Economic activities and deforestation in the Congo basin: An environmental kuznets curve framework analysis

Abstract

There is growing evidence among environmentalists that the acceleration of economic growth has undesired environmental outcomes such as pollution, natural resource degradation, desertification, the loss of wildlife habitat, soil erosion and deforestation. We contribute to this literature by estimating the aggregated and disaggregated effects of economic activities on deforestation in the Congo Basin, a region that has experienced an increase in deforestation in recent years. We further test for the presence of an Environmental Kuznets Curve hypothesis between deforestation and economic activities. We control for other determinants of deforestation to verify whether the relationship between deforestation and economic activities is sensitive to the inclusion of these determinants. Data from 1996 to 2020 for countries in the Congo Basin - sourced from the World Bank website, Food and Agricultural Organization, World Governance Indicators and the Federal Reserve Bank was used. Fixed and random effects panel regressions were employed - based on the Hausman test results. The results show that agriculture and gross domestic product are significant determinants of deforestation in the Congo Basin but evidence of an inverse U-shaped relationship could not be confirmed. A U-shaped relationship was instead observed. However, an inverted U-shaped pattern was evident when manufacturing is considered an indicator for economic activities. We also found that population, openness, forest rents and institutions were significant determinants of deforestation in the Congo Basin. Hence, a structural transformation of the economy from the agricultural to the manufacturing sectors, while strengthening governance will curtail deforestation and pave the way for sustainable exploitation of forest resources.