Is There an Environmental Kuznets Curve for Bangladesh? Evidence from ARDL Bounds Testing Approach

FARIDUL ISLAM, MUHAMMAD SHAHBAZ & MUHAMMAD SABIHUDDIN BUTT

 

Abstract

The environmental Kuznets curve (EKC) hypothesis posits that in the early stages of economic growth environmental degradation and pollution increase. However, as a country reaches a certain level of income, the trend reverses postulating a relationship that produces an inverted U-shaped curve. Bangladesh has been recording remarkable rates of economic growth which, along with other factors, has raised the specter of a looming environmental crisis. This paper empirically investigates the EKC hypothesis for Bangladesh using data from 1971 to 2010 applying the Autoregressive distributed lag (ARDL) approach to cointegration for a long run relation and the Granger causality within the vector error correction model for the short run dynamics. The results show that energy consumption is a major contributor to CO2 emissions; trade openness lowers CO2 emissions, but urbanisation worsens it. Economic growth, energy consumption, trade, and urbanisation Granger cause CO2 emissions.

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