Rethinking Economic Growth Policies in Context of Sustainability: Comparison
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Please note this is a comparison between Version 2 by Fanny Huang and Version 1 by Florin Andrei.

Extensive investigation has conclusively demonstrated that a direct and positive correlation exists between population size and energy consumption and the subsequent impact on carbon dioxide (CO2) emissions. Interestingly, there is a negative association between the GDP per capita and CO2 emissions, suggesting the possibility of a decoupling between economic growth and carbon emissions. This might be attributed to the development of cleaner technology and a heightened awareness of environmental concerns. Comprehending these processes is crucial for well-informed policy formulation with the objective of attaining a healthy equilibrium between economic success and environmental sustainability. Further investigation is required to explore these associations in greater depth, considering improvements in technology, the efficacy of policies, and variances across different regions, with the aim of promoting a more environmentally friendly and sustainable future.

  • CO2 emissions
  • sustainability
  • economic growth
  • GDP per capita
  • energy

1. Introduction

Although economic growth is commonly regarded as a favorable measure of a country’s affluence and progress, it can also have adverse consequences on the environment, resulting in escalated levels of pollution [1]. The correlation between economic growth and pollution is attributed to multiple causes and exhibits variability across diverse countries and locations. Industrialization and urbanization are key factors contributing to the positive correlation between economic expansion and pollution [2]. As a nation’s economy expands, there is frequently an increased need for energy, transportation, and manufacturing, all of which have the potential to result in elevated levels of pollution. This encompasses the release of toxins, such as carbon dioxide (CO2), nitrogen oxides (NOx), and sulfur dioxide (SO2), into the atmosphere through emissions from factories, power plants, and cars [3]. Consequently, this contributes to the occurrence of air pollution and the phenomenon of global warming. Moreover, it is frequently observed that as individuals’ financial capacities expand in tandem with economic development, there tends to be a corresponding surge in consumption patterns and a notable transition towards more resource-intensive modes of living [4]. This phenomenon can lead to an increase in both the generation and disposal of garbage, hence increasing environmental issues to a greater extent. Furthermore, the endeavor to achieve economic expansion may occasionally result in the exploitation of natural resources, deforestation, and the destruction of habitats, all of which can have adverse environmental implications [5,6][5][6]. Nevertheless, it is crucial to acknowledge that the correlation between economic growth and pollution does not follow a linear pattern. There is a contention that economic expansion has the potential to engender favorable transformations in environmental policies and technologies. As nations experience economic growth, there is a likelihood of increased investment in cleaner technologies and the implementation of more stringent environmental rules, resulting in a decrease in pollution levels [7].

