Testing the environmental Kuznets curve hypothesis in South Africa using the ARDL approach

Abstract

AbstractIn recent years, an abundance of research has been conducted on the purported environmental Kuznets curve (EKC) hypothesis, which progressively proposed an inverted U‐shaped relationship between income and emissions. The primary objective of this research is to examine the case of South Africa, which stands as a prominent example of a highly developed industrialized economy within the African continent. This study aims to explore the potential of South Africa in reducing emissions resulting from human activities. Therefore, this study utilizes the autoregressive distributed lag (ARDL) approaches. The study's findings demonstrate the existence of both the U‐shaped curve and the inverted U‐shaped EKC when considering the parameters being examined in both short‐term and long‐term scenarios. In the short term, the inflection points of per capita GDP obtained from two regressions on carbon emissions validate values within the range of US$45.675‐US$45.72. The relationship between foreign direct investment (FDI) and financial development and their effects on environmental quality have yielded inconclusive and statistically insignificant results in both periods. The long‐term impact of renewable energy usage on environmental quality, specifically in terms of carbon emissions and ecological footprint, is substantial and exhibits a negative correlation. Nevertheless, it is evident that there exists a notable positive correlation in the immediate timeframe. In the long term, human capital has a key role in reducing the ecological footprint, since it is inversely correlated with it. However, in the near term, human capital has a substantial positive relationship with environmental quality, namely in terms of carbon emissions and ecological footprint. Therefore, the study affirms that in certain cases, it is exceedingly difficult for a nation to simultaneously uphold the preservation of its natural environment and foster economic development during the initial phases of expansion, and conversely.