Beyond Environmental Kuznets Curve: Structural Transformation and Emissions Decoupling in Advanced Economies
Beyond Environmental Kuznets Curve: Structural Transformation and Emissions Decoupling in Advanced Economies

Summary/Abstract: While the Environmental Kuznets Curve (EKC) hypothesis has been widely tested across different regions (OECD, South Asia, Africa, East Asia, etc.), much of the literature focuses either on developing countries or global panel datasets. Studies on advanced economies, particularly the EU, often assume that decoupling between growth and emissions occurs naturally once income reaches a threshold. However, recent findings are mixed, with some evidence pointing toward N-shaped or alternative curves. Hence, this study examines the validity of the Environmental Kuznets Curve (EKC) hypothesis in the 27 member states of the European Union between 1995 and 2022. Using panel econometric methods, we analyse the relationship between GDP per capita and CO₂ emissions. The results provide no evidence of the inverted U-shaped relationship predicted by the EKC. Instead, economic growth driven by the increasing importance of the services sector appears to coincide with declining emissions. These findings suggest that the EKC framework does not adequately explain environmental dynamics in the EU and that structural transformation, rather than income level alone, is key to reducing emissions.

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