Economic Growth and Environmental Degradation in Nigeria: Beyond the Environmental Kuznets Curve

Akpan, Usenobong F. and Chuku, Agbai (2011): Economic Growth and Environmental Degradation in Nigeria: Beyond the Environmental Kuznets Curve. Forthcoming in: Procedings of 2011 Annual Conference of NAEE, Abuja

Abstract

The Environmental Kuznets Curve (EKC) hypothesis is a presumption that environmental degradation follows an inverted U-shaped trajectory in relation to economic growth. The thorny question of whether economic growth could provide a cure to environmental degradation has sparked off a large body of empirical studies in the last decade. The conclusions have been mixed. This study contributes to the debate on the existence and policy relevance of the EKC for Nigeria by applying autoregressive distributed lag (ARDL) framework to annual time series data from 1960 to 2008. The traditional EKC model is extended by including (in addition to the level, square and cubed values of the income variable), trade openness as well as the shares of manufacturing, agriculture and service sectors in Nigeria’s GDP. Using Co2 emissions per capita to proxy environmental degradation, our findings do not support the existence of the EKC hypothesis. Rather our results show that Nigeria’s situation when confronted with data is exemplified by an N-shaped relationship with a turning point at $77.27 that lies below the data set used for the study. Based on these findings, the paper posit that the hypothesized EKC serves as a dangerous policy guide to solving environmental problems in Nigeria. The conclusion is that to ensure sustainability, there exist an urgent need to look beyond the EKC by adopting courageous policy measures of environmental preservation in Nigeria irrespective of the country’s level of income.

• Item Type: MPRA Paper
• Language: English
• Keywords: Environmental Degradation, ARDL, Environmental Kuznets Curve, Nigeria
• Subjects: C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O43 - Institutions and Growth; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q2 - Renewable Resources and Conservation > Q24 - Land

References

Akbostanci, E., S. Turut-Asik, & G. I. Tunc (2009), The Relationship between Income and Environment in Turkey: Is there an Environmental Kuznets Curve?, Energy Policy, 37, 861-867.

Ang, J.B. (2008), Economic Development, Pollutant emissions and energy consumption in Malaysia. Journal of Policy Modelling, 30: 271-8.

Ang, J.B. (2009), Co2 emissions, Research and Technology Transfer in China. Ecological Economics, 68(10): 2658-2665.

CBN (2008), Statistical Bulletin 50 years Special Anniversary Edition, December, Abuja.

Ciegis, R. , D. Streimikiene & R. Matiusaityte (2007), The Environmental Kuznets Curve in Environmental Policy, Environmental Research, Engineering and Management,2(40): 44-51

Chuku, C. A. (2011), Economic Development and Environmental Quality in Nigeria: Is there an Environmental Kuznets Curve? Mimeograph, Department of Economics, University of Uyo, Nigeria.

Cole, M.A. (2004), U.S. Environmental load displacement: Examining consumption, regulations and the role of NAFTA, Ecological Economics, 48(4)439-450.

De Bruyn, S.M., V. D Bergh, & J.B. Opschoor, (1998), Economic Growth And Emissions: Reconsidering The Empirical Base Of Environmental Kuznets curves. Ecological Economics ,25, 161–175.

Diao, X. D., S.X. Zeng, C.M. Tam & V.W.Y. Tam (2009), EKC Analysis for Studying Economic Growth and Environmental Quality: A Case Study in China, Journal of Cleaner Production, 17, 541-548

Dinda, S. (2004),Environmental Kuznets Curve Hypothesis: A Survey, Ecological Economics, 49, 431-455.

Di Tella R. & R. MacCulloch (2008), Gross National Happiness as an Answer to the Easterline paradox? Journal of Development Economics, 86:239-57.

Fodha, M. & O. Zaghdoud (2010), Economic Growth and Pollutant Emissions in Tunisia: An Empirical Analysis of the Environmental Kuznets Curve, Energy Policy, 35: 1150-1156.

Galeotti, M, L. Alessandro & F. Pauli (2006), Reassessing the environmental Kuznets Curve for Co2 emissions: A robustness exercise, Ecological Economics, 57:152-163.

Grossman , G.M. & A.B. Krueger (1991), Environmental impacts of the North American free trade agreement, NBER Working Paper, 3914

Grossman , G.M. & A.B. Krueger (1995), Economic Growth and the Environment. Quarterly Journal of Economics, 110(2): 353-377.

Gowdy, J. (2004), The Revolution in Welfare Economics and its implications for Environmental Valuation. Land Economics, 80: 239-57

Gowdy, J. (2005), Towards a new Welfare Foundation for Sustainability. Ecological Economics, 53:211-22.

Harbaugh, W., T. Levinson, A. Wilson & D. Molloy (2002), Rethinking the empirical evidence of the Environmental Kuznets Curve, Review of Economics and Statistics, 84(3): 541-551.

He, J. & P. Richard (2010), Environmental Kuznets Curve for Co2 in Canada, Ecological Economics, 69, 1083-1093.

