DOES ECONOMIC GROWTH REDUCE OR INCREASE POLLUTION? AN EXAMINATION OF CROATIA’S SECTOR-SPECIFIC ENVIRONMENTAL KUZNETS CURVE

Long-term cointegration, but with non-significant short-term adjustments, was observed in the buildings, transportation, and utility/electricity sectors. Among sectors with a significant long-term relationship, an inverted U-shaped Environmental Kuznets Curve (EKC)-where emissions initially rise and then, after reaching a certain GDP threshold, decline-was identified in the buildings and energy-intensive sectors. In contrast, a Ushaped relationship was found in the utility/electricity sector, where emissions initially decrease but start to increase again as GDP grows. The transportation sector shows a positive linear relationship with GDP, with emissions rising consistently with economic growth, highlighting the need for targeted interventions like carbon pricing. Conversely, the fossil fuel sector shows no significant GDP-emissions relationship, pointing to external factors like geopolitical risks as primary influences.