Economic Growth and the Environment: Friends or Foes?

The relationship between certain indicators of environmental quality and income, which in some cases has shows an inverted-U relationship, has been called The Environmental Kuznets Curve. The implications of this relationship in terms of economic and environmental policy are important. If there is reason to believe that environmental quality will improve after a certain income level, encouragement of economic growth will be optimal. If this relationship does not exist, a lack of focus on environmental problems can lead to potentially dramatic consequences. This paper explores the mechanisms behind the relationship, and for which pollutants the relationship exists. In particular, the relationship between income and CO2 emissions are investigated further.