Economy - environment relationship: The case of sulphur emissions

This paper explores the relationship between economic development (in the form of GDP/c) and environmental pollution (in the form of sulphur emissions) by using a dynamic panel data for 97 countries for the time period 1950-2003. Various panel data econometric techniques are applied to a sample including only European Union (EU) countries and to a full sample including both the EU countries of the EU-countries sample, as well as, certain non-EU countries. The empirical results indicate significant differences between the two samples. For the case of the full sample, cross-country variation in the estimated slopes is observed, and parameters are extremely heterogeneous across countries making aggregate summarization not to be useful at all. However, the previous findings do not hold for the sample of the EU country members, resulting to the conclusion that policies to control pollution have to take into consideration both the specific economic situation and the structure of the industrial and the business sectors of each region. The last argument is even more important if someone takes into consideration transboundary pollution problems. Finally, in terms of policy implications, the study discusses the main options for sulphur emissions abatement.