Testing the environmental Kuznets curve hypothesis in Africa: A focus on the moderating effect of Sino-African economic cooperation 1

Abstract

This study tested whether the Sino-African economic partnership, represented by the share of Chinese foreign direct investment (FDI), affected the validity of the environmental Kuznets curve (EKC) hypothesis in Africa. Therefore, we zeroed in on 41 countries and ran a panel analysis, covering the period ranging from 2003 to 2018, to examine whether the effect of gross domestic product (GDP) per capita on carbon dioxide (CO₂) and methane (CH₄) emissions per capita was moderated by the share of Chinese FDI stock. We found an overall inverted U-shaped relationship between GDP per capita with CO₂ and CH₄ emissions per capita. We also found that the impact of the GDP per capita on pollutants emissions per capita was contingent upon the level of the share of Chinese FDI. We estimated the turning points of GDP per capita and found that the share of Chinese FDI stock was making the turning point of CO₂ per capita move left and made the data shift from the inverted U-shaped to U-shaped, and the EKC hypothesis was rejected when the share of Chinese FDI increased. On the contrary, the share of Chinese FDI stock was making the turning point of CH₄ per capita move left, and still maintained the inverted U-shaped, and the EKC hypothesis was supported regardless of the magnitude of the share of Chinese FDI. These findings highlight the varying effect of the Sino-African economic ties on the environment depending on the types of pollutants. This conclusion suggests the attainment of economic growth simultaneously with the improvement of environmental quality if the Sino-African economic ties effectively help increase the GDP per capita of African countries, and become environmentally friendly driven. Controlling the type of cooperation on which the Sino-African economic partnership is grounded will be the most determinant factor in lessening the degradation of the environment in Africa.