Amid Rising Global Uncertainty: Examining the Impact of Economic and Political Uncertainty on the Environmental Kuznets Curve in Emerging Economies

The environmental Kuznets curve (EKC) proposes an inverted U-shaped link between economic growth and environmental degradation. However, the impact of economic policy uncertainty (EPU) on this link has been understudied. This study examined a panel of 25 emerging economies between 2000 and 2020, employing generalized method of moments techniques to investigate how fluctuations in EPU affect the EKC’s trajectory. The study results revealed that higher levels of uncertainty extend the EKC’s turning point, prolonging the shift from increasing to decreasing environmental degradation. The turning point of the EKC under uncertainty occurs at a higher per capita income and emissions level than in the scenario without uncertainty. The study results also revealed that while carbon emissions in the sampled countries decrease with increasing renewable energy use and research and development, they increase with rising foreign direct investment. The findings draw attention to policymakers that EPU could hamper global efforts to reduce emissions in developing economies. JEL Classification: Q56, O13, C33