International Economic Growth and Environmental Pollution

This paper estimates the relationship between the level of economic growth and the extent of environmental pollution for a wide range of both industrialized and emerging countries. Using data from 28 countries over the period 1975-1998, the paper finds support for an inverted U- shaped economic growth-pollution relationship. Using the aggregate level of CO2 as the measure of pollution and real GDP per capita as the measure of economic growth, the following countries appear to be operating on the rising portion of the inverted U relationship: India, China, Nigeria, and Thailand. On the other hand, the following eight countries appear to lie on the declining portion of the inverted U- relationship: Brazil, South Korea, Spain, United Kingdom, Canada, France, United States, and Japan. Furthermore, ten of the remaining fourteen countries, with per capita GDP below $4,000 exhibited a positive regression coefficient, although none were statistically significant. The turning point appears to occur at a level of GDP per capita, perhaps as low as $3,000-4,000. The paper explores the energy prospects and environmental polices of three of the worlds largest and fastest growing economies, China, India, and Brazil. These three countries are found to play a key role in the empirical findings of this study. The study demonstrates that growth in knowledge and improvements in environmental technology can compensate for an inevitable increase in the use of natural resources in production.