Testing the Environmental Kuznets Curve Hypothesis: The Role of Deforestation

  • Korhan K. Gokmenoglu
  • Godwin Oluseye Olasehinde-Williams
  • Nigar TaspinarEmail author
Part of the Green Energy and Technology book series (GREEN)


This study examines the validity of the environmental Kuznets curve (EKC) hypothesis by augmenting the model with renewable energy consumption, fossil fuel energy consumption, urbanization, and deforestation. The ten countries that jointly own two-thirds of the global forest area are studied over the period of 2000–2015. This study fills the gap in the environmental economics literature by introducing deforestation for the first time as a variable affecting environmental degradation, instead of as a measure of environmental degradation. The long-run equilibrium relationship between the variables was confirmed by Kao (J Econ 90(1):1–44, [40])and Pedroni (Fully modified OLS for heterogeneous cointegrated panels. Emerald Group Publishing Limited, 93–130, [59]) panel cointegration tests. Fully modified ordinary least squares’ (FMOLS) results support the validity of the deforestation-induced EKC hypothesis, and the pairwise Dumitrescu and Hurlin Granger causality test suggests the existence of a causal relationship among the variables. The empirical results suggest that policies which induce afforestation—such as afforestation grants, tax exemptions for plantations, and tariffs on imports for forest products—are crucial to reducing the carbon dioxide (CO2) emissions in host countries.


