Explaining the environmental Kuznets Curve: the case of sulphur emissions

Environmental Kuznets Curves have been estimated using a simple econometric model that hampers interpretation of the various determinants underlying the inverted-U-shaped relationship between some pollutants and income. Explanations for the observed patterns have been offered ex-post without reference to theoretical or empirical investigations. The influence of environmental policy and structural change through sectoral shifts are frequently mentioned as important determinants of the achieved reductions of some pollutants in developed economies. Reviewing the literature on decomposition analysis and applying this method to sulphur emissions fails to find evidence for structural change to be an important determinant of the recorded reductions in sulphur emissions. Environmental policy, fostered by international agreements, has presumably been the main determinant of the reduction in emissions. A regression analysis on the determinants of the non-uniform reductions agreed under the Second Sulphur Protocol makes clear that higher income countries have a more ambitious environmental policy. This provides an explanation for the observed inverted-U curve between sulphur emissions and levels of income.