Do affluent nations value a clean environment and preserve it? Evaluating the N-shaped environmental Kuznets curve

Shaheen, Fiza; Zaman, Khalid; Lodhi, Muhammad Saeed; Nassani, Abdelmohsen A.; Haffar, Mohamed; Abro, Muhammad Moinuddin Qazi

Do affluent nations value a clean environment and preserve it? Evaluating the N-shaped environmental Kuznets curve

2022

Since industrialization, the world has been under great strain from rising temperatures. Economies work hard to boost economic growth by sacrificing natural surroundings that are degrading owing to increased carbon emissions from unsustainable production and consumption. The race-to-the-bottom strategy is seen in different parts of the globalized world, corroborating the pollution haven concept and energy-related emissions. The study assumed that once affluent nations reached a particular economic level, they would concentrate on environmental reforms to safeguard environmental and natural resources. The study built a model of the emissions-growth nexus by controlling inward FDI, information and communication technology, research and development expenditures, and renewable energy using aggregated data from high-income nations from 1976 to 2019. The study verified the N-shaped environmental Kuznets curve using a three-degree polynomial factor of per capita income. On the other hand, inward FDI was assessed as having the potential to support the pollution haven hypothesis (PHH) by increasing carbon emissions. The data show that the square and cubic forms of per capita income have a significant negative and positive effect on carbon emissions in the long run, corroborating the short-peak V-shaped EKC hypothesis. However, the N-shaped EKC hypothesis between income and emissions is verified in the short run. The PHH confirmed that more inward FDI is associated with higher long-term carbon emissions. For decreasing global carbon emissions and unclean production, stringent and incentive-based regulations are preferable.

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