Evidence from panel unit root and cointegration tests that the Environmental Kuznets Curve does not exist

The Environmental Kuznets Curve (EKC) hypothesis – an inverted U-shape relationbetween various indicators of environmental degradation and income per capita –has become one of the ‘stylised facts’ of environmental and resource economics.This is despite considerable criticism on both theoretical and empirical grounds.Cointegration analysis can be used to test the validity of such stylised facts whenthe data involved contain stochastic trends. In the present paper, we use cointegrationanalysis to test the EKC hypothesis using a panel dataset of sulfur emissionsand GDP data for 74 countries over a span of 31 years. We find that the data is stochasticallytrending in the time-series dimension. Given this, and interpreting theEKC as a long run equilibrium relationship, support for the hypothesis requiresthat an appropriate model cointegrates and that sulfur emissions are a concavefunction of income. Individual and panel cointegration tests cast doubt on the generalapplicability of the hypothesised relationship. Even when we find cointegration,many of the relationships for individual countries are not concave. The results showthat the EKC is a problematic concept, at least in the case of sulfur emissions.