Is the load capacity curve hypothesis valid in Turkey? An empirical investigation with smooth structural shifts

From past to present, numerous natural events have continued to occur. Among these, climate change resulting from global warming has become one of the most critical environmental issues of our time. Climate change is influenced by both natural disasters and human activities. In particular, the extensive use of fossil fuels increases the emission of CO₂, leading to significant air pollution. Additionally, water and soil pollution contribute to overall environmental degradation, further accelerating global warming and climate change. Therefore, in order to achieve sustainable economic activities, reducing environmental pollution has become a key priority for countries. This study aims to examine the relationship between GDP, trade openness, and the load capacity factor within the framework of the load capacity curve hypothesis in Turkey during the period 1961–2022. The results of the traditional ADF and Fourier ADF unit root tests indicate that the variables are not stationary at their level but become stationary at their first differences. To identify the presence of a cointegration relationship, the Bayer-Hanck and Fourier ADL cointegration tests were applied. The findings suggest the existence of a long-term relationship among the series. The results of the FMOLS, DOLS, and CCR estimators, which were employed to estimate the long-term coefficients, indicate a statistically significant relationship between the load capacity factor and GDP, while no statistically significant relationship is found between the load capacity factor and trade openness. Furthermore, the findings of the long-term estimators support the validity of the load capacity curve hypothesis, revealing the presence of a U-shaped relationship between the load capacity factor and GDP. Finally, the findings presented in this study suggest that, with the support of policymakers, the use of alternative energy sources and hydropower is expected to reduce environmental pollution. The results show that Turkey's load capacity factor will begin to increase after reaching the GDP turning point in the future. Therefore, it is imperative to switch to alternative energy sources.