Causal links between renewable energy, environmental degradation and economic growth in selected SAARC countries: Progress towards green economy

Abstract

The objective of the study is to investigate the short-run and long-run causality relationship among energy (electricity production from renewable sources), carbon dioxide emissions, natural resource depletion, Gross Domestic Product (GDP) and poverty in selected SAARC countries, namely, Bangladesh, India, Nepal, Pakistan and Sri Lanka, over a period of 1975–2010. The results show that there is bidirectional Granger causality between carbon dioxide emissions & natural resource depletion in Nepal and between energy production & poverty in Pakistan. For the other three countries, the Granger causality runs from energy production to poverty in Bangladesh and India, and from poverty to energy production in Sri Lanka. The results of panel group Fully Modified OLS (FMOLS) indicates that GDP and poverty has a positive impact while carbon dioxide emission has a negative impact on energy production. Similarly, an increase in energy production leads to decrease in carbon emissions, where as, natural resource depletion increase carbon emissions in selected SAARC countries. Subsequently, an increase in energy production leads to increase in GDP which further increase carbon dioxide emission in SAARC region.