Dynamic Effects of Energy Consumption and Economic Growth on CO2 Emission: Testing EKC Hypothesis in Africa
Keywords:
EKC Hypothesis, Panel cointegration, African countries
Abstract
This paper focuses on using time series data on real GDP, energy consumption, and CO2 emission to examine the effect of economic growth and energy consumption on CO2 emission for a panel of 23 African countries within the period 1980–2019. The study used Pedroni (1999) approach of panel cointegration analysis to test for existence of long-run cointegration relationship between the variables. Fixed effect model was used to test for the Environmental Kutznets Hypothesis, and income squared was included as an additional explanatory variable. The estimated empirical results for the panel of 23 African countries from fixed effect model indicates the evidence of EKC hypothesis. At the level of individual countries, there is large divergence. 13 countries show evidence of EKC, implying that CO2 emission has fallen over the long run. As income increases, the levels of environmental damage decreases in those countries. 10 countries show opposite relationship among the variables. Based on the estimated results, it is recommended that countries should pursue economic growth policies that are not highly carbon intensive. Policy makers in these countries should adopt strategies that uses environmentally friendly technologies to decrease CO2 emission. Countries should also implement strong regulatory and market-based policies in highly energy-intensive sectors to reduce their current level of emissions and attain sustainable, environment-friendly economic growth.
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References
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22. Lin, B., Omoju, O. E., Nwakeze, N. M., Okonkwo, J. U., & Megbowon, E. T. (2016). Is the environmental Kuznets curve hypothesis a sound basis for environmental policy in Africa? Journal of Cleaner Production, 133, 712–724. https://doi.org/10.1016/j.jclepro.2016.05.173
23. Lluís Carrion‐i‐Silvestre, J., Del Barrio‐Castro, T., & López‐Bazo, E. (2005). Breaking the panels: An application to the GDP per capita. The Econometrics Journal, 8(2), 159–175. https://doi.org/10.1111/j.1368-423x.2005.00158.x
24. Masih, A. M. M. & Masih, R. (1996). Energy consumption, real income and temporal causality: Results from a multi-country study based on cointegration and error-correction modelling techniques. Energy Economics, 18(3), 165–183. https://doi.org/10.1016/0140-9883(96)00009-6
25. Menyah, K. & Wolde-Rufael, Y. (2010). Energy consumption, pollutant emissions and economic growth in South Africa. Energy Economics, 32(6), 1374–1382. https://doi.org/10.1016/j.eneco.2010.08.002
26. Mirza, F. M. & Kanwal, A. (2017). Energy consumption, carbon emissions and economic growth in Pakistan: Dynamic causality analysis. Renewable and Sustainable Energy Reviews, 72(October 2016), 1233–1240. https://doi.org/10.1016/j.rser.2016.10.081
27. Narayan, P. K. & Narayan, S. (2010). Carbon dioxide emissions and economic growth: Panel data evidence from developing countries. Energy Policy, 38(1), 661–666. https://doi.org/10.1016/j.enpol.2009.09.005
28. Nguyen-Van, P. (2010). Energy consumption and income: A semiparametric panel data analysis. Energy Economics, 32(3), 557–563. https://doi.org/10.1016/j.eneco.2009.08.017
29. Omaye, S. O., Sa’ad, S., Hamma Adama, A., Dotti, R., & Usman, A. B. (2022). Energy consumption, economic growth and energy transition in Africa: A cross-sectional dependence analysis. OPEC Energy Review, 46(4), 502–514. https://doi.org/10.1111/OPEC.12271
30. Omri, A. (2013). CO2 emissions, energy consumption and economic growth nexus in MENA countries: Evidence from simultaneous equations models. Energy Economics, 40, 657–664. https://doi.org/10.1016/j.eneco.2013.09.003
31. Özokcu, S. & Özdemir, Ö. (2017). Economic growth, energy, and environmental Kuznets curve. Renewable and Sustainable Energy Reviews, 72(April 2016), 639–647. https://doi.org/10.1016/j.rser.2017.01.059
32. Panayotou, T. (1994). Empirical tests and policy analysis of environmental degradation at different stages of economic development. In Pacific and Asian Journal of Energy (Vol. 4, Issue 1).
33. Pedroni, P. (1999). Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple of Economics and Statistics, Vol. No. 0, pp. . Oxford Bulletin of Economics and Statistics, 61, 653–670.
