Positioning the Croatian Environmental Kuznets Curve in a European Context

The existence of the environmental Kuznets curve (EKC) has attracted growing research interest worldwide. This paper uses a panel autoregressive distributed lag model to examine the relationship between environmental quality and economic development in Croatia in a European context. Energy consumption, environmental taxes and human capital are treated as control variables. Economic development is measured by real gross domestic product per capita, while environmental quality is proxied by greenhouse gas (GHG) emissions. The statistically significant existence of the U-shaped form is confirmed for the entire sample consisted of European countries in the long run, suggesting that economic development itself cannot reduce harmful emissions. In the short run, on the other hand, there is not enough evidence to validate the existence of this shape, neither for the EU as a whole nor for Croatia. Therefore, the results confirm that the relationship of interest is a long run phenomenon. The results also show that energy consumption, environmental taxes, and human capital significantly influence GHG emissions in the long run. Unlike in the EU, where the effect of these variables is not significant, energy consumption and human capital in Croatia demonstrate statistically significant short-term impacts on GHG emissions.