ENVIRONMENTAL KUZNETS CURVE HYPOTHESIS IN SELECTED EU COUNTRIES: KYOTO EFFECT

Abstract

The purposes of this study is to investigate the relationship between per capita CO2 emissions, per capita energy consumption, per capita real GDP, the squares of per capita real GDP, trade openness and Kyoto dummies in selected 20 EU countries over the periods from 1991 to 2013 in order to analyze the connection between environmental pollution and Kyoto Protocol using Environmental Kuznets Curve (EKC) framework. According to EKC hypothesis, there is an inverted-U shape relation between environmental pollution and economic growth. Generally, the relationship between environmental pollution, per capita GDP and energy consumption has been analyzed for testing EKC hypothesis. In this study, it is used dummy variable to analyze the effects of Kyoto protocol on environmental degradation in the context of EKC hypothesis model. The dummy variable indicates Kyoto Protocol agreement year 2005. The results show that there is long run cointegration relationship between CO2, energy consumption, GDP growth, and the squares of GDP growth, trade openness and Kyoto dummy variable. Energy consumption and GDP growth increase the level of CO2 emissions. On the contrary, Kyoto dummy variable de­creases CO2 emissions in EU countries. In addition, the results reveal that the squares of per capita real GDP and trade openness rate are statistically insignificant. As a result of analysis, the inverted-U shape EKC hypothesis is invalid in these EU countries over the periods from 1991 to 2013.