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Environmental Kuznets curve

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The environmental Kuznets curve is a hypothesised relationship between environmental quality and economic development: various indicators of environmental degradation tend to get worse as modern economic growth occurs until average income reaches a certain point over the course of development.[1] Although the subject of continuing debate, some evidence supports the claim that environmental health indicators, such as water and air pollution, show the inverted U-shaped curve.[2] It has been argued that this trend occurs in the level of many of the environmental pollutants, such as Template:Sulfur dioxide, nitrogen oxide, Template:Lead, DDT, chlorofluorocarbons, sewage, and other chemicals previously released directly into the air or water.

For example, between 1970 and 2006, the United States' inflation-adjusted GDP grew by 195%, the number of cars and trucks in the country more than doubled, and the total number of miles driven increased by 178%. However, during that same time period regulatory changes meant that annual emissions of carbon monoxide fell from 197 million tons to 89 million, nitrogen oxides emissions fell from 27 million tons to 19 million, sulfur dioxide emissions fell from 31 million tons to 15 million, particulate emissions fell by 80%, and lead emissions fell by more than 98%.[3]

However, there is little evidence that the relationship holds true for other pollutants, for natural resource use or for biodiversity conservation.[4] For example, energy, land and resource use (sometimes called the "ecological footprint") do not fall with rising income.[5] While the ratio of energy per real GDP has fallen, total energy use is still rising in most developed countries. Another example is the emission of many greenhouse gases, which is much higher in industrialised countries. In addition, the status of many key "ecosystem services" provided by ecosystems, such as freshwater provision and regulation (Perman, et al., 2003), soil fertility,Template:Citation needed and fisheries,Template:Citation needed have continued to decline in developed countries.

In general, Kuznets curves have been found for some environmental health concerns (such as air pollution) but not for others (such as landfills and biodiversity). Advocates of the EKC argue that this does not necessarily invalidate the hypothesis – the scale of the Kuznets curves may differ for different environmental impacts and different regions. If the search for scalar and regional effects can salvage the concept, it may yet be the case that a given area will need more wealth in order to see a decline in environmental pollutants. In contrast, a thermodynamically enlightened economics suggests that outputs of degraded matter and energy are an inescapable consequence of any use of matter and energy (so holds the second law); some of those degraded outputs will be noxious wastes, and whether and how their production is eliminated depends more on regulatory schemes and technologies at use than on income or production levels. In one view, then, the EKC suggests that "the solution to pollution is more economic growth;" in the other, pollution is seen as a regrettable output that should be reduced when the benefits brought by its production are exceeded by the costs it imposes in externalities like health decrements and loss of ecosystem services.

For statisticians, deforestation appears to follow a Kuznets curve.Template:Citation needed Among countries with a per capita GDP of at least $4,600, net deforestation has ceased to exist.[6] Yet it has been shown that wealthier countries are able to maintain forests along with high consumption by exporting deforestation. For instance, Japan, which is 70% forested, focuses its economy on capital-intensive technological and manufactured goods for export, while purchasing timber that is logged unsustainably and often illegally in the forests of South-East Asia. Template:Citation needed


Critics argue that even the US is still struggling to attain the income level necessary to prioritize certain environmental pollutants such as Template:Carbon emissions, which have yet to follow the EKC.[7] With other pollutants however, like sulfur dioxide, production seems to coincide with a country's economic development and at a certain threshold level of income a mitigation of environmental damage occurs. This could be related rather than causal, because economic growth without institutional reform does not accomplish this environmental improvement. It appears that with GDP growth, government policies are strengthened and populations experience a rise in their demand for improved environmental quality.Template:Citation needed It may be the case, however, that regulation in relatively wealthy countries simply shifts the production and pollution to less-regulated, poorer countries; if this were true, the total size of the negative externalities of production remains the same or is larger, though in the wealthier country an EKC appears to have been obtained.

