Trade-Off Between Pollution and Growth: Myth or Reality?

 Introduction:

Economic growth and pollution have been on the news for years, and there has been a lot of debate about their relationship. Many argue that urbanization, transportation, and industrialization occur as economies grow and pollution increases. If green technologies are adopted and good policies are implemented, pollution can be reduced even with high economic growth. Is the idea of a trade-off between pollution and growth a myth or a reality? Some theories, such as the Environmental Kuznets Curve(EKC), talk about how pollution increases and decreases after a certain income level is reached in the early stages of development. The real-world evidence is mixed in developing countries.

Source: Environmental Kuznets Curve

The Traditional View: Growth Leads to Pollution
 Historically, increasing pollution has always been linked to industrialization. As economies grow, growth will be more reliant or dependent on fossil fuel deforestation, which in turn contributes to air and water pollution.  The main reason why the growth is often linked to pollution is Increased energy demand: More factories, vehicles, electricity, and fossil fuels will lead to pollution. Increased deforestation: People cut down trees for their shelter, for use of timber, etc. Industrial waste and emissions: The manufacturing sector releases pollutants into the air, water, etc. Many developing countries believe that economic growth is the first priority and environmental problems are second. Let us understand the growth and pollution through the figures and data:

 Methodology:

The data used in this analysis comes from the World Bank database, covering 216 countries. Six key variables were examined: CO2 emissions, GDP growth, carbon intensity in GDP, access to electricity, fuel imports, and fuel exports. A regression analysis was conducted to understand the relationships among these variables.

Data analysis and interpretation:

Regression Result

Added Variable plot

This study shows the impact of GDP growth, carbon intensity in GDP, fuel export, and fuel import on CO2 emissions using a multiple regression model. Through the table and the added-variable plots, the results can be interpreted to indicate that fuel export has a significant positive impact (beta=0.084283, p<0.001) on CO2 emissions, meaning that as fuel exports increase, CO2 emissions will also increase. This suggests that regions exporting more fuel contribute more to emissions. GDP growth does not significantly (beta=0.007336, p>0.005) impact CO2 emissions, indicating that as production increases, there is no direct effect on CO2 emissions. However, carbon intensity in GDP does affect CO2 emissions, showing a weakly significant positive impact (beta=2.992574, p<0.005). Fuel imports have a moderately significant negative impact (beta=-0.132201, p<0.001) on CO2 emissions, indicating that countries that import fuel produce less CO2 emissions.        

Conclusion

This study found that CO2 emissions are affected by the carbon intensity in GDP, fuel exports, and fuel imports, with no direct impact of GDP growth on CO2 emissions. Policymakers should focus on promoting cleaner energy and sustainable practices to reduce carbon emissions.

By
Shivangi
Ph.D. Scholar, Department of Economics, SBSS, MRIIRS, Faridabad

To cite this article:  Shivangi. ( 2025, February)."Trade-Off Between Pollution and Growth: Myth or Reality?" Eco-Bizz, Department of Economics. https://ecobizzblog.blogspot.com/2025/02/trade-off-between-pollution-and-growth.html

Article Received on: 28 January 2025

Article Published on: 15 February 2025