Transition and sustainability: Empirical analysis of environmental Kuznets curve for water pollution in 25 countries in Central and Eastern Europe and the Commonwealth of Independent States

This paper examines the effects of political, structural and economic changes on environmental quality in 25 Central and East European countries (CEECs) and the countries of the Commonwealth of Independent States (CIS) using selected water pollution indicators and by testing the environmental Kuznets curve (EKC). Despite substantial research on the transition effects from centrally planned economies and totalitarian political systems to democracy and free market economies, the literature is limited with respect to the short- and long-term environmental impacts. Considering the institutional and structural changes in these economies, rising per capita income and increased trade and investment openness, these countries can be characterized as early, late and non-liberalizers with respect to the start and continuation of liberalization processes - a critical element of the systemic transformation in the CEECs. While trends in selected economic and social indicators (based on the OECD pressure-state-response framework) show that early liberalizers enjoyed positive gains relative to late liberalizers, the selected environmental indicators do not indicate consistent trends with regard to surface water quality. Among early and late liberalizers, nitrate, orthophosphate and ammonium concentrations decline and converge over time. Phosphorus concentrations initially dropped but then increased again for both groups of countries. Using the indicator of biological oxygen demand (BOD) as the dependent variable and a set of structural and economic measures as the independent variables, our econometric regression model provides some evidence for the EKC hypothesis and estimates the per capita income turning point for industrial BOD effluents to be approximately 3800-5000 USD.