Economic growth and the sustainable development of ecosystems must be balanced. Scholars have found the trade-offs between economic development and its effects on the environment for a long time.
The theory of the EKC indicates that the relationship between economic growth and its environmental impacts is not linear, but instead an inverted U-shaped curve. The intention is to create negative ecological consequences, which eventually begin to escalate as the economy increases before they hit a tipping point where environmental degradation stabilizes and declines as economic growth persists.
This theory is based on an original Kuznets principle concerning the relationship between economic growth and unequal income. However, substantial progress has since been made in the testing of this theory, particularly in the field of environmental sciences.
A variety of statistical theories indicate that the falling side of the economy should be less influenced as revenue increases. First, environmental quality, not a luxury good, must be referred to as a common good. It means the income elasticity of demand for environmental quality is higher than zero, perhaps only higher than one, or with growing environmental concern, maybe even higher.
Moreover, developed countries can better meet higher environmental protection demands through their operational potential for the climate. It is questioned, though, that the wealthy care more for the environment than the poor and the data is far from definitive. Second, economic growth is likely to increase the likelihood that more new and less pollution-intensive human capital and infrastructure will be adopted. Although per unit of production emissions may decline, total emission rates may very well increase as economic growth increases. The effect of technological change on pollution is therefore fundamentally ambiguous.
Thirdly, as economic development progresses and the income increases, as services increase, the share of the industry will decrease, thus less polluting sectors may benefit from sectoral changes. However, systemic shifts in the economy would most definitely harm the climate, beginning with low-income rates.
The effect of economic development on environments has been extensively examined using different variables and methods, including mathematical models. Results demonstrated that the economic system would bring a strain on the ecological system(s), thus undermining its sustainability.
Traditionally, economic development is synonymous with environmental destruction. However, new approaches have emerged with the introduction of the concept of sustainable development. Economic growth may also be linked to the preservation of the environment. Sustainable development can be seen as a strategy aimed at pacification the interaction between the environment and economic growth.
Financial operations typically generate goods and services utilizing fossil fuels and other natural resources; there is a strong link between GDP development and CO2 emissions. Typical of economically developed countries, urbanization leads to a significant increase in the levels of municipal pollution, since both modes of transport, as well as resource consumption (such as water and energy), affect the environment.
Businesses are utilizing cleaner methods, and policymakers are committing more money to the enforcement of environmental policies. The primary industry controls the initial phases of economic development, causing high levels of waste and resource consumption. As the economy is rising, infrastructure, facilities, and knowledge quality are changing, while raising environmental degradation by increasing the use of capital.
Technology influences the turning point at which environmental degradation begins to decrease, as it can significantly enhance energy efficiency and renewable energy utilization. Energetic environmental efficiency can, therefore, be deemed to have the general characteristics of a luxury product in this regard.
There are many ideas to examine the connection between economic development and its effects on the climate. Income and GDP growth rates were the most frequently used variables for measuring economic growth. As far as the variables used to measure environmental damage are concerned, there is a broad diversity, and predominantly one single variable, although some approaches use index.
The lack of consensus in the conclusions of the EKC hypothesis may be based on the methodology or variables used to build the models. The explanation of EKC may be sensitive to the specificities of countries, and time series may affect the relationship. It may be due to the quality of the data sets used and the selection of individuals.
All effects on different environmental dimensions cannot be captured by using one variable alone. Some authors, therefore, use composite indicators to measure environmental impacts so that broader aspects of the ecosystems can be addressed. However, studies evaluating the EKC hypothesis using a composite index to quantify around-mental deterioration (or performance) are still difficult to detect.
All proposed models are polynomial standard models with linear, quadratic and cubic functions to estimate economic growth (measured by GDP or per capita revenue) and are based on time series, cross-section or panel data. On the one side, there are differences in ecological measurements identified by a composite map, which would take account of the whole spectrum of environmental measures, including air, water, land, fauna and flora.
It can be called the critical weakness of all composite indexes, as they only report a portion of the environmental impact(s). Composite indexes can be used to synthesize the central trend (without losing any critical information, and with potentially different directions, and several variables).
Besides, the composite indicators would also involve the cause and effects on human safety and the ecosystem, but the approach used to develop such metrics does not consider the effect-cause implications, the harm stock and the steps to address the environmental impacts.
The environmental impact is minimized even in the early stages of economic development in the context of the guiding power and the demand factors as contingent variables. In the early stages of economic growth, the adverse effect on human wellbeing, calculated by the impact factor, decreases in the second stage and again at the end. The underlying assumption is that the guiding power, energy and the measurements of results do not help the EKC hypothesis.
These measurements are aggregated in two parameters, which are used to describe environmental harm as dependent variables. Strategies that regulate cumulative pollutant supplies and not just polluting pollutants will be taken into consideration by decision-makers. It is therefore essential to make clear that economic development alone is not adequate to boost the quality of the climate.
Aug 05, 2020