Is There an Environmental Kuznets Curve for Bangladesh?

The Environmental Kuznets Curve (EKC) posits that environmental degradation increases at the initial stages, but declines as the economy achieves a certain level of economic growth, measured in per capita income terms. This postulated relation produces an inverted Ushaped curve. The topic has drawn much research attention for both developed and emerging economies. Over the past few decades Bangladesh has been achieving remarkable rates of economic growth. A dense population along with a growing industrial base has raised the specter of a looming environmental crisis. The present study empirically investigates the EKC hypothesis for Bangladesh using data from 1971 to 2010. The Autoregressive distributed lag (ARDL) approach to cointegration has been implemented for a long run relation; and the Granger causality within the vector error correction model (VECM) for the short run dynamics. The series are found to be cointegrated. We find that energy consumption is a major contributor to CO2 emissions. Trade openness improves environment, but urbanization worsens it. Economic growth, energy consumption, trade and urbanization Granger cause CO2 emissions. Knowledge of the existence of an EKC relation can help craft appropriate policies to promote economic growth and identify the turning point, and help preserve the environment.