Halicioglu, F. (2009), An Econometric Study of C02 emissions , energy consumption, income and foreign trade in Turkey, Energy Policy, 39: 1156-64.

Holtz-Eaikin, D. & T.M. Selten (1992), Stocking the Fires?, Co2 Emissions and Economic Growth. National Bureau of Economic Research

Jalil A. & S.F. Mahmud (2009), Environmental Kuznets Curve for Co2 Emissions: A cointegration analysis for China, Energy Policy, 37:5167-5172.

Kijima, M., K. Nishide, & A. Ohyam (2010), Economic Models for the Environmental Kuznets Curve, Journal of Economic Dynamics& Control, 34, 1187-1201.

Kuznets, S. (1955), Economic Growth and Income Inequality, American Economic Review, 45(1):1-28.

Lindmark, M, (2002), An EKC-pattern in historical perspective: carbon dioxide emissions, technology, fuel prices and growth in Sweeden, 1870-1997, Ecological Economics, 42:333-347.

Marland, G., Boden, T. & B. Andres (2004), Oak Ridge Laboratory, U.S Department of Energy, Available at http://cdiac.esd.ornl.gov/trends/emis/top2004.tot .

Martinez-Zarzoso, I, & A. Bengochea-Marancho (2004), Pooled Mean Group Estimation for an environmental Kuznets Curve for Co2, Economic letters, 82:121-126.

Machado, G.V. (2000), Energy use, C02 emissions and foreign trade: An Input-Output approach applied to the Brazilian case. Paper presented at the 13th Conference on Input-Output Technique, Italy, August 21-25.

Narayan, P.K. (2004), Reformulating Critical Values for the Bounds F-statistics Approach to Cointegration: An Application to the Tourism Demand Model for Fiji. Discussion Paper No. 02/04, Department of Economics, Monash University, Victoria 3800, Australia.

Narayan, S. & P.K. Narayan (2004), Determinants of Demand for Fiji’s Export: An Empirical Investigation. The Developing Economies, XLII-1: 95-112.

Narayan, P.K. & R. Smyth (2005). “The Residential Demand for Electricity in Australia: An Application of the Bounds Testing Approach to Cointegration” Energy Policy, 33: 467-474.

Panayotou, T. (1993), Empirical tests and Policy analysis of Environmental Degradation of different stages of economic development. Working paper WP238, Technology and Employment programme, Geneva: International labour Office.

Alan H., R. Summers & B. Aten (2009), Penn World Table Version 6.3. Center for International Comparisons of production, income and prices, University of Pennsylvania, August, Available freely at pwt.econ.upenn.edu./php-site/pwt63/pwt63-form.php

Pesaran, M.H.& Y. Shin (1999), An autoregressive distributed lag modelling approach to cointegration analysis. In: Storm, S. (ed.), Econometric and Economic theory in 20th Century, The Ragnar Frisch Centennial Symposium. Cambridge: Cambridge University Press, Chapter 11.

Pesaran, M.H., Y. Shin.& R. Smith (2001), Bounds testing approaches to the analysis of level relationships, Journal of Applied Econometrics, 16: 289-326.

Phillips, P.C.B & P. Perron (1988), Testing for Unit root in time series regression, Biometrika, 75:335-346.

Johansen, S. & K. Juselius (1990), Maximum Likelihood estimation and Inference on cointegration-with applications to the demand for money. Oxford Bulletin of Economics and Statistics, 52: 169-210.

Raymond, L. (2004), Economic Growth as Environmental policy? Reconsidering the Environmental Kuznets Curve, Journal of Public Policy,24(3): 327-348.

Romilly, P. & H. Song (2001), Car ownership and use in Britain: A comparison of the empirical results of alternative cointegration estimation methods and forecasts, Applied economics, 33:1803-18

Selden, T.M. & D. Song (1994), Environmental quality and development: Is there a Kuznets curve for air pollution? Journal of Environmental Economics and Environmental Management, 27: 147-162.

Shafik, N. & S. Bandypadhyay (1992), Economic Growth and Environmental Quality: Time series and cross sectional evidence. Background paper for World Development Report, World Bank, Washington D.C.

Stagl, S. (1999), Delinking Economic growth from environmental degradation? A literature survey on the Environmental Kuznets Curve Hypothesis. Working paper series of the research focus, Growth and Employment in Europe: Sustainability and Competitiveness, Wartschaftsuniversitat Wien.

Stern, D. , M.S. Common & E.B. Barbier (1996), Economic growth and environmental degradation: The environmental Kuznets Curve and sustainable development. World Development, 24: 1151-1160.

Suri, V. & D. Chapman (1998), Economic growth, trade and energy: implications for the environmental Kuznets curve, Ecological Economics, 25: 195-208.

Wagner, M. (2008), The Carbon Kuznets Curve: A cloudy picture emitted by bad econometrics? Resource and Energy Economics, 30:388-408.