South African Insights on the Validity of the Environmental Kuznets Curve using Economic Complexity and Environmental Degradation: The Role of ICT Development

Abstract

This study aims to assess the effect of economic complexity (EC) on environmental degradation and evaluate the applicability of the Environmental Kuznets Curve in the South African context between 2000 and 2025. The study also examines the interaction effect of Information and Communication Technology (ICT) development. This analysis uses the ARDL estimation technique.  The results reveal an inverted U-shaped relationship between EC and environmental degradation in the long run. The turning point occurs at a complexity index of 1.262, which lies within the EC data range (-2.8 to 1.274).  In contrast, short-run estimates indicate a monotonic positive relationship, with the implied turning point of 1.53 lying outside the observed data range. This indicates that EC initially exacerbates environmental degradation. However, once EC exceeds 1.262, the economy's structure appears to favour fewer polluting activities. The results also indicate that ICT development in South Africa erases the detrimental effect of EC in the long run. Furthermore, the results show that human capital and renewable energy reduce environmental degradation in the long run in South Africa.  The results offer policy implications for policymakers and the government to promote environmental sustainability.