Environmental Kuznets curve Deforestation FMOLS Granger causality 

JEL Codes

C23 Q53 Q58 


  1. 1.
    Acaravci A, Ozturk I (2010) On the relationship between energy consumption, CO2 emissions and economic growth in Europe. Energy 35(12):5412–5420Google Scholar
  2. 2.
    Ahmed K, Long W (2012) Environmental Kuznets curve and Pakistan: an empirical analysis. Procedia Econ Finan 1:4–13Google Scholar
  3. 3.
    Ahmed K, Shahbaz M, Qasim A, Long W (2015) The linkages between deforestation, energy, and growth for environmental degradation in Pakistan. Ecol Ind 49:95–103Google Scholar
  4. 4.
    Al-Mulali U, Ozturk I, Solarin SA (2016) Investigating the environmental Kuznets curve hypothesis in seven regions: the role of renewable energy. Ecol Ind 67:267–282Google Scholar
  5. 5.
    Al-Mulali U, Saboori B, Ozturk I (2015) Investigating the environmental Kuznets curve hypothesis in Vietnam. Energy Policy 76:123–131Google Scholar
  6. 6.
    Ang JB (2007) CO2 emissions, energy consumption, and output in France. Energy Policy 35(10):4772–4778Google Scholar
  7. 7.
    Apergis N, Ozturk I (2015) Testing environmental Kuznets curve hypothesis in Asian countries. Ecol Ind 52:16–22Google Scholar
  8. 8.
    Atasoy BS (2017) Testing the environmental Kuznets curve hypothesis across the US: evidence from panel mean group estimators. Renew Sustain Energy Rev 77:731–747Google Scholar
  9. 9.
    Azam M, Khan AQ (2016) Testing the environmental Kuznets curve hypothesis: a comparative empirical study for low, lower middle, upper middle and high-income countries. Renew Sustain Energy Rev 63:556–567Google Scholar
  10. 10.
    Baccini AGSJ, Goetz SJ, Walker WS, Laporte NT, Sun M, Sulla-Menashe D, Samanta S (2012) Estimated carbon dioxide emissions from tropical deforestation improved by carbon-density maps. Nat Clim Change 2(3):182–185Google Scholar
  11. 11.
    Bakirtas I, Cetin MA (2017) Revisiting the environmental Kuznets curve and pollution haven hypotheses: MIKTA sample. Environ Sci Pollut Res 24(22):18273–18283Google Scholar
  12. 12.
    Benedek Z, Fertő I (2013) Development and application of a new forestation index: global forestation patterns and drivers. IEHAS discussion papers, no. MT-DP-2013/26, Hungarian Academy of SciencesGoogle Scholar
  13. 13.
    Bhattarai M, Hammig M (2001) Institutions and the environmental Kuznets curve for deforestation: a cross-country analysis for Latin America, Africa, and Asia. World Dev 29(6):995–1010Google Scholar
  14. 14.
    Bilgili F, Koçak E, Bulut Ü (2016) The dynamic impact of renewable energy consumption on CO2 emissions: a revisited environmental Kuznets curve approach. Renew Sustain Energy Rev 54:838–845Google Scholar
  15. 15.
    Breusch TS, Pagan AR (1980) The Lagrange multiplier test and its applications to model specification in econometrics. Rev Econ Stud 47(1):239–253MathSciNetzbMATHGoogle Scholar
  16. 16.
    Cerrato M, Sarantis N (2002) The cross-sectional dependence puzzle. London Guildhall UniversityGoogle Scholar
  17. 17.
    Cetin M, Ecevit E (2017) The impact of financial development on carbon emissions under the structural breaks: empirical evidence from Turkish economy. Int J Econ Perspect 11(1):64–78Google Scholar
  18. 18.
    Chang MC (2015) Room for improvement in low carbon economies of G7 and BRICS countries based on the analysis of energy efficiency and environmental Kuznets curves. J Clean Prod 99:140–151Google Scholar
  19. 19.
    Chen B, McCoskey SK, Kao C (1999) Estimation and inference of a cointegrated regression in panel data: a Monte Carlo study. Am J Math Manag Sci 19(1–2):75–114zbMATHGoogle Scholar
  20. 20.
    Cho CH, Chu YP, Yang HY (2014) An environment Kuznets curve for GHG emissions: a panel cointegration analysis. Energy Sources Part B 9(2):120–129Google Scholar
  21. 21.
    Cotter J (2014) The importance of being a big tree. Retrieved 5 Jan 2017, from Greenpeace:
  22. 22.
    Culas RJ (2007) Deforestation and the environmental Kuznets curve: an institutional perspective. Ecol Econ 61(2):429–437Google Scholar
  23. 23.
    Culas RJ (2012) REDD and forest transition: tunneling through the environmental Kuznets curve. Ecol Econ 79:44–51Google Scholar
  24. 24.
    Dickey DA, Fuller WA (1979) Distribution of the estimators for autoregressive time series with a unit root. J Am Stat Assoc 74(366a):427–431MathSciNetzbMATHGoogle Scholar
  25. 25.
    Dickey DA, Fuller WA (1981) Likelihood ratio statistics for autoregressive time series with a unit root. Econ J Econ Soc 49:1057–1072MathSciNetzbMATHGoogle Scholar
  26. 26.
    Dogan E, Turkekul B (2016) CO2 emissions, real output, energy consumption, trade, urbanization and financial development: testing the EKC hypothesis for the USA. Environ Sci Pollut Res 23(2):1203–1213Google Scholar
  27. 27.
    Dumitrescu EI, Hurlin C (2012) Testing for Granger non-causality in heterogeneous panels. Econ Model 29(4):1450–1460Google Scholar
  28. 28.
    Ehrhardt-Martinez K, Crenshaw EM, Jenkins JC (2002) Deforestation and the environmental Kuznets curve: a cross-national investigation of intervening mechanisms. Soc Sci Q 83(1):226–243Google Scholar
