In addition, in my doctoral thesis from 2009, I listed 7 distinct explanations for the EKC, did I miss any, or has some additional been suggested since that?
1) Income elasticity of environmental quality demand: when a country achieves a sufficiently high standard of living, people attach increasing value to environmental amenities.
2) Scale, composition and, technological effects:
Scale effect: Increasing output requires more input and thus more natural resources are used and as a by-product more wastes and emissions a generated.
Composition effect: Environmental degradation tends to increase as the structure of the economy changes from rural to urban or from agricultural to industrial, but it starts to fall with another structural change from energy intensive industry to services and knowledge based technology intensive industry.
Technological effect: Because a wealthy nation can afford to spend more on R & D, technological development occurs with economic growth and dirty and obsolete technologies are replaced by upgraded new and cleaner technology.
3) International trade:
Displacement Hypothesis: Changes in the structure of production in developed economies are not accompanied by equivalent changes in the structure of consumption; therefore, the EKC actually records displacement of dirty industries to less developed countries.
Pollution Haven Hypothesis has fundamentally the same implications, referring to the possibility that multinational firms, particularly those engaged in highly polluting activities, relocate to countries with lower environmental standards.
4) Market mechanism: An endogenous “self-regulatory market mechanism” for those natural resources that are traded in markets might prevent environmental degradation from continuing with income.
5) Regulation: With economic growth, economies advance their social institutions that are essential to enforce environmental regulation: environmental standards, laws, proper allocation of property rights and informal regulation pursued by NGOs and social groups.
6) The severity of environmental degradation might itself create a turning point for the emissions, or insome cases fear of severe effects
7) Finally, what at a first glance seems to be an environmental improvement might just be a transformation of one environmental problem into another. What in an ahistorical perspective seems to be one single environmental Kuznets curve are in fact several sequential curves.
http://cadmus.eui.eu/handle/1814/11753
I would like to mention something related with the presence of multicollinearity in the traditional specification (cuadratic or cubic):
http://www.sciencedirect.com/science/article/pii/S0301421509006880
Furthermore, Endogeneity within regressors:
Selden, T. M., & HEIL, M. T. (2001). Carbon emissions and economic development: Future trajectories based on historical experience. Environment and Development Economics, 6(1), 63 - 83
Richmond, A. K., & Kaufmann, R. K. (2006). Energy Prices and Turning Points: The Relationship between Income and Energy Use/Carbon Emissions. The Energy Journal, 27(4), 157 - 180.
Mrabet, Z., Alsamara, M., & Jarallah, S. (Noviembre de 2016). The impact of economic development on environmental degradation in Qatar. Environmental and Ecological Statistics, 1 - 32. doi:10.1007/s10651-016-0359-6
You may find a modest contribution to the questions you have made..
http://journals.univ-danubius.ro/index.php/oeconomica/article/view/2384/2642
Foreign Direct Investment Environment and Economic Growth (pp.37-39)
Negative Externalities from Consumption of FDI and GDP
Economic growth through fast industrialization and environmental consequences has sparked a fierce debate. Studies (Grossman and Grueger1991, Selden and Song1994 Rothman 1998) support a U-shaped curve, the Environmental Kuznets Curve (EKC), which express the relationship between environmental degradation and economic growth, in most cases emphasizes that economic success of the countries has been reached at the expense of degradation of their environment. According to this curve relationship between economic growth and CO2 emissions, means that economic growth worsens the environment while per capita income (PC)2 are low.
With the improvement of this indicator, the environment is improved. This is
supported by Stern (2004) too. However, this is best expressed by Muhammad
Shahbaz, Nasreen Samia and Afza Talat in their paper, using panel data of 110
developed and developing economies. Results showed that the environmental
Kuznets curve exists and foreign direct investment increase the environmental
degradation. Kuznets Simon in his first report in the U.S. Congress in 1934 said: Welfare of a nation can scarcely be achieved by a measure of national income. In 1962, Kuznets states: differences should be remembered amongst the quantity and quality of growth, between costs and benefits, between short term and long term growth.
Table 2. This table should be edited as the three- lines table, the trend of FDIPC,GDPPC and CO2PC in 110 countries
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According to table 2, the FDI annual average per capita amounted to US$ 400.19 between 2000 and 2005, more than triple amount for the period 1991-1995. As a result, the annual GDP average per capita increased from US$ 4,460.56 to US$ 8,307.06 during the same period. Economic growth has been associated with the problem of environmental pollution, but the higher the economic growth per capita is, the lower the pollution will be. For example, the average annual CO2 emissions per capita increased by 3.38 metric tons from 1986 to 1990 and 3.82 metric tons during the years 2000-2005. For a better environmental performance, environmental regulations are essential means that from the economic activity of firms reduce the external cost they cause. Two thoughts are expressed in terms of this issue:
a. companies relocate their activities in developing countries to benefit from
the low cost of production;
b. the benefit of investors from non-stringent regulations. But it is believed
that foreign companies use best management practices and advanced
technology that results in a clean environment in the host country (Zarsky,
1999).
Public reactions to the externalities in cases where companies operate according to their mentality do not achieve an efficient choice; there are various ways through which the government can intervene. Pigou suggested setting a tax on pollutants for each unit produced equal to the marginal damage that it causes an efficient level of output. (Rosen, 2003).
This should happen exactly in developing countries as they are the largest
participants of global environmental pollution. When we consider that in
developing countries the right to property in most cases is contestable then the Cose‟s theorem (1960)1, applies not satisfactory. This explains the effectiveness of policies in all countries with the aim of improving environmental performance on planet Earth (Pao & Tsai, 2011).
Figure 1. An empirical evaluation report of GDP environmental quality2
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If we take only Kosovo as an example from SEE countries to argue this concern,Kosovo is the fifth in Europe in coal reserves, but its use has caused environmental pollution three times higher than the permitted standards. There is no doubt that FDI promote economic growth, but also negatively affect the environment (Xing & Kolstad, 2002). But if these plants are equipped with the perfect technology (technological transfers and know-how), then negative effects will be reduced to the extent of no inconvenience (Chay & Greenstone, 1998).
http://mimoza.marmara.edu.tr/~mtekce/Dinda_2004.pdf
very insightful research paper for EKC.
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