Rule of law and the Environmental Kuznets Curve: evidence for carbon emissions

In response to the growing body of literature on the relationship between the environment and institutions, this study investigates how the rule of law influences the turning point of the Environmental Kuznets Curve. Using Bradford et al. (2005) and Leitão’s (2010) alternative specification of the EKC that avoids nonlinear transformation of potentially nonstationary regressors, we find evidence for the EKC in European countries for carbon emissions. Our results show a negative relationship between pollution and the rule of law, demonstrating that when the rule of law is strong, the turning point of the EKC occurs at a lower level of per capita income, thus, enhancing environmental preservation. Since the rule of law provides a composite institutional framework, we argue that the solution to environmental degradation can be sought not only through institutional reforms, but also through the allocation of additional resources to provide an adequate regulatory context in which this institution is enforced.