An Inverse Global Environmental Kuznets Curve

Abstract

This paper articulates the necessity of emphasizing the absolute level of environmental degradation in different countries as a guide to understanding the links between such degradation and economic development. We argue the case for developing a composite environmental degradation index (EDI) and relating it to a better measure (in comparison to per capita income) of economic development, viz. the HDI. We put forward a methodology that would achieve this end. This has necessitated the use of principal components analysis to extract information and for forming an index of global environmental degradation. This index has then been related to the HDI.

Some other conclusions of the paper are as follows. First, there seems to be an inverse link between HDI ranks and EDI. Second, the US alone has a highly disproportionate (adverse) influence on all the six environmental degradation indicators. Therefore, in the design of a regulatory mechanism for global environmental management this factor would have to be recognized explicitly.

In the extant literature there is no consensus about the empirical basis for global environmental degradation (GED). All along the two contending views only try to verify whether or not an inverted U shaped EKC exists. Even if we agree that an inverted U shaped EKC does not exist it does not follow that an inverted N shaped global EKC exists. Our study argues precisely that an inverted N shaped global EKC does indeed exist and provides empirical support for this position. In the process we discover extreme inequalities in the contribution of low, medium and high country groups to GED with the low country group effectively ameliorating GED and the high group countries exacerbating it.

There are several important implications of the results of this paper and a few of these may be mentioned here. First, it provides a framework for assessing the current state of environmental degradation and its distribution world-wide. Thus, it would provide important inputs to a global agency like a WEO that would be interested in monitoring environmental degradation and its geographical distribution. Second, by relating such degradation to HDI, this relationship would highlight the contributions of countries with different levels of human development and assist in assigning liability. The contention that GED is essentially "caused" by a certain type of development characteristic of high (income) development countries is borne out by the results of this study.

These conclusions clarify that the first and foremost concern of global environmental management, and the WEO, should be to reckon with the inequality in global environment degradation and its intrinsic relationship with inequalities across countries in levels of economic development.

Keywords: Global Environmental Kuznets Curve, Principal Components, Environmental Degradation Index

JEL Classification: Q0, Q2, Q3