How does environmental regulation affect production location of non-carbon ecological footprint?

Abstract

Abstract The aim of the paper is to investigate how the location of non-carbon ecological footprint (home or abroad) changes along with environmental regulation. Ecological footprint measures the amount of biocapacity required to sustain the consumption patterns of human beings. Employing panel data analysis, the relationship between income and footprints that result from domestic production and importsis investigated for 87 countries during the period 2004-2010 within the Environmental Kuznets Curve (EKC) framework. We find that an EKC relationship cannot be validated for income (GDP per capita) and non-carbon footprints of production and of imports. Besides, the analysis shows that countries reach the turning points for import footprint at lower levels of income once stringency of environmental regulation and enforcement of environmental regulation are accounted for. Environmental regulations push the economic structure towards a cleaner transformation by which resources can be exploited more effectively, and short run losses in economic growth can be avoided in the medium and long run, conditional on a successful transformation toward higher value-added and cleaner production processes.