Working Paper

Do productivity improvements move us along the environmental Kuznets Curve?



Turner K, Hanley N & De Fence J (2009) Do productivity improvements move us along the environmental Kuznets Curve?. Stirling Economics Discussion Paper, 2009-02.

The Environmental Kuznets Curve (EKC) hypothesis focuses on the argument that rising prosperity will eventually be accompanied by falling pollution levels as a result of one or more of three factors: (1) structural change in the economy; (2) demand for environmental quality increasing at a more-than-proportional rate; (3) technological progress. Here, we focus on the third of these. In particular, energy efficiency is commonly regarded as a key element of climate policy in terms of achieving reductions in economy-wide CO2 emissions over time. However, a growing literature suggests that improvements in energy efficiency will lead to rebound (or backfire) effects that partially (or wholly) offset energy savings from efficiency improvements. In this paper we consider whether increasing labour productivity will have a more beneficial, or more predictable, impact on CO2/GDP ratios than improvements in energy efficiency. We do this by using CGE models of the Scottish regional and UK national economies to analyse the impacts of a simple 5% exogenous (and costless) increase in energy or labour augmenting technological progress.

Computable general equilibrium models; Technical progress; Energy efficiency; Labour productivity; Environmental kuznets curve; Energy conservation Great Britain; Technological innovations Great Britain; Economic development Great Britain

JEL codes

  • D57: General Equilibrium and Disequilibrium: Input-Output Tables and Analysis
  • D58: Computable and Other Applied General Equilibrium Models
  • R15: General Regional Economics: Econometric and Input-Output Models; Other Models
  • Q41: Energy: Demand and Supply; Prices
  • Q43: Energy and the Macroeconomy

Title of seriesStirling Economics Discussion Paper
Number in series2009-02
Publication date online01/01/2009
PublisherUniversity of Stirling Management School