Energy Regulation in the EKC Model with a Dampening Effect

摘要

The empirical environmental kuznets curve (EKC) model provides a popular means to analyze the correlation between economic growth and environmental destruction. This study seeks to verify if implementing environmental regulations has effects beyond the EKC. An elaborated panel data model applies to 28 OECD countries to analyze not only the relationship between economic growth and environmental destruction but also the effect of regulatory activities on the replacement of energy sources and their efficiency. The proposed model also accounts, for the first time, for the effect of level of income on the replacement of energy sources. Using the EKC, this study demonstrates that energy regulation measures help reduce greenhouse gas emissions (GHG). To validate this hypothesis, we have also added the dampening effect that income level has over the contribution of renewable energy sources to the total of energy consumption. The estimation reveals increases in the explanatory power of the model. This study concludes that pollution will not disappear automatically when economic growth increases. Therefore the need to develop energy efficiency RD&D in order to reduce environmental pollution.