The Environmental Kuznets Curve Hypothesis for Colombia: Impact of Economic Development on Greenhouse Gas Emissions and Ecological Footprint

Abstract

Climate change has become a significant concern for developing countries given the risk that it poses to energy and food independence, and to general productivity. Despite having an energy system with low carbon intensity when compared to other Latin American countries, Colombia is already facing climate change impacts and requires urgent efforts to mitigate them. As a developing country, the challenge is bigger as policies for economic growth should be in line with the global commitment of reducing greenhouse gas emissions. With the aim of contributing to the design of climate policies by using data driven methodologies and scientific evidence, this study assesses the impact of economic development on the environment by examining the validity of the environmental Kuznets curve hypothesis for Colombia. Statistically validated and stable autoregressive distributed lag models are estimated for three different environmental indicators: carbon dioxide emissions, methane emissions, and the ecological footprint. Moreover, the effects of other variables such as urbanization, foreign direct investment, the value added by the agricultural and industrial sectors, and energy use are analyzed with dynamic simulations. To the best of our knowledge, there are no reports of EKC estimation using these variables in statistically validated models for Colombia; thus, this paper adds to the scientific evidence of the EKC hypothesis in developing countries. Empirical evidence supports a long-run equilibrium relationship among investigated variables and the existence of an inverted U-shaped EKC relationship between gross domestic product (GDP) and methane emissions, and GDP and the ecological footprint. The results of this paper show that shifting to renewable energy sources and leveraging the use of cleaner technologies in agricultural and industrial sectors are key factors for economic growth without harming the environment, which has important scientific value because of its evidence-based approach for public policy making in developing countries, particularly Colombia.