The Nexus Between Coal Consumption, Co2 Emissions and Economic Growth in South Africa

This paper examines the impact of the coal industry in South Africa’s economy. A supply-side approach allowed estimation of the impact of energy consumption on economic growth with a Cobb-Douglas type production function involving economic output, labour, technology, flow of services and capital stock. Demand-side analysis examined the interaction among output, coal prices, coal consumption and carbon emissions. Overall, the study finds uni-directional causality from output to both labour and capital formation in the short and long-run. Coal consumption tends to heighten carbon emissions. An examination of the Environmental Kuznets Curve (EKC) shows a link between per capita GDP and pollutant emissions, giving strong support to the EKC hypothesis. We argue that reducing carbon emissions without compromising economic growth will be difficult hence the need to harness alternative sources of energy.