  29. 29.
    Ellis EC, Klein Goldewijk K, Siebert S, Lightman D, Ramankutty N (2010) Anthropogenic transformation of the biomes, 1700 to 2000. Glob Ecol Biogeogr 19(5):589–606Google Scholar
  30. 30.
    Fisher RA (1992) Statistical methods for research workers. In: Breakthroughs in statistics. Springer, New York, pp 66–70Google Scholar
  31. 31.
    Galinato GI, Galinato SP (2012) The effects of corruption control, political stability and economic growth on deforestation-induced carbon dioxide emissions. Environ Dev Econ 17:67–90Google Scholar
  32. 32.
    Gill AR, Viswanathan KK, Hassan S (2017) A test of environmental Kuznets curve (EKC) for carbon emission and potential of renewable energy to reduce greenhouses gases (GHG) in Malaysia. Environ Dev Sustain 20:1–12Google Scholar
  33. 33.
    Grossman GM, Krueger AB (1991) Environmental impacts of a North American free tade agreement (no. w3914). National Bureau of Economic ResearchGoogle Scholar
  34. 34.
    Grossman GM, Krueger AB (1995) Economic growth and the environment. Q J Econ 110(2):353–377zbMATHGoogle Scholar
  35. 35.
    Gutierrez L (2003) On the power of panel cointegration tests: a Monte Carlo comparison. Econ Lett 80(1):105–111Google Scholar
  36. 36.
    Harris NL, Brown S, Hagen SC, Saatchi SS, Petrova S, Salas W et al (2012) Baseline map of carbon emissions from deforestation in tropical regions. Science 336(6088):1573–1576Google Scholar
  37. 37.
    Im KS, Pesaran MH, Shin Y (2003) Testing for unit roots in heterogeneous panels. J Econ 115(1):53–74MathSciNetzbMATHGoogle Scholar
  38. 38.
    Jalil A, Mahmud SF (2009) Environment Kuznets curve for CO2 emissions: a cointegration analysis for China. Energy Policy 37(12):5167–5172Google Scholar
  39. 39.
    Kang YQ, Zhao T, Yang YY (2016) Environmental Kuznets curve for CO2 emissions in China: a spatial panel data approach. Ecol Ind 63:231–239Google Scholar
  40. 40.
    Kao C (1999) Spurious regression and residual-based tests for cointegration in panel data. J Econ 90(1):1–44MathSciNetzbMATHGoogle Scholar
  41. 41.
    Kao C, Chiang MH (2001) On the estimation and inference of a cointegrated regression in panel data. In: Nonstationary panels, panel cointegration, and dynamic panels. Emerald Group Publishing Limited, pp 179–222Google Scholar
  42. 42.
    Kasman A, Duman YS (2015) CO2 emissions, economic growth, energy consumption, trade and urbanization in new EU member and candidate countries: a panel data analysis. Econ Model 44:97–103Google Scholar
  43. 43.
    Katircioğlu ST (2014) Testing the tourism-induced EKC hypothesis: the case of Singapore. Econ Model 41:383–391Google Scholar
  44. 44.
    Katircioğlu S, Katircioğlu S (2018) Testing the role of urban development in the conventional environmental Kuznets curve: evidence from Turkey. App Econ Lett 25:741–746Google Scholar
  45. 45.
    Kohler M (2013) CO2 emissions, energy consumption, income and foreign trade: a South African perspective. Energy Policy 63:1042–1050Google Scholar
  46. 46.
    Koop G, Tole L (1999) Is there an environmental Kuznets curve for deforestation? J Dev Econ 58(1):231–244Google Scholar
  47. 47.
    Kuznets S (1955) Economic growth and income inequality. Am Econ Rev 45(1):1–28Google Scholar
  48. 48.
    Lau LS, Choong CK, Eng YK (2014) Investigation of the environmental Kuznets curve for carbon emissions in Malaysia: do foreign direct investment and trade matter? Energy Policy 68:490–497Google Scholar
  49. 49.
    Lean HH, Smyth R (2010) CO2 emissions, electricity consumption and output in ASEAN. Appl Energy 87(6):1858–1864Google Scholar
  50. 50.
    Levin A, Lin CF, Chu CSJ (2002) Unit root tests in panel data: asymptotic and finite-sample properties. J Econ 108(1):1–24MathSciNetzbMATHGoogle Scholar
  51. 51.
    Li B, Yao R (2009) Urbanisation and its impact on building energy consumption and efficiency in China. Renew Energy 34(9):1994–1998Google Scholar
  52. 52.
    Liu X, Zhang S, Bae J (2017) The impact of renewable energy and agriculture on carbon dioxide emissions: investigating the environmental Kuznets curve in four selected ASEAN countries. J Clean Prod 164:1239–1247Google Scholar
  53. 53.
    Maddala GS, Wu S (1999) A comparative study of unit root tests with panel data and a new simple test. Oxford Bull Econ Stat 61(1):631–652Google Scholar
  54. 54.
    Miah MD, Masum MFH, Koike M, Akther S (2011) A review of the environmental Kuznets curve hypothesis for deforestation policy in Bangladesh. For-Biogeosci For 4(1):16Google Scholar
  55. 55.
    Myers KS, Klein SA, Reindl DT (2010) Assessment of high penetration of solar photovoltaics in Wisconsin. Energy Policy 38(11):7338–7345Google Scholar
  56. 56.
    Onafowora OA, Owoye O (2014) Bounds testing approach to analysis of the environment Kuznets curve hypothesis. Energy Econ 44:47–62Google Scholar
  57. 57.
    Ozturk I, Al-Mulali U (2015) Investigating the validity of the environmental Kuznets curve hypothesis in Cambodia. Ecol Ind 57:324–330Google Scholar
