Testing the Environmental Kuznets’ Curve Hypothesis: Experience From Tanzania

Abstract

The recent environmental concerns have compelled researchers to find out the relationship between economic growth and environmental degradation. There have been concerns that countries grow economically at the expense of the environment while others argue that greater levels of economic growth facilitate the application of environmental friendly technologies and better abatement technologies. This study investigated the existence of the Environmental Kuznets Curve (EKC) in Tanzania. This is a hypothesized relationship between economic growth and environmental degradation. The specific objectives of the study were first, to analyse the economic growth related determinants of the per capita Carbon Dioxide (CO2) emissions and second to analyse the long term relationship between per capita Carbon Dioxide (CO2) emissions and economic growth. The study made use of time series data for 10 years from 2008 to 2017. The variables estimated were per capita Carbon Dioxide (CO2) as the dependent variable while The Income per capita (GDP), Income per capita squared (GDP²), Energy Consumption (EC), and Foreign Direct Investment (FDI) were used as independent variables. In estimating this relationship, the study made use of the Autoregressive Conditional Heteroscedasticity (ARCH) model. The results from the study show that the EKC exists for the case of the tested variables in Tanzania. Lastly the study recommends that the country can still utilize environmental resources for more development but this should be coupled with efforts to use environmental friendly technologies so that the country can attain a quick U turn in the environmental degradation-economic growth relationship.