Revisiting the CO2emission-induced EKC hypothesis in South Asia: the role of Export Quality Improvement

Global climate change adversities have particularly sparked the urgency in mitigating carbon dioxide emissions across the world. Against this backdrop, the paper attempts to investigate the validity of the carbon dioxide emission-induced Environmental Kuznets Curve (EKC) hypothesis controlling for the impacts of export quality on the economic growth-carbon dioxide emission nexus in the context of selected South Asian economies: Bangladesh, India, Pakistan, Sri Lanka and Nepal. Using annual data from 1972 to 2014, the results from the panel data econometric analyses provide statistical validity to the EKC hypothesis while the country-specific results depict heterogeneity of the findings in this regard. The EKC hypothesis is validated only for Bangladesh and India while in the context of Pakistan the economic growth-carbon dioxide emission nexus portrays a U-shaped association. In contrast, economic growth is found to monotonically decrease carbon dioxide emissions in Sri Lanka and Nepal. Besides, the results from both the panel and time-series analyses suggest that improvement in export quality lead to lower levels of carbon dioxide emissions. Moreover, the statistical significance of the interaction term between economic growth and export quality implies that the overall impacts of economic growth on carbon dioxide emissions are conditional on the quality of the exports. Thus, enhancing the quality of the export products is pertinent with respect to ensuring environmental sustainability across South Asia.