CO 2 Emissions and Economic Growth in the West African Economic and Monetary Union (WAEMU) Countries

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1 CO Emssons and Economc Growth n the West Afrcan Economc and Monetary Unon (WAEMU) Countres Youmanl Ouoba Economcs department, Unversty of Ouaga (Burkna Faso) BP 710 Ouagadougou 03, Burkna Faso Tel: E-mal: theodoreouoba@yahoo.fr Receved: May 1, 017 Accepted: June, 017 do:10.596/emsd.v URL: Abstract The objectve of ths work s to address the valdty of a quadratc envronmental Kuznets curve (EKC) hypothess n the West Afrcan Economc and Monetary Unon (WAEMU) countres over the perod The bound test procedure s used to analyze the relatonshp between CO emssons and GDP. The results ndcate that there s no long term relatonshp between these varables for the panel of 8 countres of the WAEMU. Smlarly, the co-ntegraton exsts only n Benn, Mal and Togo. For the purposes of robustness check, addtonal varables (energy consumpton and trade openness) and the Sasabuch Lnd Mehlum U test are used. The results confrm the valdty of a quadratc carbon Kuznets curve only n Mal. Moreover, the valdty of the "polluton havens" hypothess suggests that the government of Mal should strengthen ts envronmental regulaton polcy to lmt the nflux of pollutng ndustres n the country. Keywords: CO emssons, EKC hypothess, Bound test, WAEMU 1. Introducton The relatonshp between economc growth and envronmental qualty s relevant n a context strongly marked by technologcal progress and clmate change. Most of the consequences of the degradaton of envronmental condtons are supported by developng countres. Indeed, envronmental degradaton caused by emssons of greenhouse gases may reverse the economc progress and developng countres wll support between 75 and 80 % of the damage costs (Hope, 009). Any effectve envronmental polcy should be able to address the determnants of 174

2 envronmental degradaton. In economc theory, economc growth s consdered as a source of polluton (Meadows et al, 197). Thus, there s ample evdence about an nverted U-shaped relatonshp between ncome and envronmental qualty, whch s nspred by Kuznets (1955) who found a smlar relatonshp between ncome nequalty and economc growth. Kuznets (1955) hypotheszed that ncome nequalty frst rses and then falls as ncome per capta ncreases. The relatonshp between growth and envronmental qualty has been descrbed n the lterature of envronmental Kuznets curve (EKC) (Panayotou, 1993). The EKC theory states that the early stages of economc growth are assocated wth the degradaton of the qualty of the envronment. Ths trend should be reversed when economc growth reaches a hgh level (turnng pont). Snce the Kyoto Protocol n 199, global partnershps and ndvdual ntatves n each country are encouraged to reduce emssons of greenhouse gases. Yet n recent years, the West Afrcan Economc and Monetary Unon (WAEMU) countres have experenced an ncrease n ther CO emssons (see Fgure 1). These emssons are postvely correlated to the GDP. In the WAEMU countres lke other countres, there s no a pror on the factors that explan the relatonshp between GDP and polluton lgdp Ftted values lco Fgure 1. Income and CO emssons n WAEMU Source: Author, usng data from the World Development Indcators (WDI 015). Beyond the ncome, several factors are often consdered n the lterature (Dnda, 004). They nclude manly energy consumpton (Govndaraju and Tang, 013; Ozcan, 013; Shahbaz et al 013; Yavuz, 014), trade lberalzaton, foregn drect nvestment, growth of the populaton (Ahmed and Long, 01; Onafowora and Owoye, 014), urbanzaton (Hossan, 011; Farhan and Ozturk, 015), fnancal development (Ozturk and Acaravc, 013), captal and labor (Menyah and Wolde-Rufael, 010; Al-Mulal et al, 015). These emprcal studes found mxed results regardng the valdty of the envronmental Kuznets curve (EKC) hypothess both n developed and developng countres. As sgnatores to the Kyoto Protocol, the WAEMU countres have ndvdual and collectve responsblty to reduce ther emssons of greenhouse gases. Therefore, one fundamental queston emerges: Can the WAEMU countres reduce ther polluton through economc 175

