Economic Growth and the Environment: A Canadian Perspective

The paper examines the relationship between economic growth and environmental degradation in Canada. Reduced form models are estimated to measure the relationship between GDP and 10 measures of environmental degradation. The reduced form results provide little support for the existence of an Environmental Kuznets Curve (EKC), the view that environmental degradation initially rises with GDP per capita, but reaches a turning point, and then declines. The data are tested for the presence of unit roots and for the existence of cointegration between each of the measures of environmental degradation and income. Cointegration and causality tests indicate that some long-term relationship exists between most measures of environmental degradation and economic growth and that this relationship, in several cases, is bi-directional. The results suggest that a sectoral analysis of the causes of pollution that relate environmental measures to specific anthropogenic causes may provide a better approach to understanding the economic growth-environment relationship.