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Testing environmental Kuznets curve hypothesis in Peru: The role of renewable electricity, petroleum and dry natural gas

Abstract:

This paper analyzes the relationship between GDP (gross domestic product), carbon dioxide emissions from the consumption of energy, total renewable electricity consumption, dry natural gas consumption, and total petroleum consumption (all variables are in per capita terms) for Peru during 1980–2011. The Autoregressive Distributed Lag (ARDL) methodology was used to test a cointegration relationship, and the Granger causality test, based on the vector error correction model (VECM), was used to test for causality. An innovative criterion proposed by Narayan and Narayan (2010) was employed to test the Environmental Kuznets Curve (EKC) hypothesis. The study does not support an inverted U-shaped EKC relationship. For this reason, it is urgent that Peru designs environmental policies that minimize the emission of greenhouse gases (GHG) using alternative energy sources e.g. solar, wind, hydraulics, among others. In addition, we found an unidirectional causality relationship between CO2 emissions and their determinants.