3 progress? In other words, does envronmental Kuznets curve (EKC) hypothess vald n the WAEMU countres? The contrbuton of ths study s twofold. The frst contrbuton s that the study provdes emprcal evdence of the EKC hypothess n West Afrcan countres. Indeed, except few studes that focused on Afrcan countres (Orubu and Omotor, 011; Osabuohen et al 014; Ln and al, 016), there s no emprcal evdence of the EKC specfcally on West Afrcan countres. As a second contrbuton, the study tests the suffcent condton of quadratc relatonshp between GDP and polluton. Untl now, ths condton has been tested only by Begum et al (015) n the case of Malaysa. The am of ths study s to check the valdty of the EKC hypothess n the WAEMU countres durng the perod The exstence of a long-term relatonshp between the varables s tested for all the eght WAEMU countres wth a panel (poolng data) on the one hand and for each country (tme seres) on the other hand. The results ndcate that there s no panel co-ntegraton between GDP and CO emssons. A more sutable approach to the analyss of the relatonshp between economc growth and polluton would be the examnaton of hstorcal experence of ndvdual countres (Stern et al., 1996), as there s a dfference n state level per capta emssons. Usng country-specfc data, the results show that there s a relatonshp between ncome and polluton n Benn, Mal and Togo. Therefore, the results reported and analyses focused on these three countres of the WAEMU. The remander of the artcle s structured n fve sectons. The frst secton presents the theoretcal and emprcal revew of the envronmental Kuznets curve lterature, the second descrbes the methodology and data, the thrd secton presents the man results, the fourth secton focuses on the dscusson of the results, and the last secton concludes the paper whle provdng polcy mplcatons of the results.. Theoretcal and Emprcal Analyses of the Relatonshp between Polluton and Economc Growth The relatonshp between polluton and economc growth has been dscussed n the lterature snce the work of Kuznets (1955). Theoretcally, n the early stages of development, economc growth leads to degradaton of the envronment and after a certan level of growth (turnng pont), t follows an mprovement n envronmental condtons. That s known as envronmental Kuznets curve hypothess. Several factors such as () the scale effect, () the technologcal effect and () the "polluton havens" hypothess or technology transfer could explan ths relatonshp between growth and the envronment (Grossman and Krueger, 1995). The scale effect that tends to preval n the early stages of economc growth s based on the dea that producton growth s accompaned by an ncrease n nputs requred for ndustral producton. More generally, rapd ndustralzaton, populaton growth and changes n lfe style are the major factors of ncreased energy consumpton (Apergs and Ozturk, 015). Wth ncreasng energy consumpton, the level of carbon emssons s expected to rse and ths wll contrbute further to global warmng. However, hgher energy consumpton n goods 176

4 producton s supposed to allow economc growth that s assocated wth technologcal progress. Thus, economc growth s a source of technologcal progress that causes a replacement of obsolete technques by envronmentally frendly technques (technologcal effects). The technologcal effect shows that the envronmental mpacts of economc growth may depend on changes n producton technques. The mpact of economc growth on the qualty of envronment could be postve or negatve dependng on the changes n the structure of producton of a country (composton effect). If a country produces less polluton-ntensve goods as ncome growth, the composton effect wll cause the envronmental mpacts of economc growth to declne (Brock and Taylor, 005). As a whole, t appears that the scale effect has a postve effect on polluton whle the technologcal effect affects polluton negatvely. Accordng to the polluton haven hypothess (PHH), t refers to the possblty that multnatonal frms, partcularly those engaged n hghly pollutng actvtes, relocate to countres wth lower envronmental standards (Dnda, 004). Thus, the PHH or technology transfer effect depends to the degree of trade openness. On the one hand, trade openness fosters technology transfer through foregn drect nvestments that reduce polluton by the dffuson of clean technologes (Martn and Wheeler, 199; Reppeln-Hll, 1999). On the other hand, openness may cause ncreased polluton for developng countres that wll host pollutng ndustres (polluton havens) due to ther less restrctve regulatons on envronment. Although other factors explan the EKC hypothess (Dnda, 004), those mentoned above are the ones that wdely receved emprcal support. Emprcal evdence of the EKC hypothess was frst establshed by Grossman and Krueger (1995) who found a non-lnear relatonshp between polluton and ncome. The smplest emprcal model relates the level of polluton (CO emssons) to ncome level (GDP and GDP ). Despte the dfferent approaches, most of the studes confrmed the exstence of the EKC (Fodha and Zaghdoud, 010; Acaravc and Ozturk, 010; Esteve and Tamart, 01; Hamt-Haggar, 01; Saboor et al, 01; Chow, 014). The basc model to test the valdty of the EKC hypothess was expanded further to take nto account several control varables. Thus, energy consumpton varable s mostly used to account for the scale effect (Ang, 007; Apergs and Payne, 009; Lean and Smyth, 010; Wang et al, 011; Shahbaz al, 01; Chandran and Tang, 013; Yavuz, 014). The results have been mxed wth respect to the evdence of the EKC. For example, the EKC s not confrmed n the case of Malaysa (Saboor and Sulaman, 013, 013a) and Chna (Wang et al, 011; Govndaraju and Tang, 013) whle t remans vald for other cases (Ang, 007; Shahbaz et al, 01). Smlarly, wth the bound test and Granger causalty approaches, Saboor and Sulaman (013, 013a) found n the case of Malaysa that the hypothess s not vald when addng the varable "energy consumpton" nto the quadratc model but remans vald wth foregn drect nvestment (Lau et al. 014). Foregn drect nvestment or trade openness varables are used n some studes as control varables to take nto account the "polluton havens" hypothess or technology transfer effect. All the studes usng these varables confrmed the EKC hypothess (see Table 1). Fnally, urbanzaton (Hossan, 011; Sharma, 011; Farhan et al, 014; Farhan and Ozturk, 177

