The effects of financial development, economic growth, coal consumption and trade openness on CO2 emissions in South Africa

This paper explores the effects of financial development, economic growth, coal consumption and trade openness on environmental performance using time series data over the period 1965-2008 in case of South Africa. The ARDL bounds testing approach to cointegration has been used to test the long run relationship among the variables while short run dynamics have been investigated by applying error correction method (ECM). The unit root properties of the variables are examined by applying Saikkonen and Lutkepohl (2002. Econometric Theory 18, 313-348) structural break unit root test. Our findings confirmed long run relationship among the variables. Results showed that a rise in economic growth increases energy emissions, while financial development reduces it. Coal consumption has significant contribution to deteriorate environment in South African economy. Trade openness improves environmental quality by reducing the growth of energy pollutants. Our empirical results also verified the existence of environmental Kuznets curve. This paper opens up new insights for South African economy to sustain economic growth by controlling environment from degrdation through efficient use of energy. (C) 2013 Elsevier Ltd. All rights reserved.