How economic growth affects emissions? An investigation of the environmental Kuznets curve in Portuguese and Spanish economic activity sectors

It is a disquieting reality that increased economic growth for many years now in the Western world is at odds with environmental degradation. In this paper the relationship between economic growth and environmental variables is analyzed under two non-linear specifications, a quadratic and a cubic specification. The study is conducted for Portugal and Spain in the period 1975-2012, using data for 13 sectors. GVA is used as proxy for income, while energy use and carbon dioxide account for environmental degradation. There is evidence for an inverted U-shaped EKC. However, there are also other inverted N-shaped functions that explain the relationship between economic growth and emissions. Altogether, empirical results do indicate particular differences between Portuguese and Spanish sectors. The results are of interest not only for researchers but also for policy-makers. Political mitigation measures are also analyzed.