Revisiting the Environmental Kuznets Curve in the European Union countries

Abstract

In order to mitigate emissions, the European Union (EU) countries have implemented several legislative regulations. At the same time, the importance of trade in EU countries increased, which opened up an opportunity for carbon leakage. These two factors raise the question regarding the validity of the traditional Environmental Kuznets Curve (EKC) hypothesis. The study verifies the validity of the EKC hypothesis in the EU countries in the period between 1970 and 2017 by testing three EKC specifications, comparing the validity of the EKC for production-based emissions (PBA) and consumption-based emissions (CBA), and extending the analysis period to cover the effects of energy transformation. Due to the heterogeneity of the analysed countries, the ARDL testing bound approach is used. The results reveal that in most countries, the EKC models fail to explain the relationship between income and PBA emissions in the period 1970–2017. In most analysed cases, all three EKC specifications indicate no long-term relationship. The results obtained for CBA emissions also reject the EKC hypothesis.