Environmental implications of N-Shaped Environmental Kuznets Curve for E7 Countries.

Abstract

The Environmental Kuznets Curve (EKC) hypothesis is of great importance to understanding the relationship between economic activity and environmental degradation. Given the current wave of climate change and environmental crisis traced to rising environmental pollution from economic activities it has become important to investigate the impact of economic expansion on the environment especially in the Emerging-7 countries that are responsible for a large amount of global economic activity. This study investigates the N-shaped EKC for the E-7 countries using data spanning the period 1995 to 2018. The study employs the use of PMG-ARDL estimator and heterogeneous causality tests to establish the long run and short-run and direction of causality respectively regarding the variables of interest. According to study empirical results, the long-run results fail to confirm the presence of an N-shaped EKC in the emerging 7 countries but rather confirms the existence of an inverted U-shaped EKC in the study countries. While renewable energy and non-renewable energy have a positive and significant relationship with CO2 emissions. Short-run results show that there is no significant relationship between economic expansion, renewable energy, non-renewable energy and CO2 emissions. Causality tests showed a bi-directional causality between GDP and GDP-squared, and a uni-directional causality from CO2 emissions to GDP-cubed, non-renewable energy and CO2 emissions, renewable energy and CO2 emissions. The study suggests increased use of renewable energy to mitigate pollutant emissions in the E-7 countries.