  58. 58.
    Panayotou T (1993) Empirical tests and policy analysis of environmental degradation at different stages of economic development (no. 992927783402676). International Labour OrganizationGoogle Scholar
  59. 59.
    Pedroni P (1999) Critical values for cointegration tests in heterogeneous panels with multiple regressors. Oxford Bull Econ Stat 61(1):653–670Google Scholar
  60. 60.
    Pedroni P (2001) Fully modified OLS for heterogeneous cointegrated panels. In: Nonstationary panels, panel cointegration, and dynamic panels. Emerald Group Publishing Limited, pp 93–130Google Scholar
  61. 61.
    Pesaran MH (2004) General diagnostic tests for cross section dependence in panels. CESifo working paper, no. 1229Google Scholar
  62. 62.
    Phillips PC (1995) Fully modified least squares and vector autoregression. Econ J Econ Soc 63:1023–1078MathSciNetzbMATHGoogle Scholar
  63. 63.
    Phillips PC, Hansen BE (1990) Statistical inference in instrumental variables regression with I(1) processes. Rev Econ Stud 57(1):99–125MathSciNetzbMATHGoogle Scholar
  64. 64.
    Polomé P, Trotignon J (2016) Amazonian deforestation, environmental Kuznets curve, and deforestation policy: a cointegration approach. Available at SSRN: or
  65. 65.
    Saboori B, Sulaiman J (2013) Environmental degradation, economic growth, and energy consumption: evidence of the environmental Kuznets curve in Malaysia. Energy Policy 60:892–905Google Scholar
  66. 66.
    Saboori B, Sulaiman J, Mohd S (2012) Economic growth and CO2 emissions in Malaysia: a cointegration analysis of the environmental Kuznets curve. Energy Policy 51:184–191Google Scholar
  67. 67.
    Selden TM, Song D (1994) Environmental quality and development: is there a Kuznets curve for air pollution emissions? J Environ Econ Manag 27(2):147–162Google Scholar
  68. 68.
    Shafik N (1994) Economic development and environmental quality: an econometric analysis. Oxford Econ Pap 46:757–773Google Scholar
  69. 69.
    Shafik N, Bandyopadhyay S (1992) Economic growth and environmental quality: time-series and cross-country evidence, vol 904. World Bank PublicationsGoogle Scholar
  70. 70.
    Shahbaz M, Lean HH, Shabbir MS (2012) Environmental Kuznets curve hypothesis in Pakistan: cointegration and Granger causality. Renew Sustain Energy Rev 16(5):2947–2953Google Scholar
  71. 71.
    Shahbaz M, Mutascu, M, Azim P (2013) Environmental Kuznets curve in Romania and the role of energy consumption. Renew Sustain Energ Rev 18:165–173Google Scholar
  72. 72.
    Shahbaz M, Solarin SA, Mahmood H, Arouri M (2013) Does financial development reduce CO2 emissions in Malaysian economy? A time series analysis. Econ Model 35:145–152Google Scholar
  73. 73.
    Smith P, Clark H, Dong H, Elsiddig EA, Haberl H, Harper R, Ravindranath NH (2014). Agriculture, forestry and other land use (AFOLU). Available at SSRN:
  74. 74.
    Solarin SA, Shahbaz M, Mahmood H, Arouri M (2013) Does financial development reduce CO2 emissions in Malaysian economy? A time series analysis. Econ Model 35:145–152Google Scholar
  75. 75.
    Stern NH (2007) The economics of climate change: the Stern review. Cambridge University pressGoogle Scholar
  76. 76.
    Tan F, Lean HH, Khan H (2014) Growth and environmental quality in Singapore: is there any trade-off? Ecol Ind 47:149–155Google Scholar
  77. 77.
    Tang CF, Tan BW (2015) The impact of energy consumption, income and foreign direct investment on carbon dioxide emissions in Vietnam. Energy 79:447–454Google Scholar
  78. 78.
    Tiwari AK, Shahbaz M, Hye QMA (2013) The environmental Kuznets curve and the role of coal consumption in India: cointegration and causality analysis in an open economy. Renew Sustain Energy Rev 18:519–527Google Scholar
  79. 79.
    Van der Werf GR, Morton DC, DeFries RS, Olivier JG, Kasibhatla PS, Jackson RB, Randerson JT (2009) CO2 emissions from forest loss. Nat Geosci 2(11):737–738Google Scholar
  80. 80.
    Wang SS, Zhou DQ, Zhou P, Wang QW (2011) CO2 emissions, energy consumption and economic growth in China: a panel data analysis. Energy Policy 39(9):4870–4875Google Scholar
  81. 81.
    Wei BR, Yagita H, Inaba A, Sagisaka M (2003) Urbanization impact on energy demand and CO2 emission in China. J Chongqing Univ Eng Ed 2:46–50Google Scholar
  82. 82.
    Yin J, Zheng M, Chen J (2015) The effects of environmental regulation and technical progress on CO2 Kuznets curve: an evidence from China. Energy Policy 77:97–108Google Scholar
  83. 83.
    Zhai P, Larsen P, Millstein D, Menon S, Masanet E (2012) The potential for avoided emissions from photovoltaic electricity in the United States. Energy 47(1):443–450Google Scholar

Copyright information

© Springer Nature Switzerland AG 2019

Authors and Affiliations

  • Korhan K. Gokmenoglu
    • 1
  • Godwin Oluseye Olasehinde-Williams
    • 2
  • Nigar Taspinar
    • 1
    Email author
  1. 1.Department of Banking and FinanceEastern Mediterranean UniversityFamagustaTurkey
  2. 2.Department of EconomicsEastern Mediterranean UniversityFamagustaTurkey

Personalised recommendations