Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/316196 
Year of Publication: 
2025
Series/Report no.: 
WIDER Working Paper No. 18/25
Publisher: 
The United Nations University World Institute for Development Economics Research (UNU-WIDER), Helsinki
Abstract: 
In this paper, we first test the validity of the Environmental Kuznets Curve (EKC) hypothesis, using a large sample of approximately 190 advanced and developing countries, over a period of 34 years (1989- 2022). We find that (CO2) emissions respond positively to increasing income per capita, up to a turning point of approximately US$25,000. In a departure from the previous literature, we allow the relationship between economic development and emissions to depend on the stringency of environmental regulation. Our results indicate that environmental policies-and particularly market-based instruments, such as carbon taxes and emissions trading systems-make the EKC lower and flatter. These results are robust to several sensitivity checks, and to the use of regional (rather than global) data. Overall, our results have important policy implications, as they identify economic development as a pathway to environmental improvements. Moreover, we show that environmental policies are an essential means to achieving decoupling of emissions and economic output over the longer term.
Subjects: 
Environmental Kuznets Curve
climate change policy
decoupling
carbon tax
JEL: 
C33
Q53
Persistent Identifier of the first edition: 
ISBN: 
978-92-9256-575-6
Document Type: 
Working Paper

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