Abstract
This paper attempts to examine the environmental Kuznets curve (EKC) hypothesis for the BCIM-EC (Bangladesh–China–India–Myanmar economic corridor) member countries under the Belt and Road Initiative (BRI) of China. Both time series and panel data are covered, with respect to carbon dioxide (CO2) emissions, GDP per capita, energy use, and trade openness. For panel data analysis, GDP per capita and energy consumption have positive effects on CO2, while the effect of the quadratic term of GDP per capita is negative in the short-run. However, the short-run effects do not remain valid in the long-run, except for energy use. Therefore, the EKC hypothesis is only a short-run phenomenon in the case of the panel data framework. However, based on the Autoregressive Distributed Lag (ARDL) approach with and without structural breaks, the EKC hypothesis exists in India and China, while the EKC hypothesis holds in Bangladesh and Myanmar with regard to disregarding breaks within the short-run. The long-run estimates support the EKC hypothesis of considering and disregarding structural breaks for Bangladesh, China, and India. The findings of the Dumitrescu and Hurlin panel noncausality tests show that there is a unidirectional causality that runs from GDP per capita to carbon emission, squared GDP to carbon emission, and carbon emission to trade openness. Therefore, the BCIM-EC under the BRI should not only focus on connectivity and massive infrastructural development for securing consecutive economic growth among themselves, but also undertake a long-range policy to cope with environmental degradation and to ensure sustainable green infrastructure.
Highlights
The environmental Kuznets curve (EKC) hypothesis suggests that the earlier stage of economic development shows a negative relationship between low GDP per capita and environmental quality, but later, there is a positive relationship between higher level of growth or higher GDP per capita and environmental quality
We examined the Pooled Mean Group (PMG) proposed by Pesaran and Shin [16], and the recently-developed Common Correlated Effects Mean Group (CCEMG) test proposed by Chudik and Pesaran [17] to reveal the relationships among variables
Our empirical analysis consisted of the Bangladesh–China–India–Myanmar economic corridor (BCIM-EC) member countries with respect to carbon emissions, GDP per capita, energy use, and trade openness based on the econometric methods used in the EKC studies
Summary
The environmental Kuznets curve (EKC) hypothesis suggests that the earlier stage of economic development shows a negative relationship between low GDP per capita and environmental quality, but later, there is a positive relationship between higher level of growth or higher GDP per capita and environmental quality. With high levels of production due to the demand for goods and services, and with the aim of creating jobs for a vast population, the Bangladesh–China–India–Myanmar economic corridor (BCIM-EC) countries create a lot of manufacturing and heavy industries, resulting in increasing carbon emissions and more energy. According to the executive summary report of the Environmental Performance Index (EPI) from 2018, three-fifths of the world’s economies have reduced their carbon emissions, as the EKC hypothesis is commonly studied for developed countries by considering their economic growth and environmental indicators. As for the scale effect, economic growth resulting from trade has an adverse effect (negative effect) on the environment, as increases in production negatively effect the natural environment, leading to increased carbon emissions. The structure of the rest of this paper is as follows: the second section consists of a literature review; the third section discusses the data and methodology used in the EKC studies; the fourth section discusses the empirical results; the fifth section implies the causality test of the model; the sixth section presents the conclusion and the policy implications of this study
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