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Does the ‘Environmental Kuznets Curve’ Exist? An Application of Long-run Structural Modelling to Saudi Arabia - La Curva di Kuznets esiste? Un’applicazione LRSM al caso dell’Arabia Saudita


Author Info

  • Masih, A. Mansur M.

    (The Global University of Islamic Finance (INCEIF))

  • De Mello, Lurion

    (Macquarie University)


This study examines the relationship between income and CO2 emission on a per capita basis in Saudi Arabia during 1975-2003. It is motivated by the recent heightened world concern over global warming pollution which resulted in the formulation of the Kyoto protocol and its rapid ratification by a majority of countries in the late 1990s. There have been many attempts to explain the increase in per capita CO2 emission by relating it to per capita income growth in a country via the ‘Environmental Kuznets Curve’ (EKC). The curve is named after Kuznets (1955) who hypothesized that income inequality in a country first rises and then falls as economic growth progresses. The EKC is usually postulated to have an inverted-U shape, which means that per capita income growth is initially associated with an increase in per capita CO2 emission. However, beyond a certain point, the relationship reverses and further per capita income growth is associated with a decrease in per capita CO2 emission. The practical implication of an EKC with inverted-U shape is that a continued increase of per capita income alone would ultimately reduce per capita CO2 emission, thus obviating the need for proactive political intervention. In contrast to the above, our study, based on a recently developed rigorous time series technique known as the Long Run Structural MODELLING (LRSM) (Pesaran and Shin, Econometric Reviews, 2002), indicates that at least in the context of Saudi Arabia (1975-2003) the EKC possesses a cubic-N shape. This implies that although increasing per capita income may indeed be associated with decreasing per capita CO2 emission for a certain period, in the long run the trend will reverse and it will again be associated with increasing per capita CO2 emission. This empirical finding of our study has a significant policy implication in that increases in per capita income alone are not enough to reduce per capita CO2 emission, but should be supported by a proactive industrial/technological policy that tackles related causes and also, since CO2 emission is evidenced to be mainly income-driven, policies should be focused on environment-friendly GDP growth. Moreover, not only the production but also the consumption of GDP, in particular the tastes and preferences of high-income individuals need to be environment-friendly. These findings have profound policy implications for both the developing and the developed economies of the world. - Questo studio esamina la relazione tra reddito procapite ed emissioni di CO2 in Arabia Saudita nel periodo 1975-2003. La scelta di questo argomento è dovuta all’aumentato interesse mondiale circa l’inquinamento causato dal riscaldamento globale e tradotto nell’impegno assunto con la sottoscrizione del Protocollo di Kyoto alla fine degli anni ’90. Si è tentato più volte di spiegare l’incremento delle emissioni procapite di CO2 mettendole in relazione con l’aumento del reddito di un paese, così come indicato dalla ‘Curva ambientale di Kuznets’ (EKC). Generalmente la curva di Kuznets viene rappresentata con una U inversa, il che significa che la crescita del reddito procapite è inizialmente associata ad un incremento delle emissioni procapite di CO2. Oltre un certo livello però, la relazione si inverte ed ulteriori aumenti del reddito procapite sono associati a diminuzioni delle emissioni di CO2. Quindi, secondo le implicazioni pratiche della curva di Kuznets a U inversa, la continua crescita del solo reddito procapite porta in ultima istanza ad una diminuzione delle emissioni procapite di CO2, evitando in tal modo la necessità di interventi politici preventivi. Contrariamente a quanto sopra esposto, questo studio, che si basa su un modello time series formulato di recente da Pesaran e Shin (2002) e conosciuto con il nome di Long Run Structural Modelling (LRSM), indica che almeno per quanto riguarda l’Arabia Saudita nel periodo 1975-2003 la curva di Kuznets ha un andamento diverso. Sebbene un aumento del reddito procapite può essere associato, per un certo periodo, ad una diminuzione delle emissioni procapite di CO2, nel lungo periodo la tendenza si invertirà e tale aumento nel reddito sarà di nuovo associato ad un aumento nelle emissioni di CO2. Questo risultato ha importanti implicazioni politiche in quanto gli incrementi del reddito procapite da soli non sono sufficienti a ridurre le emissioni di CO2, ma devono essere affiancati da politiche industriali e tecnologiche preventive che affrontino le cause del problema e, posto che le emissioni sono trainate dal reddito, da decisioni mirate ad una crescita del PIL sostenibile dal punto di vista ambientale. Inoltre non solo la produzione ma anche i consumi (specialmente i gusti e le preferenze di persone con alto reddito) devono essere sostenibili. Queste conclusioni rivestono notevole importanza sia per le economie in via di sviluppo che per quelle sviluppate.

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Bibliographic Info

Article provided by Camera di Commercio di Genova in its journal Economia Internazionale / International Economics.

Volume (Year): 64 (2011)
Issue (Month): 2 ()
Pages: 211-235

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Handle: RePEc:ris:ecoint:0616

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Keywords: Environmental Kuznets Curve; Long Run Structural Modelling;

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