Estimation of Environmental Kuznets Curve and Kyoto Parties: A Panel Data Analysis

The present study investigates the relationship between economic growth and environment quality using panel data on 39 countries which includes Annex 1 and Non-Annex 1 parties under the Kyoto Protocol. The study employs least squares method for testing the Environmental Kuznets Curve hypothesis using secondary data on GDP per capita and CO2 emissions. The Environmental Kuznets Curve hypothesis postulates an inverted „U ‟ shape relationship between income and environmental quality. The empirical findings of the study support the EKC hypothesis and found inverted „U ‟ shape relationship between income and environment with turning point at a level 30088 US $ PPP. Similarly Non-EIT parties and Non-Annex1 parties are also support the EKC hypothesis with turning point levels 37500 US $ and 48125 US $ PPP respectively. However in case on EIT parties there found a „U ‟ shape relationship between income and environment with turning point at a level 29000 US $ PPP. For Indian economy the study reveal a inverted U shape relationship between CO2 emission and growth of per capita GDP with turning point occurring at 49003 US $ PPP. The study reveals that the growth of per capita tends to improve the environmental quality. The study suggests that at a broad level of development per capita emission of CO2 begin to decline. The acceptance of EKC implies that there is an inevitable level of environmental damage that follows up due to economic development of a country at early stages but with significant improvement at later stage of development. This means that nations can opt for present value of higher future growth and cleaner future environment at the cost of current rate if environmental damage.