Rethinking Economic Growth Policies in the Context of Sustainability: Panel Data Analysis on Pollution as an Effect of Economic Development in EU Countries

Abstract

This study investigates the complex interplay between carbon dioxide (CO2) emissions and significant socio-economic determinants, namely gross domestic product (GDP) per capita, population, and energy consumption. The analysis revealed a deficiency in the literature since most studies have primarily focused on the contemporary period, neglecting the 1970s and 1980s, which were characterized by extensive industrialization in a substantial portion of Europe. The study aims to establish a definitive association between socio-economic factors and the observed fluctuations in CO2 emissions. The study focuses on a panel of 20 countries within the European Union. It collects 52 yearly observations spanning from 1970 to 2021. The analysis employs panel data regression estimate. Extensive investigation has conclusively demonstrated that a direct and positive correlation exists between population size and energy consumption and the subsequent impact on carbon dioxide (CO2) emissions. Interestingly, there is a negative association between the GDP per capita and CO2 emissions, suggesting the possibility of a decoupling between economic growth and carbon emissions. This might be attributed to the development of cleaner technology and a heightened awareness of environmental concerns. Comprehending these processes is crucial for well-informed policy formulation with the objective of attaining a healthy equilibrium between economic success and environmental sustainability. Further investigation is required to explore these associations in greater depth, considering improvements in technology, the efficacy of policies, and variances across different regions, with the aim of promoting a more environmentally friendly and sustainable future.