5 015) and the populaton dynamcs (Ahmed and Long, 01; and Onafowora Owoye, 014) are also consdered as factors that ncrease the level of polluton. Begum et al (015) found n the case of Malaysa that the growth of the populaton has no effect on CO emssons whle the study of Al-Mual et al (015) showed that urbanzaton ncreases polluton n the long term n Europe. The quadratc functon has been challenged recently (Müller-Fürstenberger and Wagner, 007). Usng GDP and GDP square n one regresson may cause an econometrc problem due to the multcollnearty (Al-Mulal et al, 015). Recent studes tested the EKC hypothess through a lnear functon models takng nto account the man determnants mentoned above (Al-Mulal et al., 015; Bastola and Sapkota, 015). In partcular, n the case of Vetnam, the EKC hypothess s nvaldated because of the nonexstence of the polluton havens hypothess (the captal ncreased polluton) and the postve effect of the GDP on CO emssons n the short and long terms (Al-Mulal et al, 015). The arguments aganst the quadratc functon n nvestgatng the EKC seem to be nsuffcent. Indeed, there are many recent studes that used the quadratc functon to check the relatonshp between ncome and polluton (Begum et al., 015; Ben Jebl and Ben Youssef, 015; Ln et al, 016). However, all these studes used quadratc functon that ntegrates other varables besdes GDP and GDP square. Usng a quadratc functon, Ln et al (016) found that there s no evdence for an nverted U-shaped relatonshp between CO emssons and economc growth n fve Afrcan countres (Ngera, Kenya, Congo, Egypt, South Afrca), regardless of whether economc development s drven by agrculture or ndustralzaton. Table 1. Emprcal studes on EKC hypothess Author (s) Countres/regons Methodology Kuznets hypothess Varables: CO emsson, GDP, GDP square Fodha and Zaghdoud (010) Tunsa Johansen contegraton test, VECM Granger causalty. Acaravc and Ozturk (010) Europe Bound test, VECM Granger causalty Esteve and Tamart (01) Span Threshold VECM model Hamt-Haggar (01) Canada Pedron contegraton, fully modfed OLS (FMOLS), VECM Granger causalty Saboor et al. (01) Malaysa Bound test, VECM Granger Chow (014) 13 developed and developng countres causalty OLS Varables: CO emsson, energy consumpton, GDP, GDP square Ang (007) France Bound test, Johansen contegraton test, Granger causalty Apergs and Payne (009) Central Amerca Pedron contegraton, fully EKC relatonshp n only Itala and Denmark 178

6 modfed OLS (FMOLS), VECM Granger causalty. Lean and Smyth (010) ASEAN Fsher contegraton, dynamc Apergs and Payne (010) Commonwealth of Independent states OLS, VECM Granger causalty. Pedron contegraton, dynamc OLS, VECM Granger causalty Pao and Tsa (010) BRIC countres Kao, Fsher, Pedron contegraton tests, OLS, VECM Granger causalty Pao and Tsa (011a,b) Brazl Gray predcton model, VECM Granger causalty Wang et al. (011) Chna Pedron contegraton, VECM Granger causalty Pao et al. (011) Russa Johansen contegraton, OLS, Granger causalty Shahbaz et al. (01) Pakstan Bound test, VECM Granger causalty Chandran and Tang (013) ASEAN Johansen contegraton, VECM Saboor and Sulaman (013, 013a) Saboor and Sulaman (013, 013a) Granger causalty ASEAN Bound test, Granger causalty EKC relatonshp n only Malaysa Bound test, Granger causalty No Govndaraju and Tang (013) Chna et Inda Johansen contegraton No Ozcan (013) Mddle East Pedron contegraton, fully modfed OLS (FMOLS), VECM Granger causalty Shahbaz et al. (013) Romana Bound test, Fxed effects and random effects model. Yavuz (014) Turkey Johansen contegraton, Gregory-Hansen contegraton, OLS Varables: CO emsson, energy consumpton, GDP, GDP square, trade openness Jall and Mahmud (009) Chna Bound test, Granger causalty Halcoglu (009) Turkey Bound test, VECM Granger Atc (009) Central and Eastern Europe causalty Fxed effects and random effects model. Nasr and Rehman (011) Pakstan Johansen co-ntegraton, VECM Granger causalty Jayanthakumaran et al. (01) Chna and Inda Bound test Twar et al. (013) Inda Bound test, VECM Granger No No No Sngapore and Thaland No 179

