Assessing the Impact of Factors Driving Global Carbon Dioxide Emissions

Main Article Content

Redwan Ahmed
Gabriela Sabau
Morteza Haghiri

Abstract

The aim of this study is to empirically investigate the causal relationship between global CO2 emissions and six of their potentially contributing factors (i.e., economic growth, energy consumption, population, trade openness, financial development and corruption), by using a panel data collected from 65 countries during 1995 to 2013. We developed a dynamic model and used a four-step testing procedures (i.e., panel unit root tests, panel cointegration tests, long-run estimates, i.e. FMOLS estimates and a Granger causality test). The results showed that the most important factors driving global CO2 emissions were economic growth, energy consumption, corruption and financial development. It is recommended that countries develop their own CO2 reducing policies by designing an appropriate combination/mix of policy tools, such as regulation, economic, voluntary and educational/ informational instruments to address their environmental pollution. Countries could consider all dimensions of well-being when they measure their economic development. Imposing pollution taxes on fossil fuel based energy supplies, developing emissions standards, strengthening anti-corruption strategies and educating people about the adverse effects of CO2 emissions on the natural environment and human health are potential policy measures.

Keywords:
CO2 emissions, trade openness, financial development, emissions standards, anti-corruption strategies.

Article Details

How to Cite
Ahmed, R., Sabau, G., & Haghiri, M. (2019). Assessing the Impact of Factors Driving Global Carbon Dioxide Emissions. Journal of Economics, Management and Trade, 25(4), 1-15. https://doi.org/10.9734/jemt/2019/v25i430201
Section
Original Research Article

References

Ahmed K, Rehman MU, Ozturk I. What drives carbon dioxide emissions in the long-run? Evidence from selected South Asian Countries. Renewable and Sustainable Energy Reviews. 2017;70: 1142-1153.

Kasman A, Duman YS. CO2 emissions, economic growth, energy consumption, trade and urbanization in new EU member and candidate countries: A panel data analysis. Economic Modeling. 2015;44:97-103.

Center for Climate and Energy Solutions. Main Greenhouse Gases; 2013.
Available:http://www.c2es.org/facts-figures/main-ghgs
(Accessed on March 26, 2017)

Environmental Protection Agency. Over-view of Greenhouse Gases l; 2015.
Available:http://www3.epa.gov/climatechange/ghgemissions/gases/co2.htm
(Accessed on April 13, 2017)

Lacheheb M, Rahim ASA, Sirag A. Economic growth and CO2 emissions: Investigating the environmental Kuznets curve hypothesis in Algeria. International Journal of Energy Economics and Policy. 2015;5(4):1125-1132.

NASA. Evidence; 2017.
Available:http://climate.nasa.gov/evidence
(Accessed on February 9, 2017)

IPCC. Summary for policymakers, In: Climate Change 2014: Impacts, Adaptation, and Vulnerability, Part A: Global and sectoral aspects, contribution of working group ii to the fifth assessment report of the intergovernmental panel on climate change; 2014.

IPCC. Summary for Policymakers, In: Climate Change 2007: The Physical Science Basis, Contribution of Working Group I to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change [Solomon, S., D. Qin, M. Manning, Z. Chen, M. Marquis, K.B. Averyt, M.Tignor and H.L. Miller (eds.)], Cambridge University Press, Cambridge: New York, USA; 2007.

Phys. As carbon emissions climb, so too has the Earth's capacity to remove CO2 from the atmosphere; 2015.
Available:http://phys.org/news/2015-05-carbon-emissions-climb-earth-capacity.html
(Accessed on April 11, 2015)

Al-Mulali U, Weng-Wai C, Sheau-Ting L, Mohammed AH. Investigating the environmental Kuznets curve hypothesis by utilizing the ecological footprint as an indicator of environmental degradation. Ecological Indicators. 2015;48:315-323.

Farhani S, Ozturk I. Causal relationship between CO2 emissions, real GDP, energy consumption, financial development, trade openness, and urbanization in Tunisia. Environmental Science and Pollution Research. 2015;22(20):15663-15676.

Halicioglu F. An econometric study of CO2 emissions, energy consumption, income and foreign trade in Turkey. Energy Policy. 2009;37(3):1156-1164.

Sharma SS. Determinants of carbon dioxide emissions: Empirical evidence from 69 countries. Applied Energy. 2011;88(1): 376-382.

Azomahou T, Laisney F, Van PN. Economic development and CO2 emissions: A nonparametric panel approach. Journal of Public Economics. 2006;90(6):1347-1363.

Galeotti M, Lanza A, Pauli F. Reassessing the environmental Kuznets curve for CO2 emissions: A robustness exercise. Ecological Economics. 2006;57(1):152-163.

