Environmental Kuznets curve in an open economy: A bounds testing and causality analysis for Tunisia

• Published in: Renewable & sustainable energy reviews Vol. 34; pp. 325 - 336
• Main Authors: Shahbaz, Muhammad, Khraief, Naceur, Uddin, Gazi Salah, Ozturk, Ilhan
• Format: Journal Article
• Language: English
• Published: Kidlington Elsevier Ltd 01-06-2014; Elsevier
• Subjects: Air pollution caused by fuel industries; Applied sciences; Degradation; Economic data; Economics; EKC; Energy; Energy economics; Energy policy; Energy. Thermal use of fuels; Exact sciences and technology; General, economic and professional studies; General. Regulations. Norms. Economy; Mathematical analysis; Mathematical models; Metering. Control; Methodology. Modelling; Nations; Regulations; Renewable energy; SAMHÄLLSVETENSKAP; SOCIAL SCIENCES; Tunisia; Tunisia; Africa; Energy; EKC; Tunisia; Energy consumption; Liberalisation; Carbon dioxide; Time series; Econometric model; Autoregressive model; Pollutant emission; Modeling; Environmental Kuznets curve; Ecological damage; Trade; Economic growth; Environment impact; Causality
• ISSN: 1364-0321; 1879-0690; 1879-0690
• DOI: 10.1016/j.rser.2014.03.022

The environmental Kuznets curve hypothesis posits that in the early stages of economic growth environmental degradation and pollution increase. However, as a nation reaches a certain level of income, measured in per capita terms, the trend reverses. The postulated relationship thus produces an inverted U-shaped curve. The topic has drawn much academic interest in the context of developed and emerging nations.
The aim of this paper is to investigate the existence of environmental Kuznets curve (EKC) in case of Tunisia using annual time series data for the period of 1971–2010. The ARDL bounds testing approach to cointegration is applied to test long run relationship in the presence of structural breaks and vector error correction model (VECM) to detect the direction of causality among the variables. The robustness of causality analysis has been tested by applying the innovative accounting approach (IAA). The findings of this paper confirmed long run relationship between economic growth, energy consumption, trade openness and CO2 emissions. The results also indicated the existence of EKC confirmed by the VECM and IAA approaches. The study has significant contribution for policy implications to curtail energy pollutants by implementing environment friendly regulations to sustain economic development in Tunisia.