Abstract

This study aimed to study the relationship between economic growth and environmental degradation in Ethiopia by questioning the existence of environmental Kuznets Curve. The study uses time series data from 1969/70 to 2010/2011 in a VECM analysis approach. The finding indicates existence of EKC hypothesis in Ethiopia. Like any agrarian country economic growth in Ethiopia inevitably contribute for environmental degradations at the early stage. Later on environmental degradation start to decline with increasing economic growth this might be due to an increase in share of service sector in the economic growth and application of environmental law with economic activity. To sustain the current trend the country should have to follow the existing environmental friend economic policy.

Key words: Environmental Kuznets Curve, economic growth, VECM, CO2.