7 causalty Shahbaz et al. (014) Tunsa Bound test, VECM Granger causalty Farhan et al. (014) Tunsa Bound test, VECM Granger causalty Varables: CO emsson, energy consumpton, GDP, GDP square, foregn drect nvestment Hasheng et al. (005) Chna Fxed effects and random effects model. Pao and Tsa (011a,b) BRIC countres Kao, Fsher, Pedron contegraton tests, OLS Lau et al. (014) Malaysa Bound test, Granger Causalty Varables: CO emsson, energy consumpton, GDP, GDP square, trade openness, populaton growth Ahmed and Long (01) Pakstan Bound test Onafowora and Owoye (01 4) Brazl, Chna, Egypt, Japan, Mexco, Ngera, South Korea, South Afrca. Bound test, varance decomposton EKC relatonshp n only Japan and South Korea Author(s) Countres Varables Methodology Fndngs Menyah and Wolde-Rufael (010) Ozturk and Acaravc (013) Ben Jebl and Ben Youssef (015) South Real GDP, energy consumpton, Bound test, Contegraton Afrca CO, Gross fxed captal formaton, employment Granger causalty relatonshp between varables Turkey Fnancal development, trade, Bound test EKC relatonshp economc growth, energy consumpton, carbon emsson Tunsa CO emsson, energy consumpton, Bound test, No EKC relatonshp GDP, nonrenewable energy VECM Granger consumpton, trade. causalty Al-Mulal et al (015) Vetnam CO emsson, GDP per capta, Bound test No EKC relatonshp energy consumpton (electrcty), captal, labor, export, mport Bastola and Sapkota Nepal GDP per capta, CO emsson per Bound test, Economc growth (015) capta, energy consumpton Granger causalty contrbuted to CO emssons and energy consumpton Source: Author 3. Methodology and Data Several emprcal analyses on the valdty of the envronmental Kuznets curve have examned the quadratc relatonshp between GDP and polluton (Fodha and Zaghdoud, 010; Acaravc 180

8 and Ozturk, 010; Esteve and Tamart, 01; Hamt- Haggar, 01; Saboor et al, 01; Chow, 014). Followng these studes, ths work examnes the valdty of the EKC hypothess usng a quadratc functon whch relates the CO emssons to GDP and GDP square. Ths s justfed by the lack of emprcal evdence on the valdty of ths hypothess n developng countres and especally n the WAEMU countres. Ths quadratc functon s expressed as follows: log CO 0 1 log GDPt log GDPt t 1 t CO s the carbon doxde (n kloton), GDP s the real GDP and s the error term. All varables are n logarthms. Müller-Fürstenberger and Wagner (007) have shown the lmts of ths envronmental functon. One of the man shortcomngs of ths functon s the multcollnearty problem by usng GDP and GDP square n one regresson. At ths tme, there s no suffcent evdence, however, to recommend aganst the quadratc functon n addressng the EKC. To check the robustness of the results n ths study, equaton (1) s expanded to nclude other varables such as trade openness (openness) and the share of ndustral producton to the GDP (manuf). The frst varable takes nto account the effect of the "polluton havens". There s evdence on the openness of the WAEMU economes followng the economc lberalzaton n Moreover, these countres lack a framework of restrctve envronmental regulaton that can allow a mgraton of drty ndustres from developed countres to the WAEMU countres. The second varable allows ntegratng the scale effect. The share of ndustral producton to the GDP s a proxy of the energy consumpton and was also used n one study on Asan countres (Aspergs and Ozturk, 015). More generally, energy structure and energy ntensty are the two major drvng forces of CO emssons n Afrca due to the hgh share of fossl fuel n total energy consumpton and low penetraton of clean energy as well as low energy effcency (Ln et al, 016). Fnally, the functon s expressed as follows: log CO 0 1 log GDPt log GDPt 3 log openness t 4manuf t t t The ncluson of trade openness allows testng the hypothess of technologcal dsplacement. Generally, under ths hypothess, t s assumed that trade openness causes the dsplacement of drty ndustres from developed countres to developng countres. In other words, a postve effect of openness on polluton s expected ( 3 0 ). Moreover, hgher ndustral producton s accompaned by hgher energy consumpton and polluton ( 4 0 ). Fnally, the EKC hypothess s confrmed f 1 0 and 0. Otherwse, the EKC hypothess s not supported and U-shaped curve would be vald. However, Lnd and Mehlum (010) found that the sgn of the parameters s only a necessary condton for the valdty of a quadratc functon. They propose the SLM test as suffcent condton of a quadratc relatonshp 181