34. Pedroni, P. (2004). Panel cointegration: Asymptotic and finite sample properties of pooled time series tests with an application to the PPP hypothesis. Econometric Theory, 20(3), 597–625. https://doi.org/10.1017/S0266466604203073
35. Perman, R. & Stern, D. I. (2003). Evidence from panel unit root and cointegration tests that the Environmental Kuznets Curve does not exist. Australian Journal of Agricultural and Resource Economics, 47(3), 325–347. https://doi.org/10.1111/1467-8489.00216
36. Sa’ad, S. (2010). Energy consumption and economic growth: causality relationship for Nigeria. OPEC Energy Review, 34(1), 15–24. https://doi.org/10.1111/j.1753-0237.2010.00173.x
37. Saboori, B., Sulaiman, J., & Mohd, S. (2012). Economic growth and CO2 emissions in Malaysia: A cointegration analysis of the Environmental Kuznets Curve. Energy Policy, 51, 184–191. https://doi.org/10.1016/j.enpol.2012.08.065
38. Solarin, S. A. & Lean, H. H. (2016). Natural gas consumption, income, urbanization, and CO2 emissions in China and India. Environmental Science and Pollution Research, 23(18), 18753–18765. https://doi.org/10.1007/s11356-016-7063-9
39. Omaye, SO., Sa'ad, S., Hamma Adama, A., & Dotti, R. (2022). Energy consumption, economic growth and energy transition in Africa: A cross‐sectional dependence analysis. OPEC Energy Review,Volume46', Issue 4,502-514
40. Tan, F., Lean, H. H., & Khan, H. (2014). Growth and environmental quality in Singapore: Is there any trade-off? Ecological Indicators, 47, 149–155. https://doi.org/10.1016/j.ecolind.2014.04.035
41. Wang, S., Li, Q., Fang, C., & Zhou, C. (2016). The relationship between economic growth, energy consumption, and CO2 emissions: Empirical evidence from China. Science of the Total Environment, 542, 360–371. https://doi.org/10.1016/j.scitotenv.2015.10.027
42. World Development Indicators https://datatopics.worldbank.org/world-development-indicators/
2. Apergis, N. & Payne, J. E. (2010). Coal consumption and economic growth: Evidence from a panel of OECD countries. Energy Policy, 38(3), 1353–1359. https://doi.org/10.1016/j.enpol.2009.11.016
3. Asafu-Adjaye, J. (2000). The relationship between energy consumption, energy prices and economic growth: Time series evidence from Asian developing countries. Energy Economics, 22(6), 615–625. https://doi.org/10.1016/S0140-9883(00)00050-5
4. Atasoy, B. S. (2017). Testing the environmental Kuznets curve hypothesis across the U.S.: Evidence from panel mean group estimators. Renewable and Sustainable Energy Reviews, 77(March 2016), 731–747. https://doi.org/10.1016/j.rser.2017.04.050
5. Bartsch, U. & Mueller, B. (2000). Fossil Fuels in a Changing Climate (Issue May). Oxford Univ. Press for the Oxford Institute for Energy Studies.
6. Bloch, H., Rafiq, S., & Salim, R. (2012). Coal consumption, CO2 emission and economic growth in China: Empirical evidence and policy responses. Energy Economics, 34(2), 518–528. https://doi.org/10.1016/j.eneco.2011.07.014
7. Breitung, J. (2000). “The Local Power Of Some Unit Root Test For Panel Data” In Nonstationary Panels, Panel Cointegration, and Dynamic Panels. In Advances in Econometrics (Vol. 15).
