An Examination of the Relationship between Air Quality and Income in Canada

The environmental Kuznets curve hypothesis suggests that at high income levels, economic growth is accompanied by decreasing concentrations of air pollutants. We examine the relationship between four common air pollutants and income across Canadian provinces and metropolitan areas. Our study improves upon past studies of the relationship in Canada in two ways. First, our use of panel methods and pollution concentration data from individual monitoring stations allows for a much larger sample size than previous Canadian studies. Furthermore, our econometric modeling approach separates and identifies the relative magnitudes of the scale, composition, and technique effects. Our results are as expected for annual average concentrations of sulfur dioxide, nitrogen dioxide, and carbon monoxide: a positive effect of increases in the scale of the economy was completely offset by improvements in technology and changes in the composition of output. Similar results are found for ground‐level ozone when choosing the measure used to assess the Canada‐Wide Standard; however, the results when using annual average concentrations of ozone are much different. We attribute this difference to the focus of government policy to reduce short‐term, rather than long‐term, exposure to ozone.