9 between ncome and polluton. Moreover, usng energy consumpton n CO emssons model can lead to systematc volatlty n ts coeffcents (Jaforullah and Kng, 017). Therefore, ths study uses SLM test for the purpose of robustness of the results. Several technques are used n the lterature to estmate the above equatons (see Table 1). In ths study, the bound test technque developed by Pesaran et al. (001) and based on the Autoregressve Dstrbuted Lag (ARDL) model s used. Ths approach has been wdely used n the lterature of the EKC (see Table 1). Indeed, the bound test allows varables wth dfferent optmum lag. It allows for unbased estmators even n the presence of endogenous varables (Harrs and Solls, 003). The bound test procedure conssts of fve steps (Pesaran et al, 001; Jall and Mahmud, 009). The frst s to examne the unt root test to avod havng varables wth an ntegraton order greater than two. The second step s to select the optmal number of lag. The thrd step verfes the exstence of a long-term relatonshp between the varables. If the long term relatonshp s confrmed, then the fourth step estmates the coeffcents of short and long term. Testng the stablty of these coeffcents s the fnal step of the bound test (Brown et al, 1975).The ARDL model derved from Equaton (1) s wrtten as follows: log CO lco t GDPt GDPt CO GDPt t log 1 3 log 1 1 log t 1 log r 0 1 log GDPt 1 t represents the frst dfference of the varables and the assocated coeffcents for the explanatory varables are the short-term coeffcents whle the other are the long-term coeffcents. p, q and r, are the optmal lags and determned usng the Akake Informaton Crteron (AIC), the Schwarz crteron (SC), Hannan-Qunn crteron (HQC), the lkelhood rato (LR) statstc and the Akake fnal predcton error (FPE). Equaton 3 s estmated wth the ordnary least squares (OLS) technque. The test of the exstence of a long-term relatonshp between the varables s based on the followng assumptons: H 0 and H 0, 0, 0 0 : 1 3 p 1 1 : 1 3 The exstence of co-ntegraton s confrmed when the F-statstc s greater than the crtcal values of the bound test (Pesaran et al, 001). If the co-ntegraton s confrmed, then the coeffcents of the long-term relatonshp are estmated (Equaton 1). The resduals of ths estmate are used to estmate the error correcton model whch s gven as follows: p q log CO CO GDPt GDPt mce t 1 log t 1 log 1 log t 1 (4) 1t 1 s the adjustment speed n the event of mpact n the short term 0 The robustness test s based on the Equaton () whose ARDL model s wrtten as follows: r 0 q

10 Envronmental Management and Sustanable Development log CO t 0 1 log CO t log GDPt 1 3 log GDPt 1 4 log openness t 1 manuf 1 5 t1 (5) p q r s 1log CO GDPt GDPt openness t t 1 log 1 log 1 log 1 w manuf t 1 t 0 The estmaton of the model follows the bound test procedure descrbed above. Analyss of the co-ntegraton s based on the followng assumptons: H 0 and H 1 : 1 0, 0, 3 0, 4 0, : Beyond usng addtonal varables for robustness, the Sasabuch Lnd Mehlum (SLM) U test s also used to test the suffcent condton of the exstence of the EKC hypothess. Data on CO emssons, GDP, the share of ndustral value added n the GDP and trade openness are from the World Development Indcators (WDI 015). All the varables used are n logarthms except the share of ndustral value added n the GDP. The unt root test was used to verfy that the varables ncluded n the model are I (0) or I (1) n accordance wth the bound test approach. There are a varety of panel unt root tests. The results obtaned wth the augmented Dckey Fuller (ADF) test show that the varables are I (1) n Benn and Mal (see Table ). In ths case, the Johansen contegraton and the bound test approaches are applcable. However, n Togo, manuf s I (0). Therefore, the bound test s approprate. Table. Unt root test Countres Varables level L Frst dfference L Decson Benn logco *** 0 I(1) loggdp *** 0 I(1) (loggdp) *** 0 I(1) manuf *** 0 I(1) logopenness *** I(1) Mal logco *** 0 I(1) loggdp *** 0 I(1) (loggdp) *** 0 I(1) manuf *** 0 I(1) logopenness *** I(1) Togo logco *** 1 I(1) loggdp *** 0 I(1) (loggdp) *** 0 I(1) logopenness *** 1 I(1) manuf -3.54** I(0) Note: L= optmal lag. Phllps-perron test (not presented here) gves the same optmal lag. *** p<0.01, ** p<0.05, * p<

