Happiness, Environment and Wealth: What Can Bhutan Show Us about Resolving the Nexus?

Abstract

The Environmental Kuznets Curve hypothesis examines how economic development can improve environmental outcomes (called Ecological Modernisation Theory) or it can cause worse outcomes (called Treadmill of Production Theory). This paper examines Bhutan which has committed policies for increased happiness and wealth while remaining carbon neutral. The difference is being tested by regression analysis of how economic growth varies with the environmental intensity of well being (EIWB). The regression analysis shows that the case of Bhutan can be explained in terms of the Treadmill of Production Theory based on economic and wellbeing growth harming the environment, however, it is simply too early in the EKC. The data also show that population growth helps resolve the nexus which works more in the Ecological Modernisation Theory perspective and supports the need to continue urbanization to resolve these issues. Rather than just simply waiting for economic growth to turn around the EKC, Bhutan should take direct action to maintain its carbon neutral goal and its happiness goal and thus continue to provide a model for the sustainable development discourse in general. Highlights: 1) The concept of the environmental intensity of human well being (EIWB) was used to examine the two dominant environmental impact theories: Treadmill of Production Theory (TPT) under the IPAT hypothesis and Ecological Modernisation Theory (EMT) for Bhutan under the framework of the EKC hypothesis. 2) The nexus between economic growth and EIWB leans towards TPT, but it is still too early to see EKC though decoupling has begun and is likely to lead to EMT. 3) The nexus between population and EIWB leans towards EMT. 4) The need for intervention on social and environmental issues within a modified economic growth trajectory remains the core finding of how sustainable development can be achieved.