Addressing the Nexus between Economic Growth and Environmental Pollution in a Small Petroleum-Exporting Transition Economy

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The present chapter addresses the income-environment nexus in a small fossil fuel-abundant transition economy. To address this research question, we analyze the case study of Azerbaijan. Besides delving into the reports and official documents on economic development and environmental degradation in Azerbaijan, we also quantitatively investigate the nexus between income and environmental pollution. The study rejects the inverted U-shaped relationship between the level of per capita income and atmospheric pollution. The autoregressive distributed lag model indicates that Azerbaijan experienced a rather carbon-saving economic growth over the last two decades. A 1% increase in gross domestic product (GDP) leads to a 0.01% decrease in the per capita carbon dioxide (CO2) emissions in the long run. There is no short-term effect of economic growth on the level of average per capita emissions. Furthermore, the study establishes a positive long-term relationship between the level of gross GDP and gross greenhouse gas (GHG) emissions. Contradicting at first glance, the results could be reconciled as follows: a greater level of income leads to more significant emissions. We make this conclusion because of the positive long-term gross GDP and total GHG nexus. However, an increase in income leads to decreasing marginal increases in emissions. This result emanates from the negative GDP growth and per capita emissions nexus. Hence, the empirical analyses also indicate that the growing Azeri economy has transformed into a more climate-friendly economy.

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Economic Growth and Environmental Quality in a Post-pandemic World: New Directions in the Econometrics of the Environmental Kuznets Curve

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