11 4. Results Ths secton presents the results of the bound test and the quadratc model estmates (sub-secton 1) before the results of the robustness checks (sub-secton ). 4.1 The Bound Test Results and Estmates The frst step of the bound test s to test the exstence of co-ntegraton between varables. The results ndcate that there s a long-term relatonshp between the varables n the three countres (see Table 3). Indeed, the F-stat n the three cases exceeds the crtcal values of the bound test. Table 3. Bound test results L F-statstcs Decson Low bound 5% Upper bound 5% Benn (0.00) Mal (0.001) Togo (0.00) Co-ntegraton Co-ntegraton Co-ntegraton Note: The values n parentheses are probabltes. L= optmal lag obtaned usng AIC, SC, LR, FPE and HQC crtera. Bound test values are obtaned from table CI () Case III: Unrestrcted ntercept and no trend pour k=. The long-term relatonshp coeffcents show that n the three countres the results are sgnfcant except the case of Togo where the varable GDP square s not sgnfcant (see Table 4). Furthermore, an ncrease by 1% n GDP corresponds to a decrease by 4.3% n CO emssons n Benn and an ncreased of CO emssons of 9.5% n Mal and 37.7% n Togo. In addton, the negatve and sgnfcant effect of the GDP square on the CO emssons n Mal confrms the exstence of an nverted U-shaped relatonshp between GDP and CO emssons. In the case of Benn, however, the postve and sgnfcant effect of the GDP square confrms a U-shaped relatonshp. The dagnostc tests show that there s nether seral correlaton problem (LM test) nor heteroskedastcty. Table 4. Long term coeffcents Varables Benn Mal Togo C *** loggdp *** (loggdp) *** *** *** *** * (0.076) * (0.085) (0.100) 184

12 Dagnostc tests Adjusted R =0.971 DW=1.88 LM test: F=0.768(0.761) Heteroskedastcty test: F=0.180(0.835) Adjusted R =0.933 DW=.815 LM test : F=1.763(0.67) Heteroskedastcty test: F=1.89 (0.00) Adjusted R = 0.81 DW=.31 LM test : F=0.67(0.767) Heteroskedastcty test: F=1.067(0.353) Note: The values n parentheses are probabltes *** p<0.01, ** p<0.05, * p<0.1 The estmated coeffcents of the long-term generate resduals that are used to develop the error correcton model. The results are gven n Table 5. In ths case, the results of the Wald test show that there s jont sgnfcance of the estmated coeffcents n the short term n Benn and n Mal but ths s not confrmed n the case of Togo. However, n the long-term, all the varables affect sgnfcantly CO emssons. Indeed, the adjustment speed n the equlbrum relatonshp s negatve and sgnfcant at 1%. Its coeffcent s n Benn, n Mal and -1 n Togo. Moreover, the dagnostc tests show that the error correcton model s vald for the three countres. Table 5. Short term coeffcents Varables Benn Mal Togo C log co log co t1 t log GDP t1 log GDP t log t1 (0.316) 0.16 (0.68) (0.41) (0.197) (0.148) GDP log GDP t (0.05) (0.155) ect *** Dagnostc tests (0.005) Adjusted R =0.89 LM test: F=1.565(0.6) Heteroskedastcty test: F=0.89(0.571) Wald test : F=.190(0.094) 0.00** (0.047) (0.03) (0.61) *** (0.003) (0.78) *** (0.004) (0.73) *** Adjusted R =0.040 LM test: F=0.116(0.890) Heteroskedastcty test: F=0.993(0.407) Wald test : F=9.183 Note: The values n parentheses are probabltes *** p<0.01, ** p<0.05, * p< *** Adjusted R =0.441 LM test : F=0.44 (0.657) Heteroskedastcty test: F=0.414(0.100) Wald test: F= 0.50 (0.780) 185

