A number of empirical studies on the relationship between pollution and economic growth have been conducted in recent years (e.g. Grossman and Krueger 1993, 1995; Hettige et al. 1992; Holtz-Eakin and Selden 1995; Selden and Song 1994). These studies report an inverse U-shaped relation between pollution and the level of economic development for some pollutants and, on account of its similarity to the pattern of income inequality documented by Kuznets (1955), this inverse U-shaped pollution-income pattern is often called an EKC (Figure 3.1). However, it should be emphasised that these empirical findings are debated (e.g. Ekins 1997; Harbaugh et al. 2000, Jha and Murthy 2003a; Jha and Whalley 2001; Perman and Stern 2003) and that there are warnings against exaggerated optimism based on them (Arrow et al. 1995).