Carbon Dioxide and Economic Growth: The Kuznets Curve Hypothesis and the Case for Sub-Saharan Sierra Leone

Abstract

Current studies on the environmental Kuznets curve hypothesis (EKC), which stipulates the association between economic growth and environmental pollution as an inverted U-shaped curve, appears to have had varied findings. Thus, the principal objective of the current research exploration was the examination of a conceivable association between carbon dioxide emissions (CO2) and economic growth in Sierra Leone, for the period, 2002-2015, and the endorsement of the EKC hypothesis relating to the Sierra Leone economy. This was significant because nearly all prior researches on CO2 and economic growth relationship in developing nations were on the EKC hypothesis, rather than the nexus between CO2 emissions and economic growth. The apposite research methodology was quantitative with time series data comprising 56 observations and 6 variables. Utilizing the autoregressive maximum likelihood [AR(2)] model, the results revealed the gross domestic product per capita, foreign direct investment, and renewable energy individually had significant effects on carbon dioxide pollution emissions. However, the AR(2) model showed no support for the EKC hypothesis in Sierra Leone. Moreover, applying the Phillips-Ouliaris cointegration model, the outputs specified a statistically significant long-run relationship between CO2 and, at least, one element of economic growth (Rho = -20.529, Tau = -3.907, p < .05). In addition, the error correction model (errorECM1) employed to examine the short-run departure from the long-run had the anticipated symbol, and was statistically significant (βerrorECM1 = -.159, SE = .052, t = -3.07, p = .004), indicating a rapid correction progression to long-run equilibrium of about 15.9% annually. Nevertheless, both the long- and-short-run models showed no support for the EKC hypothesis in Sierra Leone, for the examination period. Obviously, the strong and positive effect of foreign direct invest on CO2 in the long-run and short-run models had a policy corollary because the effect seemed to insinuate a surge in foreign direct investment inflows concurrently enhanced CO2 pollution emissions in the country. The findings had significant applied and policy implications because of the suggestive necessity for foreign direct investment and energy policies to aim at less greenhouse effect production methods, to guarantee both environmental imperishability and the realization of sustainable economic growth objectives.