13 The stablty test (cusum and cusumq) shows that the error correcton model (ECM) s structurally stable n the three countres but occasonally unstable n Togo and Mal over the perod (see appendx 1). 4. Robustness Checks The robustness analyss conssted on the one hand, to ncrease the number of control varables and to test the suffcent condton of the EKC hypothess proposed by Lnd and Mehlum (010), on the other hand. After determnng the optmal lag (L) for each country, the ARDL model (Equaton 5) s estmated. The results of the bound test show that the long term relatonshp exsts only n the case of Mal. Indeed, the F-stat (5.5) s hgher than the crtcal values of the bound test at the 5% threshold (see Table 6). Thus, the followng bound test steps were lmted to that country. Table 6. Bound test results Countres L F-statstcs Decson Low bound 5% Upper bound 5% Benn.613 (0.053) Mal (0.001) Togo (0.04) No co-ntegraton Co-ntegraton No co-ntegraton Note: The values n parentheses are probabltes. L= optmal lag obtaned usng AIC, SC, LR, FPE and HQC crtera. Bound test values are obtaned from table CI () Case III: Unrestrcted ntercept and no trend, k=4. In the case of Mal, the long-term coeffcents and those of the short-term were estmated and reported (see Table 7). The results show that despte the addton of control varables, the sgns of the coeffcents reman dentcal and sgnfcant wth those of equaton (1) but wth hgher effects. Indeed, the effect of the GDP on the CO emssons s whle that of GDP square s Therefore, the assumpton about the exstence of the EKC cannot be rejected. Moreover, the effect of openness s postve and sgnfcant whle the share of manufacturng value added (manuf) n the GDP s negatvely related to CO emssons. The Wald test results ndcate that the short term coeffcents are vald. Ths test confrms the sgnfcant effect of the adjustment speed at the 1%. It s the same for the long term coeffcents. Indeed, any short-term shock causes an adjustment to long-run equlbrum. The adjustment speed (-0.55) s negatve and sgnfcant at the 1%. Fnally, the dagnostc test ndcates that the results are vald. 186

14 Table 7. Short term and long term coeffcents (case of Mal) Envronmental Management and Sustanable Development Note: The values n parentheses are probabltes. *** p<0.01, ** p<0.05, * p<0.1 In terms of stablty coeffcents, cusum tests and cusum squared ndcate that the model s stable over the analyss perod (see Appendx ). Fnally, the results of the SLM test confrm the exstence of the EKC n Mal and the turnng pont at an ncome per capta equals.31 bllon US dollars (see Table 8). Ths value s n logarthmc. Thus, the ncome correspondng to the turnng pont of ncome per capta s $ 436. us (constant 005). Table 8. SLM test 5. Dscusson Short term coeffcents Lower bound Upper bound Interval Slope t-value P>t 9.9e Extremum pont:.313 t-value = 4.7 P> t = Long term coeffcents Varables Coeffcents Varables Coeffcents C log GDP log GDP logopenness manuf ect (0.807) C 9.566*** log GDP *** log GDP 0.17*** log openness (0.00) manuf -0.55*** Adjusted R =0.471 LM test: F=3.005(0.063) Heteroskedastcty test: F=0.499 (0.774) Wald test: F= 8.455( 0.000) *** *** *** 0.14*** (0.006) ** (0.010) Adjusted R =0.946 LM test: F=3.745(0.033) Heteroskedastcty test: F=1.847(0.141) The results obtaned wth the Equaton (1) show that the varables have a short and long term 187

15 effect on the level of polluton n Benn and Mal whle n Togo ths effect s only vald n the long term. In the case of Benn, envronmental curve s a U-shaped. Indeed, the postve and sgnfcant effect of the GDP square ndcates a non-monotonc relatonshp between GDP and CO emssons. However, the Kuznets hypothess s confrmed only n the case of Mal gven the negatve and sgnfcant effect of the GDP square on the CO emssons. Ths mples that economc growth n Mal reached the turnng pont where t would contrbute to reduce polluton. The result s n lne wth those found n Sub-saharan Afrca (Orubu and Omotor, 011; Osabuohen et al, 014.), n Span (Esteve and Tamart, 01), n Canada (Hamt-Haggar, 01) and n Malaysa (Saboor et al, 01) but contrast wth those found by Robalno-López et al (015) n Venezuela. Most of the studes that confrm the exstence of the EKC s related to developed countres. Therefore, the result found here seems paradoxcal n the sense that economc growth s relatvely low n Mal and wth respect to the turnng pont whch s 436 $US n the GDP per capta term. Indeed, for the most ndcators used as a proxy of polluton, the turnng pont s at a level of GDP per capta between 3000 and 10,000 $ US n constant 1985 prces (Dnda, 004). However, the result found here s supported by Narayan et al (016). Based on the cross-correlaton coeffcent (CCC) between real GDP per capta and carbon doxde emssons, they found that Mal s one of the low-ncome countres where there s evdence for an nverted U-shaped relatonshp. The frst explanaton of the result found n Mal s that the envronmental polces were n favor of less pollutng behavors. However, the postve and sgnfcant effect of the openness confrms the "polluton havens" hypothess. Indeed, more openness results n ncreased levels of polluton. The valdty of the PHH n Mal mples that openness promotes the movement of pollutng ndustres from developed to developng countres (Mal). In the case of Vetnam, Al-Mulal et al (015) found that the polluton havens hypothess s nvald whle the result of the present work s n lne wth those of other studes (Lucas et al, 199; Brdsall and Wheeler, 1993). These authors found that the perod of hgh ntensty of polluton n developng countres corresponds to the perod when the OECD countres have strengthened ther envronmental regulaton. The lack of restrctve envronmental regulaton seems to be the cause of the transfer of pollutng ndustres from developed to developng countres. Moreover, the result found n Mal could be explaned by structural adjustment programs due to the nstablty of the model durng the perod (see cusum square test n Appendx ). The robustness tests confrm the exstence of the EKC hypothess n the case of Mal. The prevous results reman vald despte the ncluson of other control varables. The SLM test confrms the valdty of the quadratc relatonshp. The coeffcent of the adjustment speed ndcates that 55.% of mbalance s corrected n the frst perod. In addton, the results ndcate that an ncrease n the share of manufacturng value added to the GDP (proxy of energy consumpton) of a percentage pont s assocated wth a decrease n CO emssons by 1.58%. Ths result seems counter-ntutve n the sense that an mportant ndustral producton corresponds to hgher energy consumpton and more polluton. However, a negatve relatonshp between the level of energy consumpton and CO emssons was also found n Ngera (Wolde-Rufael, 005), n Saud Saoudhte and Unted 188

