The energy-growth nexus in 3 Latin American countries on the basis of the EKC framework: in the case of Argentina, Brazil, and Chile

Abstract

In this paper, the effects of economic growth and four different types of energy consumption (oil, natural gas, hydroelectricity, and renewable energy) on environmental quality in terms of carbon dioxide (CO2) emissions were examined within the framework of the Environmental Kuznets Curve (EKC) for three Latin American countries, namely, Argentina, Brazil, and Chile, from 1975 to 2018. The autoregressive distributed lag (ARDL) in the form of Error Correction Mechanism (ECM) was used to verify the validity of the EKC hypothesis and the impacts of the variables in the short and the long run alike. Furthermore, the Toda-Yamamoto Granger causality test was carried out to identify the direction of causality between the variables. From ARDL-ECM estimation, the EKC was confirmed (inverted U-shaped curve between income growth and CO2 emissions) only in Argentina in the long run but not in Brazil and Chile. Based on the findings, renewable energy can have a great potential in reducing CO2 emissions in the future, but this advantage has not been fully exploited yet since a significant negative impact on CO2 emissions was only found in Chile. Also, the use of other less carbon-intensive energy sources such as natural gas and hydropower if they could be combined with renewable energy would be of great benefit and contribute to enhancing environmental quality and energy security in the short and the medium term and to successful low-carbon energy transition in the long run in Argentina, Brazil, and Chile.