EKC.ppt....1997-2003

PRESENTED BY:Rupesh Sonali Sonika

The envir nmental K znets c rve is a hypothesized relationship between various indicators of environmental degradation and income per capita. . The nvironmental Kuznets Curve ( KC) hypothesizes that the relationship between per capita income and the use of natural resources or the emission of wastes has an inverted Ushape.

but beyond some level of income per capita the trend reverses. . degradation and pollution increase. so that at high-income levels economic growth leads to environmental improvement.In the early stages of economic growth.

Later economists found this hypothesis analogous to the income-pollution relationship and popularized the phrase Environmental Kuznets Curve.The EKC takes after the name of Simon Kuznets who had famously hypothesized an inverted µU¶ income-inequality relationship (Kuznets. . 1955).

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. It suggests that environmental damage is unavoidable in the initial stage of economic development and therefore. has to be tolerated until the inversion effect kicks in.The EKC hypothesis contends that pollution increases initially as a country develops its industry and thereafter declines after reaching a certain level of economic progress.

1. . The turning point for pollution is the result of more affluent and progressive communities placing greater value on the cleaner environment and thus putting into place institutional and non-institutional measures to affect this.

service industries will gain prominence. Pollution increases at the early phase of a country¶s industrialization due to the setting up of rudimentary. When industrialization is sufficiently advanced. . inefficient and polluting industries. This will reduce pollution further.2.

the scale effect will take place and pollution increases.3. which reduces pollution. firms switching to less-polluting industries results in the composition effect. . Finally. which levels the rate of pollution . Further along the trajectory. the technique effect comes into play when mature companies invest in pollution abatement equipment and technology. When a country begins industrialization.

Scale effect Composition effect Technique effect .

€ at low levels of income. € As . the policy response becomes stronger. pollution will rise with neutral growth because the policy response is weak. income rises. hence pollution will start to fall as income increases.

€ The . the willingness to pay for environmental quality rises. and increasingly large sacrifices in consumption are made to provide great environmental benefits. reach maximum at around $8.000 and then decrease at higher levels of income. As income rises. KC says that the pollution will first increase with the level of G per capita.€ At low incomes. pollution initially rises with growth because increased consumption is valued highly relative to environmental quality.

. sewage and other chemicals previously released directly into the air or water. such as sulfur dioxide. nitrogen oxide. chlorofluorocarbons. lead DDT.It has been argued that this trend occurs in the level of many of the environmental pollutants.

This means that in this example. have even found a significant cubic Income-SO2 relationship that takes the form of an N curve. SO2 will increase indefinitely beyond $15000.Researchers like Panayotou (1997). . where the turning points are $5000 and $15000.

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