8. Choi, I. (2006). Combination unit root tests for cross-sectionally correlated panels. Econometric Theory and Practice: Frontiers of Analysis and Applied Research, 311–333. https://doi.org/10.1017/CBO9781139164863.014
9. Feng, T., Sun, L., & Zhang, Y. (2009). The relationship between energy consumption structure, economic structure and energy intensity in China. Energy Policy, 37(12), 5475–5483. https://doi.org/10.1016/j.enpol.2009.08.008
10. Gill, A. R., Viswanathan, K. K., & Hassan, S. (2017). The environmental kuznets curve (EKC) and the environmental problem of the day. Renewable and Sustainable Energy Reviews, 81(August 2016), 1636–1642. https://doi.org/10.1016/j.rser.2017.05.247
11. Gill, A. R., Viswanathan, K. K., & Hassan, S. (2018). A test of environmental kuznets curve (EKC) for carbon emission and potential of renewable energy to reduce green house gases (GHG) in Malaysia. Environment, Development and Sustainability, 20(3), 1103–1114. https://doi.org/10.1007/s10668-017-9929-5
12. Glasure, Y. U. & Lee, A. R. (1998). Cointegration, error-correction, and the relationship between GDP and energy: The case of South Korea and Singapore. Resource and Energy Economics, 20(1), 17–25. https://doi.org/10.1016/S0928-7655(96)00016-4
13. Grossman, G. M. & Krueger, A. B. (1991). Environmental Impacts of a North American Free Trade Agreement. National Bureau of Economic Research, 3914. https://doi.org/10.3386/w3914
14. Grossman, G. M. & Krueger, A. B. (1995). Economic Growth and the Environent. The Quarterly Journal of Economics, Vol. 110(2), 353–377. http://links.jstor.org/sici?sici=0033 5533%28199505%29110%3A2%3C353%3AEGATE%3E2.0.CO%3B2-G
15. Hadri, K. (2000). Testing for stationarity in heterogeneous panel data. The Econometrics Journal, 3(2), 148–161. https://doi.org/10.1111/1368-423x.00043
16. Hamit-Haggar, M. (2012). Greenhouse gas emissions, energy consumption and economic growth: A panel cointegration analysis from Canadian industrial sector perspective. Energy Economics, 34(1), 358–364. https://doi.org/10.1016/j.eneco.2011.06.005
17. Im, K. S., Pesaran, M. H., & Shin, Y. (2003). Testing for unit roots in heterogeneous panels. Journal of Econometrics, 115(1), 53–74. https://doi.org/10.1016/S0304-4076(03)00092-7
18. Kraft, O. & Kraft, A. (1978). On the Relationship Between Energy and GNP. The Journal of Energy and Development, Vol. 3, No(Spring), 401–403. https://www.jstor.org/stable/24806805
19. Kuznets, S. (1955). Economic Growth and Income Inequality. The American Economic Review, 45(1), 1–28. https://www.jstor.org/stable/1811581
20. Lean, H. H. & Smyth, R. (2010). CO2 emissions, electricity consumption and output in ASEAN. Applied Energy, 87(6), 1858–1864. https://doi.org/10.1016/j.apenergy.2010.02.003
21. Levin, A., Lin, C. F., & Chu, C. S. J. (2002). Unit root tests in panel data: Asymptotic and finite-sample properties. Journal of Econometrics, 108(1), 1–24. https://doi.org/10.1016/S0304-4076(01)00098-7
22. Lin, B., Omoju, O. E., Nwakeze, N. M., Okonkwo, J. U., & Megbowon, E. T. (2016). Is the environmental Kuznets curve hypothesis a sound basis for environmental policy in Africa? Journal of Cleaner Production, 133, 712–724. https://doi.org/10.1016/j.jclepro.2016.05.173
23. Lluís Carrion‐i‐Silvestre, J., Del Barrio‐Castro, T., & López‐Bazo, E. (2005). Breaking the panels: An application to the GDP per capita. The Econometrics Journal, 8(2), 159–175. https://doi.org/10.1111/j.1368-423x.2005.00158.x
24. Masih, A. M. M. & Masih, R. (1996). Energy consumption, real income and temporal causality: Results from a multi-country study based on cointegration and error-correction modelling techniques. Energy Economics, 18(3), 165–183. https://doi.org/10.1016/0140-9883(96)00009-6
25. Menyah, K. & Wolde-Rufael, Y. (2010). Energy consumption, pollutant emissions and economic growth in South Africa. Energy Economics, 32(6), 1374–1382. https://doi.org/10.1016/j.eneco.2010.08.002
