Analysis of pollution haven hypothesis (PHH) and Environmental Kuznets Curve (EKC) in selected association of South Asian Nations (ASEAN) countries

The Pollution Haven Hypothesis (PHH) claims that because of international trade, developing countries have been specializing and exporting pollution-intensive goods to advanced countries. This study examines the PHH claim for trade between the six Association of South East Asian Nations (ASEAN) countries and two advanced countries (the USA, Japan) in Environmental Kuznets Curve ( EKC) framework for the period 1989-2014, The Fully Modified Ordinary Least Square (FMLOS) panel co-integration approach has been employed to estimate the coefficients of the EKC model. The results reveal that the EKC docs exist in the ASEAN countries and Singapore is the only country that h.is crossed the peak turning point income level of the EKC. This result implies that economic growth without any environment policy brings more CO₂ emission in the ASEAN region. When the effect of exports of pollution-intensive goods is controlled, turning point of the EKC arrives earlier. It implies that production and export of pollution-intensive goods has increased the environmental cost of economic growth in the ASEAN countries. The conclusion remains same in the model where exports of pollution-intensive goods are taken as an interaction term with income. The positive significant coefficients on FDI in all models indicate that FDI also contributes to the increase in CO2 emissions. It is therefore, concluded that world pollution cannot be curtailed unless advanced countries reduce the consumption of pollution-intensive goods. It is a necessary condition for the existence of the world EKC that income elasticity for the demand of pollution-intensive products must fall as income increases. Changes in technologies and taste and preferences of consumers in developed world are required to reduce global pollution. An integrated well devised global programme is imperative to tackle the alarming issue of the global warming and advanced countries should lead this programme.