The wealth of nations and sustainable development: energy intensity and the environmental Kuznets curve

Abstract

Scholars warn that wealth leads to unsustainable environmental development. However, over the last decades, studies have shown an increase in environmental degradation at the initial stage of economic growth, and then a decline when economic growth reaches a certain level. This first acceleration and then deceleration create an inverted U-shaped curve between pollution and economic growth, called the environmental Kuznets curve (EKC). Environmental degradation can be measured by different factors. This paper deals with two of them, i.e. energy consumption and energy intensity (EI). The latter is measured as the ratio between energy consumption and GDP. The relationship of energy consumption and intensity to economic growth can serve as a tool for examining whether an EKC exists. The paper presents continuous series of energy consumption energy intensity and gross domestic product for the Norwegian mainland economy 1835–2019. The series are used to examine the possible existence of relative and absolute environmental Kuznets curves (EKC). Time series are established using available data and annual figures for 1835–2019, which are presented for the first time. They depict a development that, first, reflects an almost constant downward trend in EI, and, second, the existence of EKCs. The paper also proposes a polynomial regression model to discuss the relationship between environmental degradation as measured by energy consumption and intensity on the one hand, and economic growth on the other. It is concluded that there are both relative and absolute EKC-relations between environmental degradation and economic growth, with 1975 as relative and 2002 as absolute turning point.