Economic growth and the state of environment: Environmental Kuznets curve for the countries of Eastern Europe and the Baltic countries

ENThe relationship between economic growth and environmental quality is one of the most significant problems in modern economic theory. The current interest in this issue lies in climate change. One of the most promising approaches seems to deal with the Environmental Kuznetz curve (EKC). Its hypothesis states that pollution levels increase as the country develops, but they begin to decrease as rising incomes pass beyond a turning point. The main aims of the paper are: to test the hypothesis that EKC exists in the countries of Eastern Europe and the Baltic countries; to define the turning point for these countries (if EKC exists); to define how the level of emissions is affected by both specific features of economy and the adopting economic policy, including economic reforms and environmental policy. Our estimations indicate following conclusions: we find support for EKC in the countries of Eastern Europe and the Baltic countries; there are some specific features these countries that have a small but statistically significant positive impact on CO2 emission (openness of economy, level of industrialization). On the contrary the scale of production has no effect on CO2 emission; we find that liberalization process leads to reduction of CO2 emission; the country Kyoto protocol agreements participation has a great influence on CO2 emission decrease.