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date: 26 April 2017

The Environmental Kuznets Curve

This is an advance summary of a forthcoming article in the Oxford Research Encyclopedia of Environmental Science. Please check back later for the full article.

The environmental Kuznets curve (EKC) is a hypothesized relationship between various indicators of environmental degradation and GDP per capita. In the early stages of economic growth, pollution emissions and other environmental impacts increase, but beyond some level of GDP per capita (which will vary for different indicators), the trend reverses, so that at high income levels economic growth leads to environmental improvement. This implies that environmental impacts or emissions per capita are an inverted U-shaped function of GDP per capita. The EKC has been the dominant approach among economists for modeling ambient pollution concentrations and aggregate emissions since Grossman and Krueger introduced it a quarter of a century ago and is even found in introductory economics textbooks. Despite this, the EKC was criticized almost from the start on empirical, policy, and statistical grounds, and debate continues. While concentrations and emissions of some local pollutants such as sulfur dioxide have clearly declined in developed countries in recent decades, evidence for other pollutants such as carbon dioxide is much weaker. Initially, many understood the EKC to imply that environmental problems might be due to a lack of sufficient economic development rather than the reverse, as was conventionally thought. This alarmed others that a simplistic policy prescription based on this, while perhaps addressing some issues like deforestation or local air pollution, could exacerbate environmental problems such as climate change. Additionally, many of the econometric studies that supported the EKC were found to be statistically fragile. Recent research integrates the EKC with alternative approaches and finds that the relation between environmental impacts and development is more subtle than the simple picture painted by the EKC. Usually, growth in the scale of the economy increases environmental impacts, all else held constant. However, the impact of growth might decline as countries get richer, and richer countries are likely to make more rapid progress in reducing environmental impacts. Finally, there is often convergence among countries, so that countries that have relatively high levels of impacts reduce them faster or increase them more slowly, all else held constant.