Exploring the Impact of Economic Growth on the Environment: An Overview of Trends and Developments

Abstract

In our modern world, energy keeps the global economy running, and economic growth concerns are profoundly interrelated with environmental quality issues. Interestingly, scientists engage with empirical research to identify the impacts and causalities at the interface of economic activities, energy supply, and demand. The importance of the present study lies in a discussion of all contemporary research efforts bridging two strands of empirical literature in environmental economics: developments in energy growth nexus discussion and the environmental Kuznets curve. Furthermore, it highlights the inclusion of untested explanatory variables and the impacts on environmental degradation levels. In the context of the EKC hypothesis, the most popular indicators are greenhouse gas emissions (GHGs) and carbon dioxide emissions in conceptualizing environmental degradation. A review of relevant empirical studies disclosed additional research opportunities that can consider currently untested and less visible proxies of economic growth. For both strands in the literature, results differ based on the group of countries investigated, the econometric models adopted, the format of data, e.g., time series or panel analyses, the time frames due to data availability, and the proxies used to conceptualize energy, environmental degradation, and economic growth. Practical implications indicate that environmental degradation can be avoided or significantly limited within sustainable economic growth to reduce carbon dioxide emissions and increase the use of renewables in the energy mix. Furthermore, one particular implication is the concept of energy efficiency to reduce relevant demand to produce the same outcome or task.