Analysis of the validity of Environmental Kuznets Curve for the Baltic States

Abstract

The paper analyses a traditional Environmental Kuznets Curve (EKC) relationship between greenhouse gases (GHG) and gross domestic product (GDP), extending the research to include some additional factors, such as environmental tax, research and development expenditure, implicit tax rate on energy, primary production of coal and lignite, energy intensity of the economy taken from the Eurostat database. The EKC indicates that, at the early stages of economic growth, pollution increases with the growing use of resources, but when a certain level of income per capita is reached, the trend reverses so that, at a higher development stage, further economic growth leads to the improvement of the environment. In the first part of the research, the validity of the reduced EKC for the Baltic region for the period 1995-2008 is determined. In the second part, the impact of selected factors is statistically tested. In both cases, the standard cubic equation is used because it is believed that this model is the most accurate for the development stage of this region. The research results may be useful for climate change policy design.