Quantifying Central Hypotheses on Environmental Kuznets Curves for a Rich Economy: A Computable General Equilibrium Study

Abstract

Abstract:We investigate whether the future relationships between several pollutants and per capita income in rich countries may assume the inverted U-forms of Environmental Kuznets Curves (EKC). The emission-augmenting effect of scaling up aggregate economic activity may be counteracted by greener composition of production and consumption, technological progress, and increased demand for environmental quality and policy. To quantify the importance of these central hypotheses, we use a CGE model with endogenous policy for Norway. Our results suggest significant future effects of all these three counteracting mechanisms. For most local and regional pollutants, they may be strong enough to prolong the falling emission trends. However, we cannot rely on reductions in emissions of climate gases and some transport-related local pollutants. Our results also indicate that pollution leakages abroad are likely to find place.

How economic growth, renewable electricity and natural resources contribute to CO2 emissions?

“…Thus, innovation measures contribute to delays in a new ascending trend in pollution (He, 2006;Lorente and Álvarez-Herránz, 2016). To demonstrate the long-term appearance of technical obsolescence, it must be accepted that once an economy achieves a high income, society will demand a high-quality environment, which will require efforts in the form of environmental regulations to promote technical effects through more efficient and less polluting energy production actions (Bruvoll et al, 2003;Turner and Hanley, 2011). Álvarez-Herránz et al (2017) demonstrate the positive effect of energy innovation policies in lowering CO2 emissions and how these measures help delay technical obsolescence.…”

Richer and cleaner—At others’ expense?

“…While there was a decoupling between Norwegian income and domestic emissions in the past (Bruvoll and Medin 2003), this seems to become weaker over the next decades (Bruvoll, Faehn and Strøm 2003). According to the concern that leakages contribute to the EKC, one might expect to find that the historical decoupling was followed by increasing pollution leakages, and that leakages are smaller in the future, when decoupling is weaker.…”

“…Figure 1, even exceed the GDP per capita growth. In a study based on the same exogenous assumptions, Bruvoll, Faehn and Strøm (2003) decompose the future emission trends into contributions from increased economic scale, technical changes in production and emission, and effects of structural changes, and find that changes in the production structure significantly contribute to decoupling for all the gases, see Table 4. The reason for this is partly found in the expected downscaling of the offshore industry over the next decades.…”

“…In other words, changes in emissions that are not explained by the remaining endogenous or exogenous driving forces within the model, are defined as results of changes in future climate policy. For further details on the modeling of this mechanism, see Bruvoll, Faehn and Strøm (2003).…”

“…Dinda (2004) provided an empirical and theoretical survey. Bruvoll, Faehn and Strøm (2003) quantified central EKC-hypotheses based on emission projections within a Norwegian macroeconomic model. concerns about the distribution of environmental quality among nations.…”