Determinants of environmental quality in Ethiopia: testing the validity of the environmental Kuznets curve and pollution haven hypothesis from 1981-2020

This study examines the determinants of carbon dioxide (CO2) emissions in Ethiopia using time series data from 1981 to 2020. Using an extended STRIPAT analysis framework, we test the existence of the environmental Kuznets curve and the validity of the pollution haven hypothesis in Ethiopia. Methodologically, the ARDL bounds test approach is employed to find the short-run and long-run estimates of the model. We find that CO2 emission tends to fall with increasing in income in the long run in Ethiopia. Moreover, energy consumption, industrialisation, population density, trade openness, and foreign direct investment are found to significantly decrease environmental quality in the long run. Furthermore, the pollution haven hypothesis is found to be valid since both foreign direct investment and trade openness are intensifying CO2 emissions in Ethiopia. Hence, policymakers are advised to adopt green growth, sustainable industrialisation, environment-friendly investment, and trade policies to abate environmental pollution in Ethiopia.