This could be a reason why environmental Kuznets curves (EKC) have been found to be applicable to only certain types of pollutants.[7] Yandle et al. argue that the EKC has not been found to apply to carbon because most pollutants create localized problems like Template:Lead and Template:Sulfur, so there is a greater urgency and response to cleaning up such pollutants. As a country develops, the marginal value of cleaning up such pollutants makes a large direct improvement to the quality of citizens' lives. Conversely, reducing Template:Carbon dioxide emissions does not have a dramatic impact at a local level, so the impetus to clean them up is only for the altruistic reason of improving the global environment. This becomes a tragedy of the commons where it is most efficient for everyone to pollute and for no one to clean up, and everyone is worse as a result (Hardin, 1968). Thus, even in a country like the US with a high level of income, carbon emissions are not decreasing in accordance with the EKC.[7]

Arik Levinson points out that researchers disagree about the shape of the curve when longer-term time scales are evaluated. For example, Millimet and Stengos regard the traditional "inverse U" shape as actually being an "N" shape, indicating that pollution increases as a country develops, decreases once the threshold GDP is reached, and then begins increasing as national income continues to increase. While such findings are still being debated, it could prove to be important because it poses the concerning question of whether pollution actually begins to decline for good when an economic threshold is reached or whether the decrease is only in local pollutants and pollution is simply exported to poorer developing countries. Levinson concludes that the environmental Kuznets curve is insufficient to support a pollution policy regardless whether it is laissez-faire or interventionist, although the literature has been used this way by the press.[8]

Arrow et al. argue pollution-income progression of agrarian communities (clean) to industrial economies (pollution intensive) to service economies (cleaner) would appear to be false if pollution increases again at the end due to higher levels of income and consumption of the population at large.[9] A difficulty with this model is that it lacks predictive power because it is highly uncertain how the next phase of economic development will be characterized. Template:Citation needed

Suri and Chapman argue that a net pollution reduction may not actually be occurring on global scales. Wealthy nations have a trend of exporting the activities that create the most pollution, like manufacturing of clothing and furniture, to poorer nations that are still in the process of industrial development (Suri and Chapman, 1998). This could mean that as the world's poor nations develop, they will have nowhere to export their pollution. Thus, this progression of environmental clean up occurring in conjunction with economic growth cannot be replicated indefinitely because there may be nowhere to export waste and pollution intensive processes. However, Gene Grossman and Alan B. Krueger, the authors who initially made the correlation between economic growth, environmental clean-up, and the Kuznets curve, conclude that there is "no evidence that environmental quality deteriorates steadily with economic growth."[8] And Yandle et al. conclude that "policies that stimulate growth (trade liberalization, economic restructuring, and price reform) should be good for the environment".[7]

Stern warns "it is very easy to do bad econometrics", and says "the history of the EKC exemplifies what can go wrong". He finds that "Little or no attention has been paid to the statistical properties of the data used such as serial dependence or stochastic trends in time series and few tests of model adequacy have been carried out or presented. However, one of the main purposes of doing econometrics is to test which apparent relationships...are valid and which are spurious correlations". He states his unequivocal finding: "When we do take such statistics into account and use appropriate techniques we find that the EKC does not exist (Perman and Stern 2003). Instead, we get a more realistic view of the effect of economic growth and technological changes on environmental quality. It seems that most indicators of environmental degradation are monotonically rising in income though the 'income elasticity' is less than one and is not a simple function of income alone. Time related effects reduce environmental impacts in countries at all levels of income. However, in rapidly growing middle income countries the scale effect, which increases pollution and other degradation, overwhelms the time effect. In wealthy countries, growth is slower, and pollution reduction efforts can overcome the scale effect. This is the origin of the apparent EKC effect".[10]


  1. Shafik, Nemat. 1994. Economic development and environmental quality: an econometric analysis. Oxford Economic Papers 46 (October): 757–773
  2. Template:Cite news
  3. Template:Cite news
  4. Template:Cite journal
  5. Google Public Data US Energy. Energy Information Administration. Retrieved on 17 December 2011.
  6. Returning forests analyzed with the forest identity, 2006, by Pekka E. Kauppi (Department of Biological and Environmental Sciences, University of Helsinki), Jesse H. Ausubel (Program for the Human Environment, The Rockefeller University), Jingyun Fang (Department of Ecology, Peking University), Alexander S. Mather (Department of Geography and Environment, University of Aberdeen), Roger A. Sedjo (Resources for the Future), and Paul E. Waggoner (Connecticut Agricultural Experiment Station)
  7. 7.0 7.1 7.2 7.3 Yandle B, Vijayaraghavan M, Bhattarai M (2000). The Environmental Kuznets Curve: A Primer. The Property and Environment Research Center. Retrieved on 16 June 2008.
  8. 8.0 8.1 Error on call to Template:cite web: Parameters url and title must be specifiedArik Levinson (2000). . Georgetown University. Retrieved on 29 August 2011.
  9. Template:Cite journal
  10. Error on call to Template:cite web: Parameters url and title must be specifiedDavid I. Stern ( Society for Ecological Economics Internet Encyclopedia of Ecological Economics. Retrieved on 15 October 2010.

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