CO2 Emissions, Energy Consumption, Income and Foreign Trade: A South African Perspective

Working paper 356
Marcel Kohler
Publication date: 
July, 2013
Energy Policy

The effect of trade liberalisation on environmental conditions has yielded significant debate in the energy economics literature. Although research on the relationship between energy consumption, emissions and economic growth is not new in South Africa, no study specifically addresses the role that SA’s foreign trade plays in this context. A surprising fact given trade is one of the most important factors that can explain the Environmental Kuznets Curve. Our research employs recent SA trade and energy data and modern econometric techniques to investigate this. The main finding is the existence of a long run relationship between environmental quality, levels of per capita energy use and foreign trade in SA. As anticipated per capita energy use has a significant long run effect in raising the country’s CO2 emission levels, yet surprisingly higher levels of trade act to reduce these emissions. Granger causality tests confirm the existence of a positive bidirectional relationship between per capita energy use and CO2 emissions. Whilst we also find positive bidirectional causality between trade and income per capita and between trade and per capita energy use, it appears that SA trade liberalisation has not contributed to a long run growth in pollution-intensive activities nor higher emission levels.

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