Income per capita, energy consumption, population growth, foreign direct investment, and environmental degradation in South Africa

Abstract

This research examines the relationship between income, energy consumption, foreign direct investment, population growth, and environmental degradation in South Africa, using Carbon Dioxide (CO2) emissions as an indicator of environmental degradation. The objective is to evaluate the Environmental Kuznets Curve (EKC) hypothesis in South Africa. Given the pressing need for sustainable development and environmental conservation, understanding the dynamics between economic growth and environmental degradation in South Africa is crucial for effective policy formulation and implementation. Time series data from 2000-2018 is analyzed, using the Autoregressive Distributed Lag (ARDL) method, which allows for estimating short- and long-term relationships between variables and addresses potential endogeneity and non-stationarity issues. Findings reveal a positive relationship between foreign direct investment and CO2 emissions, as increasing investment means higher emissions. The positive correlation between GDP and CO2 emissions per capita highlights the challenge of decoupling emissions from economic growth in South Africa. Results highlight the need for strategies to promote decarbonization by domestic and foreign firms. Policymakers should prioritize initiatives that encourage sustainable economic growth while reducing environmental degradation. This study contributes to the ongoing discourse on sustainable development and the applicability of the EKC hypothesis in South Africa, emphasizing the importance of tailored environmental policies.