16 Arab Emrates (Squall, 007) and n USA (Bowden and Payne, 009). It s recognzed that growng economes lke Mal move towards less energy-ntensve producton sectors (Squall, 007). For example, the data obtaned from the World Development Indcators (WDI 015) show that the proporton of agrcultural value added n GDP was 54.4% from 1970 to 1985 but decreased to 4.6% between 1985 and 009. In the same tme, the ndustral sector added value over GDP ncreased from 1.6% to 19.3% and the servce sector from 3.8% to 38%. However, the servce sector s less energy-ntensve than ndustral sector (Wnkler, 007). Ths could explan the lower level of polluton n Mal despte the low level of ncome reached. Al-Mamun et al (014) found that the economc transformaton of the ndustral sector to the servce sector has led to a reducton of CO emssons n countres wth low and mddle ncomes. 6. Concluson and Polcy Implcatons The objectve of ths study was to nvestgate the exstence of the EKC relatonshp between ncome and CO emssons n the WAEMU countres over the perod 1970 to 010. To that end, the quadratc functon was used and estmated wth the bound test approach. The panel co-ntegraton test ndcates that there s no co-ntegraton relatonshp between GDP and CO emssons. Ths confrms the relevance of usng ndvdual country data n analyzng the relatonshp between ncome and polluton. Thus, for countres such as Benn, Mal and Togo, the results show a long-term relatonshp between these varables. Therefore ther estmates were only reported and analyzed. The results ndcate that GDP has a short and long term effect on CO emssons n Benn and Mal, whle n Togo ths effect s only vald n the long term. In addton, the EKC hypothess s confrmed only n Mal, whle n Benn, GDP has a U-shaped effect on polluton. The case of Togo s not conclusve. The robustness tests have been carred out for the three countres. The results of robustness checks confrm the exstence of the EKC hypothess n Mal. Moreover, the results show that the quadratc relatonshp between GDP and CO emssons s vald n the case of ths country. Thus, the estmated coeffcents ndcate that GDP affects CO emssons n the short and long term. These results mply that Mal reached the turnng pont where economc growth contrbuted to reduce polluton. Ths result, whch seems paradoxcal for a developng country lke Mal would be lnked to the country's economc transformaton over the perod 1985 to 009. Ths perod was marked by growth n the servce sector whch s less pollutng than ndustral sector. Ths would have contrbuted to the decrease n CO emssons. Nevertheless, the valdty of the "polluton havens" hypothess shows that the government of Mal may strengthen ts envronmental regulaton polcy to lmt the nflux of pollutng ndustres n the country. Although the mportance of collectve actons n mtgatng polluton, countres ndvdual ntatves n the WAEMU are also relevant as per the result. As low-ncome economes, the WAEMU countres cannot, however, rely solely on ther economc growth to further reduce CO emssons. Ths study focused on quadratc functon and used CO emssons only as an ndcator of polluton. However, usng other ndcators of polluton and testng lnear functon are also necessary when nvestgatng the relatonshp between ncome and polluton. Therefore, these 189

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