A New Approach to Pollution Modelling in Models of the Environmental Kuznets Curve

Models of the Environmental Kuznets Curve, particularly those with an explicit abatement technology, often involve that pollution becomes negative in the long run. This, of course, is a highly implausible prediction. The paper at hand examines the problem of negative pollution by, first, critically discussing two approaches adopted in existing EKC models and, second, by proposing a new approach. Motivated by the debatable assumption of perpetually increasing returns to scale in abatement, the idea of fading increasing returns to scale is introduced. This procedure does not only constitute a solution to the theoretical problem of negative pollution, but also does well regarding the empirical plausibility of the abatement technology.