Factors behind the environmental Kuznets curve - A decomposition of the changes in air pollution

The environmental Kuznets curve theory suggests that economic growth in the long run may reduce environmental problems. In this article, we use a decomposition analysis to isolate eight different factors, in order to investigate the origins of changes in emissions to air over the period from 1980 to 1996. Among these factors are economic growth, changes in the relative size of production sectors and changes in the use of energy. Given constant emissions per produced unit, economic growth alone would have contributed to a significant increase in the emissions. This potential degradation of the environment has been counteracted by first of all more efficient use of energy and abatement technologies. In addition, the substitution of cleaner for polluting energy types and other technological progressions and political actions have reduced the growth in emissions. Consequently, the growth in all emissions has been significantly lower than economic growth, and negative for some pollutants. The results indicate that policymakers may reduce emissions considerably through creating incentives for lower energy use and substitutions of environmental friendly for environmental damaging energy types, in addition to support environmental friendly research or to conduct direct emission reducing actions, such as abatement requirements or banning of environmental damaging products. This is particularly relevant to countries and sectors with relatively high energy intensities and low pollution abatement.