Millimet DL, List JA, Stengos T. The environmental Kuznets curve: Real progress or misspecified models? Review of Economics and Statistics. 2013;85(4): 1038-1047.

Bertinelli L, Strobl E. The environmental Kuznets curve semi-parametrically revisited. Economics Letters. 2005;88(3): 350-357.

Chen JH, Huang YF. The study of the relationship between CO2 emission and economic growth. Journal of International and Global Economic Studies. 2013;6(2): 45-61.

Alam MJ, Begum IA, Buysse J, Rahman S, Van Huylenbroeck G. Dynamic modeling of causal relationship between energy consumption, CO2 emissions and economic growth in India. Renewable and Sustainable Energy Reviews. 2011;15(6): 3243-3251.

Al-Mulali U, Lee JY, Mohammed AH, Sheau-Ting L. Examining the link between energy consumption, carbon dioxide emission and economic growth in Latin America and the Caribbean. Renewable and Sustainable Energy Reviews. 2013; 26:42-48.

Apergis N, Payne JE. The emissions, energy consumption and growth nexus: Evidence from the commonwealth of independent states. Energy Policy. 2010; 38(1):650-655.

Govindaraju VC, Tang CF. The dynamic links between CO2 emissions, economic growth and coal consumption in China and India. Applied Energy. 2013;104:310-318.

Lean HH, Smyth R. CO2 emissions, electricity consumption and output in ASEAN. Applied Energy. 2010;87(6): 1858-1864.

Ozcan B. The nexus between carbon emissions, energy consumption and economic growth in Middle East countries: A panel data analysis. Energy Policy. 2013;62:1138-1147.

Pao HT, Tsai CM. CO2 emissions, energy consumption and economic growth in BRIC countries. Energy Policy. 2010;38 (12):7850-7860.

Wang SS, Zhou DQ, Zhou P, Wang QW. CO2 emissions, energy consumption and economic growth in China: A panel data analysis. Energy Policy. 2011;39(9):4870-4875.

Rehman A, Rauf A, Ahmad M, Chandio AA. Deyuan Z. The effect of carbon dioxide emission and the consumption of electrical energy, fossil fuel energy and renewable energy, on economic performance: Evidence from Pakistan. Environmental Science and Pollution Research. 2019; 26(21):21760-21773.

Chandio AA, Jiang Y, Rauf A, Mirani AA, Shar RU, Ahmad F, Shehzad K. Does energy-growth and environment quality matter for agriculture sector in Pakistan or not? An application of cointegration approach. Energies. 2019;12(10):1-17.

Ahmed R, Sabau G, Haghiri M. The long run relationship between economic growth and environmental quality. Asian Journal of Agricultural Extension, Economics and Society. 2019;32(3):1-10.

Chandio AA, Rauf A, Jiang Y, Ozturk I, Ahmad F. Cointegration and causality analysis of dynamic linkage between industrial energy consumption and economic growth in Pakistan. Sustainability. 2019;11(17):1-18.

Grossman GM, Krueger AB. Economic growth and the environment (No. w4634), National Bureau of Economic Research, Cambridge, MA, USA; 1994.

Ang JB. CO2 emissions, research and technology transfer in China. Ecological Economics. 2009;68(10):2658-2665.

Farhani S, Shahbaz M, Arouri MEH. Panel analysis of CO2 emissions, GDP, energy consumption, trade openness and urbanization for MENA countries. Munich Personal RePEc Archive (MPRA). 2013; 49258.
AAvailable:http://mpra.ub.uni-muenchen.da/49258/
(Accessed on January 1st, 2018)

Jalil A, Mahmud SF. Environment Kuznets curve for CO2 emissions: A cointegration analysis for China. Energy Policy. 2009; 37(12):5167-5172.

Murtaugh PA, Schlax MG. Reproduction and the carbon legacies of individuals. Global Environmental Change. 2009;19(1): 14-20.

Hossain MS. Panel estimation for CO2 emissions, energy consumption, economic growth, trade openness and urbanization of newly industrialized countries. Energy Policy. 2011;39(11):6991-6999.

World Bank. The World Bank; 2015.
Available:http://www.worldbank.org/en/publication/gfdr/background/financial-development
(Accessed on February 27, 2015)

Ozturk I, Acaravci A. The long-run and causal analysis of energy, growth, openness and financial development on carbon emissions in Turkey. Energy Economics. 2013;36:262-267.

Dasgupta S, Laplante B, Mamingi N. Pollution and capital markets in developing countries. Journal of Environmental Economics and Management. 2001;42(3): 310-335.

Sadorsky P. The impact of financial development on energy consumption in emerging economies. Energy Policy. 2010; 38(5):2528-2535.

Zhang YJ. The impact of financial development on carbon emissions: An empirical analysis in China. Energy Policy. 2011;39(4):2197-2203.

