The Relationship Between Greenhouse Gas Emissions and Economic Growth in Iceland 1990-2018. An analysis using The Environmental Kuznets Curve, decoupling, and Granger causality

• Main Author: Tinna Hallgrímsdóttir 1994-
• Other Authors: Háskóli Íslands
• Format: Thesis
• Language: English
• Published: 2022
• Subjects: Umhverfis- og auðlindafræði; Iceland
• Online Access: http://hdl.handle.net/1946/41010

This Master’s thesis analyses the relationship between per capita economic growth and per capita greenhouse gas emissions in Iceland 1990-2018, using the Environmental Kuznets Curve, Granger causality analysis, and Tapio’s decoupling indicator. Firstly, the existence of an Environmental Kuznets Curve was examined. Secondly, causality relations between changes in per capita GDP and changes in per capita greenhouse gas emissions were studied through Granger causality analysis. Lastly, the decoupling stages of per capita greenhouse gas emissions and per capita GDP were studied using Tapio’s decoupling indicator. Decoupling stages derived from the decoupling analysis were then linked to different stages of the Environmental Kuznets Curve based on a UNEP framework. The results demonstrate that the existence of the Environmental Kuznets Curve was not confirmed for Iceland 1990-2018. Secondly, the results demonstrate unidirectional Granger causality from changes in per capita GHG emissions to changes in per capita GDP. Thirdly, the decoupling analysis demonstrated that there was a period during 1990-2018 in which the Icelandic economy reached strong decoupling. Additionally, the decoupling analysis indicated that from 2010-2018, the Icelandic economy was close to achieving sustained strong decoupling, i.e., a stage in which per capita GHG emissions are consistently declining whilst per capita income keeps growing, analogous to the last stage of the Environmental Kuznets Curve. To continue the path toward sustained strong decoupling, policies that jointly promote increased per capita income and decreases in per capita GHG emissions should be put in place. This is especially relevant considering the results from the Granger causality analysis, indicating that reductions in per capita GHG emissions may lead to reductions in per capita GDP. Therefore, policies aimed at GHG emission reductions must be effectively targeted to avoid haltering economic growth, especially in the case of emission-intensive industries that are ...