26. Mirza, F. M. & Kanwal, A. (2017). Energy consumption, carbon emissions and economic growth in Pakistan: Dynamic causality analysis. Renewable and Sustainable Energy Reviews, 72(October 2016), 1233–1240. https://doi.org/10.1016/j.rser.2016.10.081
27. Narayan, P. K. & Narayan, S. (2010). Carbon dioxide emissions and economic growth: Panel data evidence from developing countries. Energy Policy, 38(1), 661–666. https://doi.org/10.1016/j.enpol.2009.09.005
28. Nguyen-Van, P. (2010). Energy consumption and income: A semiparametric panel data analysis. Energy Economics, 32(3), 557–563. https://doi.org/10.1016/j.eneco.2009.08.017
29. Omaye, S. O., Sa’ad, S., Hamma Adama, A., Dotti, R., & Usman, A. B. (2022). Energy consumption, economic growth and energy transition in Africa: A cross-sectional dependence analysis. OPEC Energy Review, 46(4), 502–514. https://doi.org/10.1111/OPEC.12271
30. Omri, A. (2013). CO2 emissions, energy consumption and economic growth nexus in MENA countries: Evidence from simultaneous equations models. Energy Economics, 40, 657–664. https://doi.org/10.1016/j.eneco.2013.09.003
31. Özokcu, S. & Özdemir, Ö. (2017). Economic growth, energy, and environmental Kuznets curve. Renewable and Sustainable Energy Reviews, 72(April 2016), 639–647. https://doi.org/10.1016/j.rser.2017.01.059
32. Panayotou, T. (1994). Empirical tests and policy analysis of environmental degradation at different stages of economic development. In Pacific and Asian Journal of Energy (Vol. 4, Issue 1).
33. Pedroni, P. (1999). Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple of Economics and Statistics, Vol. No. 0, pp. . Oxford Bulletin of Economics and Statistics, 61, 653–670.
34. Pedroni, P. (2004). Panel cointegration: Asymptotic and finite sample properties of pooled time series tests with an application to the PPP hypothesis. Econometric Theory, 20(3), 597–625. https://doi.org/10.1017/S0266466604203073
35. Perman, R. & Stern, D. I. (2003). Evidence from panel unit root and cointegration tests that the Environmental Kuznets Curve does not exist. Australian Journal of Agricultural and Resource Economics, 47(3), 325–347. https://doi.org/10.1111/1467-8489.00216
36. Sa’ad, S. (2010). Energy consumption and economic growth: causality relationship for Nigeria. OPEC Energy Review, 34(1), 15–24. https://doi.org/10.1111/j.1753-0237.2010.00173.x
37. Saboori, B., Sulaiman, J., & Mohd, S. (2012). Economic growth and CO2 emissions in Malaysia: A cointegration analysis of the Environmental Kuznets Curve. Energy Policy, 51, 184–191. https://doi.org/10.1016/j.enpol.2012.08.065
38. Solarin, S. A. & Lean, H. H. (2016). Natural gas consumption, income, urbanization, and CO2 emissions in China and India. Environmental Science and Pollution Research, 23(18), 18753–18765. https://doi.org/10.1007/s11356-016-7063-9
39. Omaye, SO., Sa'ad, S., Hamma Adama, A., & Dotti, R. (2022). Energy consumption, economic growth and energy transition in Africa: A cross‐sectional dependence analysis. OPEC Energy Review,Volume46', Issue 4,502-514
40. Tan, F., Lean, H. H., & Khan, H. (2014). Growth and environmental quality in Singapore: Is there any trade-off? Ecological Indicators, 47, 149–155. https://doi.org/10.1016/j.ecolind.2014.04.035
41. Wang, S., Li, Q., Fang, C., & Zhou, C. (2016). The relationship between economic growth, energy consumption, and CO2 emissions: Empirical evidence from China. Science of the Total Environment, 542, 360–371. https://doi.org/10.1016/j.scitotenv.2015.10.027
42. World Development Indicators https://datatopics.worldbank.org/world-development-indicators/
Published
2023-10-31
How to Cite
Muhammed, M., Saad, S., Maikudi, Y. I., & Usman, A. B. (2023). Dynamic Effects of Energy Consumption and Economic Growth on CO2 Emission: Testing EKC Hypothesis in Africa . European Scientific Journal, ESJ, 19(28), 127. https://doi.org/10.19044/esj.2023.v19n28p127
Section
ESJ Social Sciences
Copyright (c) 2023 Musa Muhammed, Suleiman Saad, Yusuf Isah Maikudi, Ali Baba Usman
This work is licensed under a Creative Commons Attribution 4.0 International License.
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