Economic growth of South Africa

This paper examines the long-run and the causal relationship between economic growth, pollutant emissions and energy consumption for South Africa for the period 1965–2006 in a multivariate framework which includes labour and capital as additional variables. Using the bound test approach to cointegration, we found a short-run as well as a long-run relationship among the variables with a positive and a statistically significant relationship between pollutant emissions and economic growth. Further, applying a modified version of the Granger causality test we also found a unidirectional causality running from pollutant emissions to economic growth; from energy consumption to economic growth and from energy consumption to CO2 emissions all without a feedback. The econometric evidence suggests that South Africa has to sacrifice economic growth or reduce its energy consumption per unit of output or both in order to reduce pollutant emissions. In the long-run however, it is possible to meet the energy needs of the country and at the same time reduce CO2 emissions by developing energy alternatives to coal, the main source of CO2 emissions. However, the econometric results upon which the policy suggestions are made should be interpreted with care, as they may not be sufficiently robust enough to categorically warrant the choice of an unpalatable policy option by South Africa.

Keywords

• Carbon dioxide emission;
• Economic growth;
• Energy consumption;
• Bounds test;
• Causality