Integrating economic growth with the environmental intensity of human well-being: evidence from Bhutan

Abstract

ABSTRACT This paper studies whether the carbon intensity of human well-being has an Environmental Kuznets Curve (EKC) pattern with respect to economic growth in Bhutan using annual data from 1971 to 2018. Furthermore, it examines the short-term and long-term dynamics of the causal relation between emissions and growth in wealth and also whether recent trends of economic growth are carbon neutral. Econometric estimations, such as ordinary least squares, vector error correction model and variance decomposition, are applied alongside other appropriate statistical tests. The findings show that, in Bhutan, the carbon intensity of human well-being increases with economic growth and fails to support the EKC hypothesis. Long-run causality was found running from the carbon intensity of human well-being to GDP per capita and also from population growth to GDP per capita. The econometric analysis also revealed that the increasing emission of carbon dioxide is being absorbed and its negative effects are negated through rising forest cover hence, Bhutan appears to be a carbon-neutral nation. This paper is a valuable contribution to the literature and has significant policy implications. Furthermore, it provides an integrated and sustainable growth model discourse to the rest of the world which is ailing with severe emissions and climate change.