Economic Growth and Environmental Degradation: A Critique of the Environmental Kuznets Curve

In this paper we critically examine the concept of the environmental Kuznets curve (EKC). This concept, most prominently promoted in the World Development Report 1992, proposes that there is an inverted U-shape relation between environmental degradation and income per capita. The concept is dependent on a model of the economy in which there is no feedback from the quality of the environment to economic growth and in which trade has a neutral effect on environmental degradation. There are also some econometric problems with previous estimates of the EKC. The inference from the EKC estimates that further development will reduce environmental degradation is dependent on the assumption that World income is normally distributed when in fact median income is far below mean income. To illustrate the latter point we carry out a simulation under the assumption that one could actually analyze the economy-environment relationship in the way suggested by the EKC. We combine published estimates of the EKC with World Bank forecasts for long-run economic growth. The analysis shows that within the horizon of the Bank's forecast (2025) global emissions of SO2 will continue to increase. Forest loss stabilizes before the end of the period but tropical deforestation continues to proceed at a constant rate throughout the period. This is despite a near doubling in mean world income per capita.