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Revealing the complexity in the environmental Kuznets curve set in a European multivariate framework

July 2022
Environment Development and Sustainability 24(12)

Authors:

Despite considerable research attention given to the environmental Kuznets curve (EKC), little has been known about its true form and particularly the mechanisms that explain it. Using panel quantile regression, this paper designs a multivariate framework for exploring the EKC in the European Union in the period 2004–2017 and unveils the distributional heterogeneity effect hidden therein. It reveals that complexity in the relationship under consideration turned out to be higher than evidenced or assumed in the literature so far since its shape changed the form across the conditional distribution of greenhouse gas (GHG) emissions. Moreover, the paper shows that the use of efficient energy and renewable energy has the power to outweigh the scale effect. Simultaneously, it questions the efficiency of environmental and energy taxes and opens the issue of the rebound effect and the association between energy poverty and GHG emissions.

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Vol.:(0123456789)

Environment, Development and Sustainability (2022) 24:9165–9184

https://doi.org/10.1007/s10668-021-01817-y

1 3

Revealing thecomplexity intheenvironmental Kuznets

curve set inaEuropean multivariate framework

DjulaBorozan1

Received: 16 September 2020 / Accepted: 6 September 2021 / Published online: 12 September 2021

Abstract

Despite considerable research attention given to the environmental Kuznets curve (EKC),

little has been known about its true form and particularly the mechanisms that explain it.

Using panel quantile regression, this paper designs a multivariate framework for exploring

the EKC in the European Union in the period 2004–2017 and unveils the distributional

heterogeneity eﬀect hidden therein. It reveals that complexity in the relationship under con-

sideration turned out to be higher than evidenced or assumed in the literature so far since

its shape changed the form across the conditional distribution of greenhouse gas (GHG)

emissions. Moreover, the paper shows that the use of eﬃcient energy and renewable energy

has the power to outweigh the scale eﬀect. Simultaneously, it questions the eﬃciency of

environmental and energy taxes and opens the issue of the rebound eﬀect and the associa-

tion between energy poverty and GHG emissions.

Keywords Environmental Kuznets curve· Classical eﬀect· Substitution eﬀect· Regulation

eﬀect· Energy poverty· Panel quantile regression

1 Introduction

The European Union (EU) has conﬁrmed its commitment to tackling climate change as its

priority and an opportunity for transitioning to a low-carbon economy through its strategic

documents (European Commission, 2011, 2014). Although the EU works hard to achieve

its emission reduction targets, greenhouse gas (GHG) emissions were at a higher level in

2018 than they were in 2014 (Eurostat, 2020). At the same time, GHG emissions signiﬁ-

cantly vary across EU countries, ranging from the average 6 tons per capita in Latvia to

24.93 tons per capita in Luxembourg in the period 2004–2018 (Eurostat, 2020). This raises

concerns and calls for new policy actions.

Understanding the association between environmental degradation and the economy is

important for creating adequate policy mitigation initiatives and consequently fully imple-

menting strategic documents. This is because adequate policy actions and measures can

* Djula Borozan

borozan@efos.hr

1 Faculty ofEconomics inOsijek, Josip Juraj Strossmayer University ofOsijek, Gajev trg 7,

HR-31000Osijek, Croatia

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Revealing the complexity in the environmental Kuznets curve set in a European multivariate framework

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