Income Heterogeneity and the Environmental Kuznets Curve Turning Points: Evidence from Africa

The concept of environmental sustainability aims to achieve economic development while achieving a sustainable environment. The inverted U-shape relationship between economic growth and environmental quality, also called Environmental Kuznets Curve (EKC), describes the correlation between economic growth and carbon emissions. This study assesses the role of agriculture and energy-related variables while evaluating the EKC threshold in 54 African economies, and income groups, according to World Bank categorization, including low income, lower-middle, upper-middle, and high-income in Africa. With 1990-2015 panel data, the results are estimated using panel cointegration, Fully Modified Ordinary Least Square (FMOLS), and granger causality tests. The results are: (1) The study validated the EKC hypothesis in the low-income, lower-, and upper-middle-income economies. However, there is no evidence of EKC in the full African and high-income panels. Furthermore, the turning points of EKC in the income group are meagerly low, showing that Africa could be turning on EKC at lower income levels. (2) The correlation between agriculture with CO2 is found positive in the high-income economy. However, agriculture has a mitigation effect on emissions in the lower-middle-income and low-income economies, and the full sample. Also, renewable energy is negatively correlated with emissions in Africa and the high-income economy. In contrast, non-renewable energy exerts a positive effect on emissions in all income groups except the low-income economies.

Automated summary

The study confirmed the existence of the Environmental Kuznets Curve (EKC) hypothesis in low-income, lower-middle-income, and upper-middle-income economies. However, there was no evidence of EKC in the full African and high-income panels. The turning points in the income groups were very low, indicating that Africa may trigger EKC at lower income levels. Agriculture was positively correlated with CO2 emissions in high-income economies, while having a mitigating effect in lower-middle-income, low-income economies, and the overall sample. Renewable energy showed a negative correlation with emissions in Africa and high-income economies, with non-renewable energy exerting a positive effect on emissions in all income groups except low-income economies.