Is There an Environmental Kuznets Curve for Bangladesh? Evidence from ARDL Bounds Testing Approach

The environmental Kuznets curve (EKC) hypothesis posits that in the early stages of economic growth environmental degradation and pollution increase. However, as a country reaches a certain level of income, the trend reverses postulating a relationship that produces an inverted U-shaped curve. Bangladesh has been recording remarkable rates of economic growth which, along with other factors, has raised the specter of a looming environmental crisis. This paper empirically investigates the EKC hypothesis for Bangladesh using data from 1971 to 2010 applying the Autoregressive distributed lag (ARDL) approach to cointegration for a long run relation and the Granger causality within the vector error correction model for the short run dynamics. The results show that energy consumption is a major contributor to CO2 emissions; trade openness lowers CO2 emissions, but urbanisation worsens it. Economic growth, energy consumption, trade, and urbanisation Granger cause CO2 emissions.