Empirical Study on Relationship between Environmental Pollution and Economic Growth of Maldives Using Environmental Kuznets Curve and OLS Method

For the past few decades, Maldives government has been showing concern about environmental pollution.Even though Maldives’ population is low, factories are less;it still emits huge amounts of carbon every year. Maldives is the first country to announce its decision to make the entire nation a carbon neutral country. The purpose of this study is to test the relationship between environmental pollution and economic growth. This is the first research done using time series data for 34 years from 1975-2008 for Maldives. The famous Environment Kuznets Curve and OSL methods were used to test the hypothesis and relationships. Unit root tests were performed to test the statistical properties of the data used in variables. Results show strong positive relationship between environmental pollution and economic growth. EKC estimation shows Maldives could overcome the rapid rate of environmental pollution by growing its economy at a faster rate. Granger Casualty Test indicates changes in GDP per capita Granger-cause Emission. The result of this study will help the environmental authorities to understand the effects of economic growth on the environmental degradation and manage the environmental problems using macroeconomic methods.