Environmental Kuznets Curve is an argument against Green Deal

27.02.2025

Prosperity without growth might be an illusion, but environmental progress certainly is.

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Mgr. Vítězslav Kremlík, web: Climateapocalypse.eu , author of "A Guide to the Climate Apocalypse: Our Journey from the Age of Prosperity to the Era of Environmental Grief" (Identity Publications, 2021), contact: kremlik@seznam.cz

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An economic policy that makes people significantly poorer cannot be good for the environment in the long run, since people need money for environmental investment. Comparing the Soviet Union and West Germany in 1980s, who was better at environmental protection? This simple observation has been described in an economic theory known as Evironmental Kuznets Curve (EKC).

Simon Smith Kuznets, who emigrated from the Soviet Union to the United States in 1922, was awarded a Nobel Prize for economics in 1971. He authored a concept known as Kuznets Curve. Its inverted-U shape shows that social inequality first increases as the economy grows and only after certain threshold of income is achieved, the inequality begins to fall. In 1990s a similar concept was suggested for environmental degradation. In a nod to the famous Nobelist, it was named Environmental Kuznets Curve. It assumes that as modern industrial growth occurs, environmental degradation increases until the average income reaches certain level after which it begins to fall. This EKC was heavily promoted by World Bank in 1992 in its World Development Report. [1]

In 2010, the US GDP per capita was 47% higher than that of Europe. By 2021, this gap had widened to 82%. [2] This means, among other things, that over-regulated E.U. may not be able to afford large investment into nuclear power, which would efficiently slash carbon emissions. Insufficient income means that the EKC peak cannot be reached yet. Policies like Green Deal that increase energy prices and slow down the economy, are not helping. They make the situation worse.

Decarbonisation is different from other environmental causes. Montreal Protocol forced producers to replace CFC with other substances in order to protect the ozone layer. This was not free of charge and some producers protested. However that transformation was affordable and used technology that worked, was stable, affordable and already existed.

Decarbonisation policies strive for high prices of energy. Not by accident, but by design. The authors of the policy are happy when energy costs a lot. "Between 2017 and 2021, they surged tenfold, exceeding €80 tCO2−1 and reshaping investment decisions across the electricity and industry sectors." [5]

It is likely that anailing economy with high energy prices will not survive long enough to achieve any meaningful environmental progress. This is what happens when you pursue unscientific policy and ignore fundamentals like EKC.

It might be better to follow the science of the Environmental Kuznets Curve. Green growth is possible. Green without growth is not.

Figure 1: Global emissions of Sulphur Dioxide. Rising first, falling later. In Asia and Africa they are still increasing which suggests these regions, whose industrialisation started later, have not reached sufficient income threshold yet. [3]

Figure 2: For the UK, the approximate turning point at which the decoupling of GDP per head and carbon dioxide emissions seemed to have happened was in 1985, with a GDP per head of £16,667 and corresponding CO2 emissions of around 586 million tonnes. Source: Bank of England, 2019, World Resources Institute, 2017 and Business Energy Industrial Strategy, 2019 [4]

Figure 3 Putin has become a convenient scapegoat for the high prices of energy. Many have forgotton that the energy crisis started in 2021 before the Russian invasion in Ukraine. Data from the Czech Republic. [6]]

SOURCES:

[1] Yandle B, Vijayaraghavan M, Bhattarai M (2002). "The Environmental Kuznets Curve: A Primer". The Property and Environment Research Center. Archived from the original on 30 December 2008. Retrieved 16 June 2008.

[2] Ivan Ostojic. Economy 2025: Why is Europe falling behind? Linkedin 1. Jan 2025 https://www.linkedin.com/pulse/economy-2025-why-europe-falling-behind-ivan-ostojic-znr0e/

[3] Hannah Ritchie (2017) - "Air pollution: does it get worse before it gets better?" Published online at OurWorldinData.org. Retrieved from: 'https://ourworldindata.org/air-pollution-does-it-get-worse-before-it-gets-better' [Online Resource] https://ourworldindata.org/air-pollution-does-it-get-worse-before-it-gets-better

[4] The decoupling of economic growth from carbon emissions: UK evidence. Office for National Statistics. United Kingdom. (Online, Retrieved 25 Feb 2025) https://www.ons.gov.uk/economy/nationalaccounts/uksectoraccounts/compendium/economicreview/october2019/thedecouplingofeconomicgrowthfromcarbonemissionsukevidence/previous/v1

[5] Sitarz, J., Pahle, M., Osorio, S. et al. EU carbon prices signal high policy credibility and farsighted actors. Nat Energy 9, 691–702 (2024).

[6] Jan Šolc, Natálie Tomanová, Adam Ruschka. Dopad zvýšených cen energií na domácnosti a podniky. Czech National Bank. 3 Feb 2023. (retrieved 27 Feb 2025) https://www.cnb.cz/cs/menova-politika/zpravy-o-menove-politice/boxy-a-clanky/Dopad-zvysenych-cen-energii-na-domacnosti-a-podniky/