2. Rethinking Economic Growth Policies in Context of Sustainability

The environmental Kuznets curve (EKC) concept was first introduced by Grossman and Krueger [8]. While the primary focus of their study did not revolve on the EKC, it was mentioned as a noteworthy discovery. Based on the EKC hypothesis, an inverse U-shaped association exists between some environmental indicators and economic advancement, as measured by per capita income. The proposition posits that an inverse relationship exists between a nation’s income and its environmental condition, wherein environmental degradation tends to worsen during the earliest periods of economic expansion, but above a certain threshold of economic prosperity, environmental quality begins to ameliorate. It is imperative to acknowledge that subsequent to the initial discovery by Grossman and Krueger [8], the EKC has garnered significant attention and scrutiny within the realm of environmental economics. The results obtained from conducting experiments on the notion, while manipulating various environmental factors and income levels, have shown inconsistent findings. There are several factors that might potentially influence the relationship between economic growth and environmental quality, including the type of pollutant, advancements in technology, government interventions, and regional variations. Consequently, EKC does not possess the universal applicability of a theory, but rather serves as a concept that has stimulated more investigation and discourse within the field. Nevertheless, the empirical data regarding the EKC are varied and contingent on the specific setting [9].
There is a close connection among pollution, energy use, and economic expansion [10]. Given the escalating pace of global warming, it is necessary to investigate the fluctuations in pollutant levels in correlation with variations in gross domestic product (GDP). The authors investigates the existence of an EKC across many panels of nations categorized into low-, middle-, and high-income status groups globally from 1990 to 2016. To evaluate EKC in connection to carbon dioxide, nitrous oxide, and methane, a fixed/random effect regression analysis is performed using robust standard error estimation, as determined by the Hausmann test. The Kaya identity is employed in a suitable manner to analyze the increase in contributions of different component ratios to global pollution rates across many countries. The panel vector error correction model was used to analyze the unidirectional and bidirectional causal connections between the gross domestic product (GDP) and pollutant emissions.
Dogan and Ozturk [11] examined the effects of real income and the use of both renewable and non-renewable energy on CO2 emissions in the United States from 1980 to 2014. They employed the EKC model as their analytical framework. The findings from the Gregory–Hansen cointegration test suggest that there is an identified long-term connection among CO2 emissions, real income, quadratic real income, and both renewable and non-renewable energy in use. The long-term estimates of the autoregressive distributed lag (ARDL) model suggest that a rise in renewable energy (RE) consumption has a mitigating effect on environmental damage, whereas an increase in non-renewable energy consumption contributes to carbon dioxide (CO2) emissions. Furthermore, the EKC theory lacks validity when applied to the United States.
The examination and discussion of the relationship between economic expansion and environmental deterioration, particularly in terms of pollution, have been prominent areas of scholarly investigation and policy discourse. Historically, there has been a correlation between economic development, as measured by a rise in GDP and greater earnings, and the enhancement of living standards and overall prosperity. Nevertheless, it is crucial to acknowledge the significant correlation between economic growth and heightened environmental degradation, namely in terms of pollution [9]. The complex correlation between economic success and environmental pollution spans several dimensions and is shaped by a range of factors, such as advancements in technology, interventions in policy, and the level of social consciousness [12].
Industrialization and urbanization are key mechanisms via which economic growth exerts its influence on pollution. The process of economic development frequently entails a transition from agrarian-oriented economies to economies that are centered around industrial and service sectors. This period of transition is marked by a notable surge in industry, energy use, and transportation endeavors. The activities release several pollutants, including sulfur dioxide (SO2), nitrogen oxides (NOx), and particulate matter, hence contributing to the occurrence of air pollution [13]. The EKC posits a curvilinear association between income and pollution, characterized by an initial rise in pollution levels during the early stages of economic expansion, followed by a subsequent decline as societies achieve higher levels of wealth [8].
Economic growth frequently triggers the process of urbanization and results in heightened population density. However, if this urbanization is not accompanied by efficient urban planning, it can give rise to elevated levels of pollution. The process of urbanization occurring at a fast pace has the potential to lead to heightened levels of energy consumption, traffic congestion, and industrial activity, all of which have been identified as factors that contribute to the problem of pollution [14]. Nevertheless, urban planning assumes a pivotal role in the mitigation of these adverse environmental effects. The implementation of well-structured urban planning strategies has the potential to facilitate the development of sustainable transportation systems, green infrastructure, and effective land utilization. Consequently, these measures can contribute to the mitigation of pollution levels in rapidly expanding metropolitan areas [15].
Increases in economic activity stimulate transportation activity, resulting in elevated levels of pollution. The escalation of earnings leads to a heightened desire for autos and transportation services, thus leading to an upsurge in the discharge of greenhouse gases (GHGs) and air pollutants [16]. Strategies aimed at alleviating this impact encompass the allocation of resources towards the development and implementation of cleaner transportation technology, as well as the promotion of sustainable urban design practices with the objective of diminishing dependence on private vehicles [17].
