Agriculture-induced environmental Kuznets curve: evidence from panel data

This study investigates the relationship between agricultural production and pollutant (CO2) emissions for the two panels, consisting respectively of 74 and 70 developed and developing economies during the 1990–2018 period. The study tests for the presence of the environmental Kuznets curve (EKC) and experiments with alternative specifications of the EKC model (agriculture-induced EKC and EKC augmented by agricultural sector variables). It applies alternative panel data estimators and additionally considers cross-country heterogeneity and cross-sectional dependence. As per the EKC hypothesis, an inverted U-shaped relationship between emissions and agricultural and aggregate value added has been confirmed, both at the panel and at the individual economy level. The majority of the economies, with the exception of certain least developed ones, were found to be located on the downward segment of the EKC. The results were found to be robust with respect to employing different techniques. The findings demonstrate the absence of determinism in the ‘economy-environment’ relationship and the possibility of reducing emissions at higher stages of development. They imply the dual role of agriculture (as a source of emissions but also as a sector that potentially helps reduce emissions) and suggest the advantages of policies and measures that stimulate agricultural production. They also point to challenges associated with promoting ‘green agriculture’ and enacting relevant agri-environmental and economic policy reforms.