Environmental Kuznets Curve (EKC)

A Manual

Burcu Özcan,Ilhan Öztürk

• Publisher: Academic Press
• Year: 2019
• ISBN:
  9780128167960
• Topic: Economia
• Subtopic: Economia dello sviluppo

Environmental Kuznets Curve (EKC): A Manual provides a comprehensive summary of the EKC, summarizing work on this economic tool that can analyze environmental pollution problems. By enabling users to reconcile environmental and economic development policies, Environmental Kuznets Curve studies lend themselves to the investigation of the energy-growth and finance-energy nexus. The book obviates a dependence on outmoded tools, such as carrying capacity, externalities, ecosystem valuation and cost benefit analysis, while also encouraging flexible approaches to a variety of challenges.

• Provides a comprehensive summary of EKC studies, including advances in econometrics, literature reviews and historical perspectives
• Outlines solutions to common problems in applying EKC techniques by reviewing major case studies
• Explores frequently-utilized proxies for environmental quality

Part I

Introduction

Outline

1. Chapter 1. A Historical Perspective on Environmental Kuznets Curve

Chapter 1

A Historical Perspective on Environmental Kuznets Curve

Burcu Özcan, and Ilhan Öztürk

Abstract

This chapter provides a historical perspective on global environmental concerns rising over time. The “limits to growth” report, the Brundtland Report, the sustainable development notion, and the environmental Kuznets curve (EKC) are the essential notions emphasized in this chapter. Although environmental problems have been escalating worldwide, in particular since the second half of the 20th century, the onset of problems goes back to the period of industrialization in the 18th century. Since then, environmental pollution has appeared as a byproduct of economic development, and economies have tried to create effective solution mechanisms to compensate for the detrimental effects of development processes on the nature. In the current scientific field, there exists a central research question about whether economic growth is a foe or a friend for the environment. In this regard, analysts and scientists have been trying to answer this question by testing for the EKC hypothesis for different countries.

Keywords

Economic growth; Environmental Kuznets curve (EKC); Environmental pollution; Industrialization; Sustainable development

A Historical Perspective on Environmental Kuznets Curve

The close reciprocal linkage between environmental performance and economic development is of great importance and became a crucial subject of interest for too long. Regarding the economic impacts of environment, environmental quality may affect economic development through some channels. For instance, affecting the productivity level of labor, that is, the health conditions of workers, environment may have influences on the national human capital stock, which is the critical input for the development process. In this respect, Grossman and Krueger (1995, p. 355) argue that “our lives are affected by the air we breathe, the water we drink, the beauty we observe in nature, and the diversity of species with which we come into contact.” This situation is an indication that environmental quality has an undisputed importance for human being. Besides, economic development also has some effects on the environment; however, there is no any unanimous idea whether economic development is a friend or a foe to the environmental welfare. Therefore, researchers and scholars have been trying to find answer to the question whether economic development can be used as a solution for the environmental problems.

Particularly, since the industrialization era, because of the rising public concerns over environmental issues and the deterioration of environmental quality worldwide, scientists started searching for the reasons and solutions of the environmental degradation problems. For instance, global warming is accepted as a by-product of excessive consumption of fossil fuels by humans after the industrial revolution in the mid-18th century (Uchiyama, 2016), and countries have been struggling to curb the greenhouse gas emission levels against global warming and climate change problems. For the 21st century we are currently in, humanity has been witnessing some rising serious environmental disasters, such as flood, drought, melting of glaciers, global warming, and so on, which are the results of increasing pressure of human activities on the nature. Because of the environmental stress and pressure stemming from the human activities, the ecologic footprint level of each country increases as well. In other words, the ecologic footprint of human being, which is the total area necessary to produce the resources it consumes and to absorb the waste it generates based on prevailing technology (Bagliani, Bravo, & Dalmazzone, 2008), has surpassed the Earth's biocapacity, that is the amount of biologically productive land and water areas available within the borders of a given country (Moran, Wackernagel, Kitzes, Goldfinger, & Boutaud, 2008).

