Testing the Validity of Environmental Kuznets Curve for Carbon Emission: A Cross-Section Analysis

Global warming and its consequences have heightened the urgency of reducing emissions of carbon dioxide globally. The concern arises from countries’ relentless efforts to achieve economic development at the expense of the environment. In this context, the paper examines the Environmental Kuznets Curve (EKC) hypothesis at the world level using carbon emission as an indicator of environmental degradation. The EKC hypothesis postulates an inverted U-shaped curve between economic development and environmental degradation; degrading environmental quality at the initial stages of development and, after a threshold level, environmental degradation lowers. The study investigates the validity of the EKC hypothesis for carbon emission with an analysis of 158 countries in the world, with population, urbanization, forest cover, and tourist inflow as the control variables. The study is based on secondary data collected from the World Bank. A regression analysis is used for the study. To ensure environmental sustainability, it is important to identify the determinants of carbon emissions across countries with varying levels of economic development. The findings of the study support the hypothesized inverse U-shaped association between Gross Domestic Product per capita and carbon emission per capita at the world level. Out of the four control variables, urbanization and tourist inflow were found statistically significant. Urbanization was positively correlated with carbon emission per capita while forest area was negatively correlated. Carbon emission per capita initially increases with rising GDP per capita and declines after GDP per capita reaches a certain level. The estimated turning point of GDP per capita occurs at a high level and therefore, most of the countries are anticipated to emit carbon dioxide.