As civilizations experience economic growth and an increase in affluence, there tends to be a corresponding inclination towards higher levels of resource consumption, resulting in a subsequent rise in waste generation [18]. To address the escalating environmental consequences resulting from heightened waste generation in expanding economies, it is imperative to implement sustainable waste management approaches, including recycling, circular economy concepts, and trash reduction initiatives [19].
The extraction and utilization of the natural resources, such as minerals, fossil fuels, and agricultural products, frequently lead to environmental damage and pollution. As exemplified by Dasgupta [18], mining activities have the potential to result in adverse environmental consequences, such as soil and water contamination, deforestation, and habitat damage. Industries that require substantial resources, such as energy generation and manufacturing, make a substantial contribution to environmental pollution. The aforementioned industries not only exhibit high levels of resource consumption, but also contribute to the release of greenhouse gases (GHGs) and other harmful pollutants into the environment [20].
As countries experience economic growth, there is a tendency for them to allocate greater resources towards research and development (R&D), resulting in advancements in environmentally sustainable energy sources, enhanced transportation infrastructure, and the adoption of eco-conscious manufacturing techniques [21]. Furthermore, the presence of economic growth can lead to the enforcement of more stringent environmental rules. These regulations serve as incentives for firms to decrease their emissions and adopt cleaner manufacturing techniques [22].
Economic expansion frequently serves as a catalyst for technological advancements, which in turn can exert an influence on levels of pollution. This, in turn, facilitates advancements in the realm of sustainable energy sources, environmentally conscious manufacturing techniques, and enhanced pollution mitigation technology [21]. Technological improvements have the potential to result in a decrease in pollution emissions per unit of economic output, a phenomenon sometimes referred to as “dematerialization”. According to Jorgenson and Clark [23], scholarly research has demonstrated that the advancement of technology has a substantial influence in disassociating economic expansion from pollution.
The relationship between higher earnings and economic development has the potential to foster heightened environmental consciousness and a notable movement in consumer preferences towards sustainable practices. As individuals and communities experience an increase in income, there is a tendency to place greater importance on environmental conservation and exhibit a higher demand for items and behaviors that are environmentally friendly [9].
The presence of pollution can result in negative consequences for human well-being, ultimately resulting in heightened healthcare costs [24]. In addition, pollution has the potential to disturb ecosystems, diminish agricultural output, and contribute to climate change, as highlighted by Costanza et al. [20]. The presence of negative externalities has the potential to impede the sustained expansion and advancement of the economy, hence emphasizing the significance of tackling pollution as a crucial economic and environmental obstacle.
The complex interplay between economic growth and pollution presents considerable obstacles for policymakers. Achieving a harmonious equilibrium between promoting economic growth and minimizing negative environmental impacts necessitates the implementation of a comprehensive and complex strategy. This entails formulating rules that facilitate the adoption of sustainable practices, provide incentives for the utilization of cleaner technologies, and establish punishments for instances of environmental harm. In addition, it is imperative to emphasize the need for international collaboration in addressing global environmental concerns, as pollution frequently surpasses national boundaries, necessitating collective endeavors [25].
The impact of economic expansion on pollution is further moderated by governmental environmental restrictions. The primary objective of these policies is to alleviate the environmental consequences associated with economic operations. Research has indicated that the implementation of rigorous environmental regulations can successfully mitigate pollution levels, even in the presence of economic growth [26]. According to the environmental Kuznets curve theory, a positive relationship exists between economic growth and pollution levels in the early stages. However, once a particular income threshold is surpassed, the implementation of environmental legislation and increased awareness likely result in a decline in pollution levels [9].
Hamaguchi et al. [27] examine how environmental policies influence economic growth and pollution. The theory that implementing stringent environmental regulations will lead to a decline in employment opportunities and reduced levels of productivity is deeply entrenched. To promote sustainable development, it is crucial to ascertain environmental policies that align with both economic growth and the mitigation of pollution.
Onofrei et al. [28] investigates the relationship of economic development and carbon dioxide (CO2) emissions across the 27 member states of the European Union (EU) over the period spanning from 2000 to 2017. The authors utilize a combination of quantitative methodologies, including dynamic ordinary least squares (DOLS), unit root tests, and cointegration techniques, alongside a qualitative sequential methodology that incorporates empirical analysis. The findings suggest that a durable relationship exists between economic development and CO2 emissions in European Union (EU) nations. The dynamic ordinary least squares approach demonstrates that economic growth has a statistically substantial influence on CO2 emissions, as indicated by both versions of estimators. Specifically, the analysis reveals that, on average, a 1% alteration in GDP leads to a 0.072 unit change in CO2 emissions.
In a study conducted by Zoundi [29], an examination is made into the effects of renewable energy on carbon dioxide (CO2) emissions testing on a panel of 25 countries from Africa. The investigation spans the years from 1980 to 2012 and employs the panel cointegration technique. It has been observed that there is a positive correlation between economic expansion and the rise in CO2 emissions. The estimation findings show that renewable energy has a negative impact on CO2 emissions, making it an effective alternative to existing energy sources. African countries are amongst the heaviest releasers of pollution due to old technology and a lack of investments.
