Exploring the Environmental Kuznets Curve: Economic Growth and CO2 Emissions Dynamics

Abstract

This article aims to explore the relationship between CO2 emissions per capita and several key economic and environmental indicators, including gross domestic product per capita, trade openness, the number of vehicles, and the output of the services sector. This investigation is conducted within the framework of the Environmental Kuznets Curve, a hypothesized inverted U-shaped relationship between environmental degradation and economic development. By utilizing time series data spanning from 1972 to 2015, the dissertation seeks to analyze the long-term trends and dynamics of CO2 emissions and economic variables. The inclusion of a wide temporal scope allows for a comprehensive understanding of how economic growth, trade patterns, and technological advancements have influenced environmental outcomes over several decades. The primary focus is on examining the association between CO2 emissions per capita and GDP PC, as these variables represent the core elements of the ECK hypothesis. Additionally, trade openness is considered to assess the impact of international trade on environmental degradation. The number of vehicles is included as a proxy for transportation-related emissions, reflecting the role of urbanization and industrialization in shaping environmental impacts. Furthermore, the output of the services sector is analyzed to understand the contribution of different sectors to overall CO2 emissions. The essence of the results indicates the presence of an Environmental Kuznets Curve between CO2 emissions per capita and Gross Domestic Product per capita. This finding suggests that initially, as economic development progresses, CO2 emissions per capita tend to increase. However, beyond a certain threshold of economic growth, further increases in GDP per capita are associated with declines in CO2 emissions per capita, indicating a potential decoupling of economic growth from environmental degradation. Interestingly, the analysis reveals that the square of Gross Domestic Product per capita emerges as the only factor that contributes to environmental mitigation, indicating that certain levels of economic prosperity may facilitate the adoption of environmentally friendly technologies and practices. However, the study also highlights that other factors such as trade openness, the number of vehicles, and the output of the services sector are associated with exacerbating environmental pollution. Despite economic growth, these factors contribute to the overall pollution burden, suggesting the need for targeted policy interventions and technological innovations to address environmental challenges effectively.