Economic Expansion and Environmental Degradation in Ghana: A Sector Decomposition Analysis

Recent research has focused on exploring the relationship between economic expansion and environmental degradation, particularly in developing and emerging economies. This has become necessary given the several attempts by economies to increase productivity while safeguarding the environment to foster sustainable development. This study progresses from previous research to examine the disaggregated impact of economic expansion on the environment. Consequently, the study employs the Autoregressive Distributive Lagged (ARDL) approach to cointegration and annual time series data from 1985 to 2015, from the World Bank database, to examine the disaggregated impact of economic expansion on the environment in Ghana. The study finds that initial stages of agricultural expansion tends to deteriorate the environment, but as agricultural productivity increases beyond a certain point, although the effect on BOD and deforestation may still rise, CO2 emission reduces. More so, expansion in industry results in a rise in all three indicators of environmental degradation, both in the short and long run while a harmful effect was found between expansion in service output and CO2 emission at the initial stages of productivity, but not in the long-run. The impact on BOD and deforestation is harmful with expansion in service output. The results point to the fact that expansions in agriculture and services will eventually result in the reduction of CO2 emissions beyond some productivity threshold.