The Impact of Economic Growth and Urbanisation on Environmental Degradation in the Baltic States: An Extended Kaya Identity

Daiva Makutėnienė (), Algirdas Justinas Staugaitis, Valdemaras Makutėnas and Gunta Grīnberga-Zālīte
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Daiva Makutėnienė: Department of Applied Economics, Finance and Accounting, Faculty of Bioeconomy Development, Agriculture Academy, Vytautas Magnus University, 53361 Kaunas, Lithuania
Algirdas Justinas Staugaitis: Department of Applied Economics, Finance and Accounting, Faculty of Bioeconomy Development, Agriculture Academy, Vytautas Magnus University, 53361 Kaunas, Lithuania
Valdemaras Makutėnas: Department of Applied Economics, Finance and Accounting, Faculty of Bioeconomy Development, Agriculture Academy, Vytautas Magnus University, 53361 Kaunas, Lithuania
Gunta Grīnberga-Zālīte: Institute of Economics and Regional Development, Latvia University of Life Sciences and Technologies, 3001 Jelgava, Latvia

Agriculture, 2023, vol. 13, issue 9, 1-25

Abstract: The main aim of this article is to empirically examine the impact of economic growth and urbanisation on environmental degradation, as well as the existence of the environmental Kuznets curve (EKC) in three Baltic States (Lithuania, Latvia, and Estonia) from 2000 to 2020. The main Kaya identity and the extended urban Kaya identity models are applied within the analysis. The multiple regression analysis made it possible to assess the influence of urbanisation and other factors on greenhouse gas (GHG) emissions in the studied countries, as well as test the hypothesis of the inverted U-shaped EKC. The main finding reveals that GDP per capita growth has the largest and increasing effect on GHG emissions in all three countries. It was also found that changes in population in urban areas in Lithuania and Latvia reduced the amount of GHG until 2020, while in Estonia, the growing urban population greatly contributed to increasing GHG emissions. As a result, processes related to urbanisation have not yet had a significant impact on environmental quality in Lithuania and Latvia. Meanwhile, in Estonia, this is a significant factor that policymakers need to focus on when solving environmental pollution reduction problems. The hypothesis of the EKC was mostly supported when analysing GHG emissions in Lithuania and Estonia and using GDP per capita as an indicator for economic growth. On the other hand, it was found that the impact of the urbanisation rate on GHG emissions is not curved, yet there is some evidence that in Estonia, a growing urbanisation rate is related to diminishing GHG emissions, according to the multiple regression analysis. The results of the study showed that policymakers should consider economic growth and, especially in Estonia, urbanisation when solving problems related to environmental degradation.

Keywords: greenhouse gas emissions; urbanisation; economic growth; Kaya identity; environmental Kuznets curve (search for similar items in EconPapers)
JEL-codes: Q1 Q10 Q11 Q12 Q13 Q14 Q15 Q16 Q17 Q18 (search for similar items in EconPapers)
Date: 2023
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