THE RELATIONSHIP BETWEEN ECONOMIC GROWTH AND ENVIRONMENTAL DEGRADATION : Comparing the Environmental Kuznets Curve in European countries

Arguably, one of the most pressing global issues is currently the ever-growing levels of carbon dioxide in the atmosphere. This in turn is believed to be one of the main factors in the rising temperature level on Earth. To try to contain carbon dioxide levels many different theories have been proposed and tested. One of the theories used in regarding environmental degradation is the Environmental Kuznets Curve. This theory states that when a country’s economy grows, it increases its emissions up until a maximum level, at a certain level of GDP where emissions start to decrease with an increasing GDP. In this paper the validity of the Environmental Kuznets Curve has been tested in three European countries, Austria, Portugal and Sweden. Time series data with an Ordinary Least Squares-model and an Autoregressive Distributed Lag-model has been used to perform the statistical tests. The results show insignificant evidence to support the existence of the Environmental Kuznets Curve in all countries. In Austria and Sweden we can graphically see a curve with resemblance to the EKC but it is insufficient proof for the theory. In Portugal we see a strong positive sloped curve instead which might incline that we have only been looking at the first half of the EKC