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Governance, institutions and the environment-income relationship: a cross-country study

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Abstract

This paper examines the environment-income relationship in the context of the Environmental Kuznets Curve (EKC), and explores the possible role that factors like governance, political institutions, socioeconomic conditions, and education play in influencing this relationship. The results suggest that the EKC exists for carbon dioxide emissions for cross-country data over the period 1984–2002. However, there is nothing automatic about this relationship; policies designed to protect the environment may be responsible for this phenomenon. Two other significant findings are: one, countries with better quality of governance, stronger political institutions, better socioeconomic conditions and greater investment in education have lower emissions; and two, only around 15% of the countries in the dataset have reached income levels high enough to be associated with an unambiguous decline in emissions. The implications of these results are discussed within the context of the international environmental policy arena and the Kyoto Protocol. One of the main objectives of this paper is to bridge the gap between studies conducted on the EKC and developments in the international environmental policy arena. As a final note this paper emphasizes that one needs to connect the body of knowledge on the EKC hypothesis to the international environmental policy arena, despite the apparent difficulty of doing so. One hopes that future studies will further build on this line of thought.

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Notes

  1. The first major global event focusing on sustainable development was the United Nations Conference for Environment and Development (also called the Earth Summit) at Rio de Janeiro in 1992.

  2. The complete list of countries can be made available upon request.

  3. United Nations Statistics Division, 2002.

  4. Data for CO2 emissions, per capita income, and population density have been taken from the World Development Indicators, published by the Data & Research Group of the World Bank, Washington D.C.

  5. Data on political institutions have been taken from Freedom in the World rankings by Freedom House.

  6. Data on quality of governance, and socioeconomic conditions have been taken from the International Country Risk Guide, published by the Political Risk Services (PRS) Group, New York.

  7. Data on government expenditure on education have been taken from EPDC, Washington D.C.

  8. A preliminary investigation showed that the Fixed Effects Model was superior to the Random Effects Model, based on the Hausman test which tests whether a Random Effects estimator is as consistent and efficient as a Fixed Effects estimator.

  9. Yandle et al. (2004) states that the turning point for CO2 emissions as observed in the literature occurs within the income range of $37,000–$57,000. Earlier studies found turning points within the range of $5,000–$8,000.

  10. Higher order relationships were tested, such as GDP3 and GDP4 but the results for the different models were either not significant or were inconsistent with each other. Accordingly, the focus was only on GDP and GDP2

  11. The results of the model without the interaction term can be made available upon request.

  12. More information on individual emissions from each country can be made available upon request.

  13. Speth and Haas (2006)

  14. Rogers et al. (2006)

  15. In international law there is a distinction between signing a treaty and ratifying a treaty. Signing implies providing preliminary support but does not pose any binding obligations. For example, the U.S. has signed the Kyoto Protocol but not ratified it.

  16. These principles are further elaborated in Hunter et al. (2002).

  17. UNFCCC—The Kyoto Protocol. http://unfccc.int/kyoto_protocol/items/2830.php.

  18. Energy Information Administration (EIA) “Greenhouse Gases, Climate Change, and Energy” http://www.eia.doe.gov/oiaf/1605/ggccebro/chapter1.html Accessed May 30, 2007.

  19. Agenda 21, Chapter 36 “Education”.

  20. United Nations Statistics Division, 2002.

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  1. Northeastern University, Boston, MA, 02115, USA

    Kuheli Dutt

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Readers should send their comments on this paper to: BhaskarNath@aol.com within 3 months of publication of this issue.

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Dutt, K. Governance, institutions and the environment-income relationship: a cross-country study. Environ Dev Sustain 11, 705–723 (2009). https://doi.org/10.1007/s10668-007-9138-8

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