EKC Modelling in a Post-pandemic Era: A Policy Note on Socio-ecological Trade-offs

Achieving Sustainable Development Goals (SDGs) 8 and 13 is now widely recognized as crucial. Over the past three decades, many researchers have examined how economic and environmental indicators interact. Despite its early focus on the ecological impacts of anthropogenic development, conclusions associated with this literature differ and often conflict. In this chapter, we first supply a state-of-the-art review of the environmental Kuznets curve (EKC) topic and shed light on the methodological challenges the empirical literature has attempted to overcome. Then, we investigate whether the technological shock induced by COVID-19-related adaptative strategies and policies would emerge as an environmental panacea (i.e., lower energy inefficiency and storage losses but larger power needs and technological waste) or open Pandora’s box of social imbalances (i.e., productivity gains through spillover effects but capital-to-labour substitution mechanisms and unemployment due to automation). In the wake of the fourth Industrial (digital 4.0) Revolution, it appears crucial to examine the extent to which an optimum policy reconciles those ambiguous effects under a post-pandemic era. Hence, a theoretical mathematical baseline is developed to model the evolutionary impacts of policy instruments, including CO₂ emissions, total factor productivity, and employment, with non-linear patterns characterizing their relationships within a multi-variate EKC framework. Modelling findings show that economic growth drivers reduce the negative environmental externalities while increasing the negative social externalities, following thresholds of the respective associations and identified conditions, with an optimum solution between these two competing policy impacts. Finally, a set of implications for theory and policy reforms are presented, along with policy caveats and assumptions and prospects for future fruitful research directions.