Reinvestigation of the validity of the EKC hypothesis extended with energy: A time-varying analysis for the United Kingdom

Abstract

The Environmental Kuznets Curve (EKC) hypothesis has been extensively analyzed as a long-term relationship between the economic development stages and related environmental impacts. Most of the existing literature has however produced unreliable results as extensive databases have been used without considering the length of the time span. In this study, the EKC hypothesis is re-investigated for the United Kingdom for the time period 1850–2018. The objective is to conduct an innovative methodological approach that, contrary to the conventional estimation methods, uses time-varying techniques⸺the time-varying cointegration test of Bierens and Martins (2010) and the time-varying causality test of Shi et al. (2018, 2020)⸺to account for the incidence of unexpected historical events, such as socio-economic and policy crises. Results show that, for the considered years, the EKC hypothesis is valid for the UK. In addition, by including income, carbon dioxide emissions, and energy consumption data, the present study also analyses the environmental impacts of energy use and the environmental quality changes that have taken place during the considered period of time. This result proves that energy consumption pollutes the environment significantly; however, the magnitude of its impact can be affected by many shocks. According to the empirical findings, policymakers could adhere to current policies because environmental quality has started to increase for several decades in the United Kingdom. The employed methodology, and the related results, can support the definition of policies and the development of additional research initiatives.