Ozturk and Acaravci [30] investigated the connection among macro-economic variables, economic growth, foreign trade, employment ratio, and energy specific indicators, such as carbon emissions and energy consumption, in Cyprus and Malta from 1980 to 2006. They employed the autoregressive distributed lag (ARDL) bounds testing approach and error correction-based on Granger causality models to analyze the data. The empirical evidence suggests that there is a long-term association between the variables; however, this relationship is only observed in the case of Malta. Still, the countries are not representative at the European level when discussing heavy industry and the level of pollution.
Bovenberg and Smulders [31] examined the correlation between economic expansion and environmental quality by including a pollution-increasing technology breakthrough in an endogenous development model. This study examines the factors that contribute to the feasibility and desirability of achieving sustainable economic growth. The authors developed a comprehensive framework aimed at implementing a more assertive environmental policy with the objective of enhancing long-term economic growth.
There is a growing impetus in the endeavor to separate economic progress from pollution. The notion of sustainable development underscores the imperative of attaining economic growth while concurrently safeguarding the environment and maintaining social fairness [32]. The prioritization of environmental sustainability with economic success is a key feature of the sustainable development goals, as articulated in the United Nations’ 2030 Agenda for Sustainable Development [33].
In a recent study, Mitic et al. [34] studied the connection among CO2 emissions, energy production and socio-economic variables, like increases in GDP and employment, in a panel of eight countries from southern and eastern Europe between 1995 and 2019. The research indicated that bidirectional causality exists between CO2 emissions and employment as well as between energy and employment. Unidirectional causality was observed between employment and GDP.
Chomac-Pierzecka et al. [35] centers around the ongoing energy transition in European Union nations, specifically highlighting the formal regulations and the influence of decision-makers supported by the public. The authors explore the worldwide implementation of environmental conservation strategies and the broad adoption of the Green New Deal within the energy industry. The study investigates the level of familiarity across communities with mainstream transition solutions, such as renewable energy sources, and examines how public awareness impacts consumer choices, thereby altering the market. Predominantly carried out in Poland and Lithuania, the study examines these nations based on their close geographical proximity and comparable socio-economic circumstances, providing insights into the energy issue. The results indicate that heightened public consciousness promotes the acceptance of renewable energy alternatives, regardless of their specific nature, hence facilitating the process of transitioning to sustainable energy sources.
Jozwik et al. [36] explores the dynamic transformations brought about by environmentally friendly activities and the shift towards digital technologies in countries located in Central Europe. These projects incorporate cutting-edge technologies into everyday life and commercial operations, resulting in improved environmental quality through sustainable practices. The study seeks to elucidate the complex interrelationships among the utilization of renewable energy, digitalization, financial development, and their collective influence on environmental quality in the region. By analyzing data spanning from 1995 to 2019, the study reveals a positive correlation between economic growth and carbon emissions, while also identifying a negative correlation among digitization, adoption of renewable energy, and carbon emissions. The process of digitalization acts as an intermediary in the connection between the utilization of renewable energy and the state of the environment in nations, such as the Czech Republic, Hungary, Latvia, and Slovakia. Nevertheless, the impact of financial development differs between nations. These findings provide useful insights that can be used to shape policy suggestions in Central European nations.
The study prepared by Neagu [37] used the EKC model to examine the relationship between the economic complexity index (ECI) and carbon emissions in 25 European Union (EU) nations from 1995 to 2017. The study utilizes a cointegrating polynomial regression (CPR) to analyze both panel data and individual nation time series. The model also takes into account the concept of “energy intensity” as a crucial determinant of carbon emissions. According to the study, countries have an inverted U-shaped pattern in CO2 emissions based on their economic complexity. Initially, pollution levels increase as countries expand their range of exported goods. However, after reaching a certain threshold, higher economic complexity results in decreased emissions. The analysis reveals a significant correlation among economic complexity, energy intensity, and carbon emissions. Specifically, a 10% increase in energy intensity leads to a 3.9% increase in CO2 emissions over the long term. This quadratic model, which incorporates the economic complexity index (ECI), has been verified for all nations in the panel, including Belgium, France, Italy, Finland, Sweden, and the United Kingdom. The paper also examines the graphical depictions of the environmental Kuznets curve (EKC) in various nations and incorporates policy ramifications.
It is essential to reassess the EKC hypothesis in order to comprehend global economic progress and accomplish carbon reduction objectives, as an increasing number of nations pledge to achieve carbon neutrality and decrease emissions. The primary objective of this study [38] is to address the difficulty of pinpointing the exact moment when an increase in income results in a decrease in CO2 emissions. The EKC hypothesis is investigated for G7 countries from 1890 to 2015 using a novel kink regression model. The findings suggest that the inverted U-shaped environmental Kuznets curve phenomenon is not applicable to the United States, Germany, Italy, Canada, and Japan. Instead, a “pseudo-EKC” pattern emerges, wherein the positive relationship between income and CO2 emissions weakens at a certain threshold. The classic environmental Kuznets curve is only adhered to by the United Kingdom and France. Moreover, there is an inverse U-shaped correlation between wealth and SO2 emissions, with several inflection points happening at varying times across different G7 nations. These findings indicate that while developing environmental strategies to reduce pollutants, it is important to take into account the distinct attributes of different contaminants and areas.

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