Determinants of environmental degradation: Reflections on the impact of identified economic variables on the environment

Abstract

Purpose. The main objective of this study is to investigate the determinants of environmental degradation within the broader framework of the environmental Kuznets Curve analysis. To better understand the economic impact on the environment, the study focuses on the relationship between carbon emission and the variables income per capita, trade openness, foreign direct investment, energy use and urbanization. Methods. In the context of the dynamic carbon emission model a Generalized-Method-of-Moments (GMM) technique was used to analyse World Bank of 125 countries for the period 2000 to 2014. This era was chosen as the most appropriate given the completeness of the dataset. Findings. The findings indicate that economic growth and energy use are significant variables in explaining environmental degradation, supporting previous research in to the particularly negative impact of energy use on the environment. The research however, found that urbanisation had only marginal significance in explaining the impact on the environment. Originality. The findings contribute to existing research in the area of environmental degradation, providing insight into the debate surrounding urbanisation and CO2 emission which had previously received mixed results. The findings take research forward through the examination of explanatory variables and their respective impact on CO2 emission in countries which have observed an increase in the number of urban dwellers. Practical implications. Given the debate in academic and practitioner literature around climate change, pollution and a general concern over a lack of collective action to address environmental concerns, the findings have practical implications for government institutions and businesses to better understand the economic impact on the environment.