Testing for the existence of the Environmental Kuznets Curve (EKC) for CO2 emissions in Ghana: evidence from the bootstrap rolling window Granger causality test.

Abstract

This paper investigates the existence of the Environmental Kuznets Curve for carbon dioxide emissions in Ghana. The causal relationship between economic growth and carbon dioxide emissions being examined and the short-run and long-run parameters of the estimated vector autoregressive models are found to be unstable. This necessitated the use of a time-varying approach and the rolling window Granger causality test to investigate the causal relationship between economic growth and carbon dioxide emissions. We find that GDP has a positive effect on carbon dioxide emissions in the sample periods where GDP Granger causes carbon dioxide emissions. Significant feedbacks from the environment to the economy are observed, with carbon dioxide emissions having a positive effect on GDP in most of the subsample periods. The empirical results show that the Environmental Kuznets Curve for carbon dioxide emissions for Ghana is upward sloping, contrary to the standard Environmental Kuznets Curve theory which postulates an inverted "U"-shaped relationship between economic growth and environmental degradation. The implication of the result is that carbon dioxide emissions increase with increases in GDP. The study recommends that existing policies designed to ensure environmental sustainability and hence control carbon dioxide emissions need to be strengthened and enforced to ensure that the rapid urbanization and industrialization of the Ghanaian economy does not come at a cost to the quality of the environment.