Remittances and CO2 emissions in Jamaica: An asymmetric modified environmental kuznets curve

Abstract

The original environmental Kuznets curve (EKC) proposes that environmental degradation increases with economic growth up to a maximum and then decreases thereafter, in an inverted U-shaped pattern. Departing from a discussion of the EKC, we consider a modified version wherein the relationship is between carbon dioxide (CO2) emissions and remittance inflows. We then apply autoregressive distributed lag bounds testing techniques to Jamaican data over the period 1976–2014 to elucidate the causal relationship between these variables, a first for this nation. Of note, we consider the potential existence of asymmetries in this relationship. There are two central findings. First, on a per capita basis, there is a long run cointegrating relationship running from remittances to CO2. This relationship exhibits an inverted U-shaped pattern like that of the traditional EKC. Second, we find that there exists statistically significant evidence of an asymmetric response of CO2 to changes in remittances only in the short run. One important implication of our findings is that the Jamaican government should design programs that incentivize consumers and investors to use remittances to make environmentally friendly purchases.