Testing the load capacity curve hypothesis accounting for energy consumption and water use pressure in climate-vulnerable Somalia

Sustainability assessments in climate-vulnerable economies require metrics that extend beyond emissions to evaluate whether ecological demand remains within the regenerative limits of biocapacity. In Somalia, recurrent droughts and increasing pressure on limited freshwater resources have heightened concerns about the country’s ability to sustain ecological balance under growing economic and demographic pressures. Against this backdrop, this study provides the first empirical test of the Load Capacity Curve (LCC) hypothesis for Somalia over the period 1990–2022 by examining the effects of economic growth, energy consumption, urbanization, gross fixed capital formation, and water-use pressure on the load capacity factor (LCF). To accommodate the smooth structural change characteristic of a climate-exposed economy, the analysis employs a Fourier autoregressive distributed lag (FARDL) model, complemented by Fourier-ADF and Fourier-LM unit-root tests, and cumulative Fourier Granger causality analysis. Alternative long-run estimations corroborate the LCC hypothesis. Economic growth is associated with a decline in the LCF, while the significant positive coefficient on its squared term indicates an attenuation of this adverse association as income rises. Energy consumption, urbanization, and water-use pressure are significantly negatively associated with the LCF in the long-run, whereas capital formation shows a significant negative association with the LCF in the short-run. Fourier Granger causality tests reveal unidirectional causality running from economic growth and its squared term to the LCF, bidirectional causality between the LCF and water-use pressure, capital formation, and energy consumption, and no significant causal linkage with urbanization. The findings provide policy-relevant evidence on ecological sustainability in Somalia.