Testing the validity of the environmental Kuznets curve hypothesis for selected Southern African development communities' countries

Abstract

The Southern African Development Community (SADC) countries are home to many poor people. Although poverty has been decreasing proportionately in most SADC countries, food security, poverty, and malnutrition remain significant obstacles to socioeconomic progress. Achieving economic development while ensuring environmental sustainability remains a challenge for SADC countries. This study examines the validity of the Environmental Kuznets Curve (EKC) hypothesis by analysing the relationship between environmental degradation and economic development. It employs panel data from 1994 to 2020, focusing on selected SADC countries with comparable income levels. The panel autoregressive distributed lag (ARDL) and non-panel ARDL models were employed to capture the short and long-term estimates and the existence of the EKC hypothesis. The Granger Causality test investigated causal relationships among the variables, and the generalised impulse response function and variance decomposition investigate the shocks in the model. Lastly, diagnostic and stability tests were employed to determine the normality and stability of the model. The study found that per capita gross domestic product (GDP) significantly increases environmental degradation, which aligns with the EKC hypothesis. This indicates that as countries develop, their economic activities increase, which leads to environmental pollution in the early stages. Secondly, renewable energy negatively affects environmental degradation, emphasising the necessity to transition to clean energy sources. Thirdly, the analysis demonstrates that population growth contributes to reducing environmental degradation but does not significantly influence the environment, suggesting that unchecked population growth can lead to the depletion of resources. Lastly, the study determined the complex relationship between urbanisation growth and environmental degradation. It suggests that urbanisation growth does not affect the environment. Although an insignificant impact was observed, policymakers could focus on promoting eco-friendly urban development practices. These findings collectively offer a comprehensive understanding of how per capita GDP, renewable energy, population growth, and urbanisation growth impact the environment, providing valuable insights for policymakers in SADC to design more effective environmental policies. The non-panel ARDL model results revealed that per capita GDP and the square of per capita GDP have positive and negative influences on environmental degradation, respectively. The significant relationship between economic development and environmental degradation indicates the existence of the EKC hypothesis. As a result, the relationship between economic development and environmental degradation can be explained by an inverted U-shaped curve in SADC. Furthermore, the results show that the EKC hypothesis does not exist in Botswana and the Democratic Republic of Congo, because of a positive increasing relationship. At the same time, Namibia has a negative monotonic decreasing relationship. The results also revealed that the EKC hypothesis does not exist in South Africa and Tanzania, as the bell shape indicates a U-shaped relationship in the long run. The Granger causality test results indicated a non-directional causality in the per capita GDP-CO2 emissions and renewable energy-CO2 emissions nexus. On the other hand, bidirectional causality between population growth and CO2 emissions and urbanisation growth and CO2 emissions was established. The variance decomposition results revealed a shock in CO2 emissions and its exogenous variables. Moreover, the generalised impulse response function outcomes revealed that CO2 emissions have a fair share of negative trends throughout the period. Another observation is that per capita GDP remained significantly negative, due to the trend line above the positive trend. The VAR inverse roots of the AR characteristics polynomial indicated the stability of the model. The study recommends that SADC countries pursue efficiency improvements in policy intervention to prevent environmental degradation.