American Journal of Environmental Sciences

EVIDENCE OF THE ENVIRONMENTAL KUZNETS CURVE: IMPLICATIONS OF INDUSTRIAL TRADE DATA

Jamalludin Sulaiman, Azlinda Azman and Behnaz Saboori

DOI : 10.3844/ajessp.2013.130.141

American Journal of Environmental Sciences

Volume 9, Issue 2

Pages 130-141

Abstract

This study examines the dynamic relationship between CO2 emissions and economic growth in Malaysia for the period of 1980-2004. The evidence of the Environmental Kuznets Curve (EKC) is tested by including energy consumption, dirty export from Malaysia to China and dirty import from China to Malaysia based on the two and three-digit ISIC data which reflect pollution-intensive manufacturing. Using dirty industries for the period of 1980-2004, the existence of Pollution Haven Hypothesis (PHH) was tested by employing ARDL approach of cointegration and the Fully Modified Ordinary Least Squares (FMOLS). Six out of eight dirty industries are found to show statistically significant inverted U-shaped relationship between CO2 emissions and economic growth, thus the EKC. Export from industries such as textile, wearing apparel and leather, manufacture of fabricated metal products and electrical machinery significantly increase CO2 emissions in Malaysia. Most of the import coefficients are significant and positively related to CO2 emissions, which is in contrast to the PHH. This strongly rejects the PHH for CO2 emissions in Malaysia-China trade. There is no evidence that domestic production of pollution-intensive goods in Malaysia is being replaced by imports from China. Based on the analysis, Malaysia-China bilateral trade increases CO2 emissions in Malaysia. There is therefore urgent need that electricity generation in Malaysia is from clean and sustainable sources. There have been efforts by the Malaysian government towards achieving this objective through its many related policies introduced since the beginning of this new millennium.

Copyright

© 2013 Jamalludin Sulaiman, Azlinda Azman and Behnaz Saboori. This is an open access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.