Economic Expansion and Environmental Sustainability Nexus in Ghana

Abstract

In recent years, following the continued rise in the level of degradation and pollution in developing and emerging economies, the debate on the costs, benefits and longer-term implications of growth policies on the environment has intensified among stakeholders. Although economic expansion remains paramount in policy, ensuring environmental sustainability amidst the quest to stimulate growth in Ghana has assumed a central theme in its contemporary growth agenda. Exploring annual time series data spanning 1975–2015 this study examined, in Ghana, the environmental impact of economic expansion within the standard Environmental Kuznets Curve (EKC) framework. The Autoregressive Distributed Lagged bounds approach to cointegration did not confirm the existence of EKC for any of the environmental indicators in the short run, but was robustly established in the long run for CO2 emissions and energy consumption. This conclusion implies that, given the long-run parameters of Ghana, beyond a certain income level, degradation emanating from energy consumption and CO2 emissions will eventually fall as the country's economy expands. The study is the first to examine the effect of economic expansion on three of the most important environmental indicators in Ghana and also to employ an environmentally adjusted income variable as a measure of environment sustainability. © 2017 The Authors. African Development Review © 2017 African Development Bank