Claessens S, Feijen E. Financial sector development and the millennium development goals (No. 89), World Bank Publications, Washington, D.C., USA; 2007.

Jalil A, Feridun M. The impact of growth, energy and financial development on the environment in China: A cointegration analysis. Energy Economics. 2011;33(2): 284-291.

Tamazian A, Chousa JP, Vadlamannati KC. Does higher economic and financial development lead to environmental degradation: Evidence from BRIC countries. Energy Policy. 2009;37(1):246-253.

Damania R, Fredriksson PG, List JA. Trade liberalization, corruption and environmental policy formation: theory and evidence. Journal of Environmental Economics and Management. 2003;46(3): 490-512.

Fredriksson PG, Vollebergh HR, Dijkgraaf E. Corruption and energy efficiency in OECD countries: Theory and evidence. Journal of Environmental Economics and Management. 2004;47(2):207-231.

Welsch H. Corruption, growth, and the environment: A cross-country analysis. Environment and Development Economics. 2004;9(5):663-693.

Cole MA. Corruption, income and the environment: An empirical analysis. Ecological Economics. 2007;62(3):637-647.

Lopez R, Mitra S. Corruption, pollution, and the Kuznets environment curve. Journal of Environmental Economics and Management. 2000;40(2):137-150.

Rehman FU, Nasir M, Kanwal F. Nexus between corruption and regional Environ-mental Kuznets curve: The case of South Asian countries. Environment, Develop-ment and Sustainability. 2012;14(5):827-841.

Fredriksson PG, Svensson J. Political instability, corruption and policy formation: The case of environmental policy. Journal of Public Economics. 2003;87(7):1383-1405.

Cole MA, Elliott RJ. Determining the trade–environment composition effect: The role of capital, labor and environmental regulations. Journal of Environmental Economics and Management. 2003;46(3): 363-383.

Fredriksson PG, Neumayer E, Damania R, Gates S. Environmentalism, democracy, and pollution control. Journal of Environ-mental Economics and Management. 2005;49(2):343-365.

Pellegrini L, Vujic S. Corruption, economic development and environmental policy. Institute for Environmental Studies (IVM), Amsterdam, The Netherlands: Political Economy of the Environment, Institute for Environmental Studies; 2003.

Transparency International. Corruption Perceptions Index; 2016.
Available:http://www.transparency.org/news/feature/corruption_perceptions_index_2016
(Accessed on January 3, 2018)

Chang CC. A multivariate causality test of carbon dioxide emissions, energy consumption and economic growth in China. Applied Energy. 2010;87(11):3533-3537.

Levin A, Lin CF, Chu CSJ. Unit root tests in panel data: Asymptotic and finite-sample properties. Journal of Econometrics. 2002; 108(1):1-24.

Breitung J. The local power of some unit root tests for panel data. In Badi H. Baltagi, Thomas B. Fomby, R. Carter Hill (ed.) Non-stationary panels, panel cointegration, and dynamic panels (Advances in Econometrics, Emerald Group Publishing Limited. 2001;15:161-177.

Im KS, Pesaran MH, Shin Y. Testing for unit roots in heterogeneous panels. Journal of Econometrics. 2003;115(1):53-74.

Engle RF, Granger CW. Co-integration and error correction: Representation, estimation and testing. Econometrica. 1987;55:251-276.

Pedroni P. Critical values for cointegration tests in heterogeneous panels with multiple regressors. Oxford Bulletin of Economics and Statistics. 1999;61(1):653-670.

Pedroni P. Fully modified OLS for heterogeneous cointegrated panels. In Badi H. Baltagi, Thomas B. Fomby, R. Carter Hill (eds.) Non-stationary panels, panel cointegration, and dynamic panels (Advances in Econometrics, Emerald Group Publishing Limited. 2000;15:93- 130.

Kao C. Spurious regression and residual-based tests for cointegration in panel data. Journal of Econometrics. 1999;90(1):1-44.

OECD. Is GDP a satisfactory measure of growth; 2017.
Available:http://oecdobserver.org/news/archivestory.php/aid/1518/Is_GDP_a_
satisfactory_measure_of_growth_.html
(Accessed on June 17, 2017)

Hamit-Haggar M. Greenhouse gas emissions, energy consumption and economic growth: A panel cointegration analysis from Canadian industrial sector perspective. Energy Economics. 2012; 34(1):358-364.

Hwang JH, Yoo SH. Energy consumption, CO2 emissions, and economic growth: evidence from Indonesia. Quality and Quantity. 2014;48(1):63-73.

Zhang XP, Cheng XM. Energy consumption, carbon emissions, and economic growth in China. Ecological Economics. 2009;68(10):2706-2712.

Ahmed Z. Electricity crisis of Bangladesh: Result of organizational inefficiency? Energy and Environment Research. 2011;1(1):1-12.