. Cambridge University Press, Cambridge
Iwata H, Okada K, Samreth S (2010) Empirical study on the environmental Kuznets curve for CO2 in France: the role of nuclear energy. Energy Policy 38:4057–4063
Jaccard J, Turrisi R, Wan CK (1990) Interaction effects in multiple regressions. University paper series on quantitative applications in the social sciences 72. Sage, Newbury Park
Jones L, Manuelli R (1995) A positive model of growth and pollution controls. NBER Working Papers 5205, National Bureau of Economic Research, Inc.
Kaika D, Zervas E (2013) The environmental Kuznets curve (EKC) theory—part A: concepts, causes and the CO2 emissions case. Energy Policy 62:1392–1402
Kander A (2005) Baumol’s disease and dematerialization of the economy. Ecol Econ 55:119–130
Kennedy P (1998) A guide to econometrics. Blackwell, Oxford
Kenny D (1979) Correlation and causality. Wiley, New York
Kuznets S (1955) Economic growth and income inequality. Am Econ Rev 45:1–28
Lantz V, Feng Q (2006) Assessing income, population, and technology impacts on CO2 emissions in Canada: where’s the EKC? Ecol Econ 57:229–238
Lin CY, Liscow Z (2013) Endogeneity in the environmental Kuznets curve: an instrumental variables approach. Am J Agric Econ 95:268–274
Lin X, Polenske KR (1995) Input–output anatomy of China’s energy use changes in the 1980s. Econ Syst Res 7:67–84
Lindmark M (2002) An EKC-pattern in historical perspective: carbon dioxide emissions, technology, fuel prices and growth in Sweden 1870–1997. Ecol Econ 42:333–347
List JA, Gallet CA (1999) The environmental Kurnets curve: does one size fit all? Ecol Econ 31:409–423
Lomborg B, Pope C (2003) The global environment: Improving or deteriorating? John F. Kennedy, Jr. Forum at the Harvard Kennedy School of Government
Luzzati T, Orsini M (2009) Investigating the energy–environmental Kuznets curve. Energy 34(3):291–300
Moomaw W, Unruh G (1997) Are environmental Kuznets curves misleading us? The case of CO2 emissions. Environ Dev Econ 2:451–463
Neumayer E (1998) Is economic growth the environment’s best friend? J Environ Law Policy 2(98):161–176
OECD (2015) IEA energy technology RD&D Statistics, http://www.oecd.org/statistics/
Opschoor JB, Vos HB (1989) Economic instruments for environmental protection. OECD, Paris
Panayotou T (1993) Empirical test and policy analysis of environmental degradation at different stages of economic development. Working Paper 238. Technology and Environment Programme, International Labour Office, Geneva
Panayotou T (1997) Demystifying the environmental Kuznets curve: turning a black box into a policy tool. Environ Dev Econ 2:465–484
Panayotou T (2003) Economic growth and the environment. Econ Surv Eur 2:45–72
Pizer WA, Popp D (2008) Endogenizing technological change: matching empirical evidence to modeling needs. Energy Econ 30:2754–2770
Robalino-López A, Mena-Nieto JE, García-Ramos A, Golpe A (2015) Studying the relationship between economic growth, CO2 emissions, and the environmental Kuznets curve in Venezuela, 1980–2025. Renew Sustain Energy Rev 41:602–614
Saidi K, Hammami S (2015) The impact of CO2 emissions and economic growth on energy consumption in 58 countries. Energy Rep 1:62–70
Selden T, Song D (1994) Environmental quality and development: is there a Kuznets curve for air pollution emissions? J Environ Econ Manag 27(2):147–162
Selden T, Song D (1995) Neoclassical growth, the j curve for abatement, and the inverted u curve for pollution. J Environ Econ Manag 29(2):162–168
Shafik N (1994) Economic development and environmental quality: an econometric analysis. Oxford Economic Papers, New Series vol. 46, Special Issue on environmental economics, pp 757–773
Shafik N, Bandyopadhyay S (1992) Economic growth and environmental quality time-series and cross-country evidence. World Bank Working Papers 904, Washington, pp 1–6
Stagl S (1999) Delinking economic growth from environmental degradation? A literature survey on the environmental Kuznets curve hypothesis. Working Paper Series of the Research Focus Growth and Employment in Europe Sustainability and Competitiveness No. 6
Stern DI (2004) The rise and fall of the environmental Kuznets curve. World Dev 32:1419–1439
Stern DI, Common MS, Barbier EB (1996) Economic growth and environmental degradation: the environmental Kuznets curve and sustainable development. World Dev 24(7):1151–1160
Stokey L (1998) Are there limits to growth? Int Econ Rev 39:1–31
Tol RSJ, Pacala SW, Socolow RH (2009) Understanding long-term energy use and carbon dioxide emissions in the USA. J Policy Model 31:425–445
Torras M, Boyce J (1998) Income, inequality, and pollution: a reassessment of the environmental Kuznets curve. Ecol Econ 25:147–160
Turner K, Hanley (2011) Energy efficiency, rebound effects and the environmental Kuznets curve. Energy Econ 33:722–741
Unruh GC, Moomaw WR (1998) An alternative analysis of apparent EKC-type transitions. Ecol Econ 25:221–229
Verdier T (1993) Environmental pollution and endogenous growth: a comparison between emission taxes and technological standards. Fondazione Eni Enrico Mattei. Discussion Paper No. 57
Wooldridge JM (2010) Econometric analysis of cross section and panel data. Massachusetts Institute of Technology (MIT), Boston
World Bank (2015) Word databank. http://databank.worldbank.org
Wu AD, Zumbo BD (2008) Understanding and using mediators and moderators. Soc Indic Res 87:367–392
Author information
Authors and Affiliations
Corresponding author
Additional information
Responsible editor: Philippe Garrigues
Rights and permissions
About this article
Cite this article
Lorente, D.B., Álvarez-Herranz, A. Economic growth and energy regulation in the environmental Kuznets curve. Environ Sci Pollut Res 23, 16478–16494 (2016). https://doi.org/10.1007/s11356-016-6773-3
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s11356-016-6773-3