On the Mechanics of the "Green Solow Model"

Brock and Taylor (2010) argue that the Environmental Kuznets Curve (EKC) is driven by falling GDP growth rates associated with a Solow type convergence. I test the importance of their mechanism by performing a “pollution accounting†exercise that decomposes emissions data into pollution intensity and GDP growth effects. The “Green Solow†framework assumes that emission intensities decline at a constant rate and hence that all changesin emissions growth rates are driven by changes in GDP growth rates. Yet, in the data, emission intensities are hump-shaped, implying declining emission intensity growth rates. Furthermore, this decline is up to an order of magnitude larger than changes in GDP growth. By assigning all the weight to GDP growth, the Green Solow model misses the largest driver of emissions. Models aiming to explain the EKC, should thus focus on explaining humpshaped emission intensities and consequently falling emission intensity growth rates.