Abstract

For the past few decades, Maldives government has been showing concern about environmental pollution.Even
though Maldives’ population is low, factories are less;it still emits huge amounts of carbon every year. Maldives
is the first country to announce its decision to make the entire nation a carbon neutral country. The purpose of
this study is to test the relationship between environmental pollution and economic growth. This is the first
research done using time series data for 34 years from 1975-2008 for Maldives. The famous Environment
Kuznets Curve and OSL methods were used to test the hypothesis and relationships. Unit root tests were
performed to test the statistical properties of the data used in variables. Results show strong positive relationship
between environmental pollution and economic growth. EKC estimation shows Maldives could overcome the
rapid rate of environmental pollution by growing its economy at a faster rate. Granger Casualty Test indicates
changes in GDP per capita Granger-cause Emission. The result of this study will help the environmental
authorities to understand the effects of economic growth on the environmental degradation and manage the
environmental problems using macroeconomic methods.

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