According to the Global Footprint Network (GFN)¹, the Earth's total biocapacity was 12.2 billion gha² (1.71 gha per person), whereas the humanity's ecologic footprint was 20.6 billion gha (2.87 gha per person) in 2013. Thus, the Living Planet Report prepared by the World Wide Fund for Nature (World Wide Fund for Nature (WWF), 2016) estimates that humanity currently needs the regenerative capacity of 1.6 Earths to provide the goods and services we consume each year. In this respect, a number of countries are moving from ecologic creditors to ecologic debtors, a phenomenon that ultimately manifests itself in global overshoot³ (Wackernagel, Monfreda, Erb, Haberl, & Schulz, 2004). For instance, growing water shortages, desertification, erosion, reduced cropland productivity, overgrazing, deforestation, rapid extinction of species, collapse of fisheries, and global climate change are the consequences of ecologic overshoot.⁴ In this respect, as stated by Galli et al. (2012), this century will be shaped by global overshoot, which will become increasingly evident in daily life in case that the trend of increasing human pressure do not reverse. Therefore, understanding the mechanism driving environmental problems is crucial to correctly assess the need and the usefulness of environmental policies because the carrying capacity of the earth may be surpassed sooner than we think (Urheim, 2009).

Even though we are living in a century accelerating environmental threats and catastrophes as explained above, the concerns about environmental degradation and natural resource depletion date back to the 18th century, the age of industrialization. For instance, in 1798, Thomas R. Malthus published a book—An Essay on the Principle of Population—in which he assumed that food supply grew arithmetically while population grew geometrically, and thus the world would be in misery because of the pressure of increasing population on the food supply. This situation was called the Malthusian Population Trap Theory where long-run human progress would be very dim (Ginevicius, Lapinskiene, & Peleckis, 2017). The theory emphasized the presence of a stage at which the food supply is inadequate for feeding the population given that population growth is ahead of agricultural growth. The Malthusian pessimism continued in the 20th century as well. For instance, in 1972, an international team of researchers from the Massachusetts Institute of Technology published the “Limits to Growth” report for the Club of Rome. They drew highly pessimistic scenario for the future of the world and underlined the reality that the rates of population growth, usage of resources, pollution increase, and material consumption would first grow exponentially but then collapse during the next century (Ekin, 1993; Tahvonen, 2000 ). The reason of the collapse is the limits that world economy will likely reach in terms of nonrenewable resources, agricultural production, and excessive pollution. Meadows, Meadows, Randers, and Behrens (1972, p. 23) emphasized the limits to growth as follows:

If the present growth trends in world population, industrialization, pollution, food production, and resource depletion continue unchanged, the limits to growth on this planet will be reached sometime within the next one hundred years.

They asserted that economic growth would be prevented as a result of finite environmental resource stock and that a steady-state economy with zero growth is a requirement to avoid the upcoming dramatic ecologic scenarios (Dinda, 2004). Therefore, they warned that patterns of production had to be changed from quantity to quality; otherwise, it would be impossible to satisfy the infinite needs of humanity (Ginevicius et al., 2017). Stressing the importance of the world's limited natural resource endowments, they advocated that world would be better off limiting its growth as opposed to continuing to reach for maximum growth in the long-run (Urheim, 2009).

In the course of time, there happened some serious events such as the oil crises in the 1970s confirming the ideas supported by the Club of Rome. Oil prices made peak because of oil shortage and resulted in the world energy crisis. After the oil crises, there were only few who questioned the view that the world was entering a future of rising scarcity of energy and natural resources (Tahvonen, 2000). However, though this pessimistic atmosphere, during the 1970s, some empirical studies supported that the ratio of consumption of some metals to income was declining in the developed economies, which conflicted with the predictions introduced in the Limits to Growth Report (Malenbaum, 1978). Owing to positive or negative environmental developments, The United Nations Conference on the Human Environment, also known as the Stockholm Conference, was held in Stockholm, Sweden from June 5 to 16, 1972. It was the first major conference of the United Nations on the international environmental issues and marked a turning point in the development of international environmental awareness.⁵

In the 1980s, humanity witnessed much progress and many improvements in the science and technology fields that eliminate the pessimistic considerations about the environment and natural resource endowments. For instance, economics discipline introduced a new economic growth theory, named as “the endogenous growth theory,” which assum...