Abstract

The Environmental Kuznets Curve (EKC) hypothesis is a popular theory that describes the relationship between economic development and environmental degradation. So far, a consensus regarding the validity of the hypothesis is missing, and more studies have to be conducted on the subject. Trough a range of scatter plots and a granger causality test, this study aims to further investigate the EKC hypothesis by measuring environmental degradation in a country’s renewable energy shares. The result show that (1) the point in which a country significant increase their renewable energy is in the interval US$ 30 000 – 50 000 when measured in real GDP per capita, (2) the inverted U-shape of the EKC hold for most countries, (3) a unidirectional causality is running from economic growth to both renewable energy and fossil fuel consumption, as well as from renewable energy consumption to fossil fuel consumption for a panel of developed countries; a causality running from economic growth to fossil fuel consumption is also found in a panel of developing countries. The EKC hypothesis is somewhat supported through this study; however, the decrease in environmental degradation is restricted to mostly countries with smaller economies and populations. Developed countries also need to make sure that the decrease in environmental degradation is due to underlying mechanisms like energy efficiency measures and not due to counterproductive behaviors like outsourcing and deindustrialization.