Escaping the EKC hypothesis – South Africa’s problematic choice

Climate change mitigation has become an issue of global focus, with numerous countries investing in more sustainable technologies and practices. However, global carbon emissions are still on the rise. While developed nations appear to be moving towards environmental sustainability (or at the very least reducing their shares of overall greenhouse has (GHG) emissions), pollutant emissions are still growing among large and fast-growing developing nations, such as China and India.

Figure 1: Annual share of GHG emissions

This phenomenon is captured in the EKC hypothesis, which states that countries and their economies go through different stages of development and that a country’s relationship with the environment depends on the stage of development they are in. In the initial stages of development, countries achieve economic growth and development at the cost of environmental degradation, through pollution from rapid industrialization and production. Eventually, the country will reach a point of economic development where it can afford to shift its focus away from creating any jobs at any external cost, towards more environmentally inclusive avenues, like renewable energy technology development. From this point, countries should be able to simultaneously pursue economic growth and environmental sustainability.

Figure 2: EKC hypothesis

Source: Author’s own

*CO2 emissions as a representation of environmental degradation.

Historically and empirically, the hypothesis has been found to be true. The logic behind this isn’t very hard to follow – there is (generally) a very clear positive and significant relationship between a country’s energy consumption and its economic growth and standards of living (Md. R. Farooqi, A. Rahman, Md. F. Ahmad, Supriya, 2021). Where this relationship between energy and economic growth is found to exist, it can be unidirectional or bidirectional (i.e., energy and growth can feed off one another, or causality can run only one way between the two). However, energy is often found to be a driver of growth, particularly when other factors of economic growth are present (such as investment and capital) (M. M. Rahman, K. Alam, 2021).

Thus, more energy consumption/production typically drives development. However, there exists a similarly clear and positive significant relationship between a country’s energy use and its pollutant emissions (U. Al-mulali, C. N. C. Sab, 2013). Whether directly through the production of energy, such as the burning of fossil fuels, or through the consequent urbanisation and population increase, increased energy consumption is found to drive CO2 emissions and other pollutant emissions (S. A. Solarin, U. Al-Mulali, G. G. G. Gan, M. Shahbaz , 2018).

 

Figure 3: GHG emissions by sector

Source: Our World in Data based on Climate Analysis Indicators Tool (CAIT)

 

In South Africa, the EKC hypothesis has been found to be true. The country’s energy consumption has been found to be a significant driver of both economic growth and pollutant emissions across numerous studies (Odhiambo, 2011) (F. V. Bekun, F. Emir, S. A. Sarkodie, 2019). However, regardless of whether the EKC hypothesis holds, South Africa is a particularly “dirty” economy.

The country is ranked 25th in the world in terms of population, 32nd in the world in terms of GDP, but 15th in the world in terms of CO2 emissions (Worldometer, 2022). The country’s economy is heavily dependent on its energy sector, which itself is heavily dependent on coal.  This has led to the country’s over-reliance on coal, producing very high levels of CO2 emissions relative to its size and output. Measured in “per capita CO2 equivalent emissions”, South Africa is the most carbon-intensive non-oil-producing developing country globally (R. Gupta, J. R. Sato, 2014).

Therefore, whether South Africa would be placed in the initial stages of the EKC curve, or if it has become “stranded” in the middle of the curve, the message is clear that its current levels of pollution do not allow for further emissions as the country pursues economic growth.

Figure 4: South Africa on the EKC

Source: author’s own

South Africa needs to find a way to cut through the EKC curve, achieving faster growth and development without further increasing pollution. The existing positive relationships between growth and pollution will have to be broken. This will require structural change in the country’s energy systems, encouraging sustainable forms of energy production that still promote growth. Learning from existing policies and adopting tried and tested technologies from developed countries will be necessary for South Africa to escape