Global Dynamics of Environmental Kuznets Curve: A Cross-Correlation Analysis of Income and CO2 Emissions

The environmental Kuznets curve (EKC) hypothesis posits an inverted U-shaped relationship between economic growth and environmental degradation. However, there is no consensus regarding the EKC hypothesis among countries and regions of different income groups. In this study, we analyze the EKC hypothesis for 158 countries and 44 regions from 1990 to 2020, categorizing them into different income groups based on the World Banks income classification (low, lower-middle, upper-middle, and high-income countries). Our findings reveal mixed patterns in the EKC across different income levels, highlighting the heterogeneous relationship between economic growth and carbon emissions and showing differentiated patterns among different income levels. While a rise in income for high-income countries should be reflected in a shift toward fewer carbon emissions, for lower-income countries, growth is still associated with rising emissions. This underscores the urgent need for policy interventions that decouple economic development from environmental degradation. A balanced approach to economic growth, which prioritizes carbon neutrality across all stages of development, by tailoring environmental and economic strategies to address CO2 emissions effectively, should be adopted, recognizing the different developmental stages and income levels of countries and regions.