CO2 emissions and output in Iran: Environmental Kuznets Curve approaches

Abstract

This paper evaluates the dynamic causal relationships between CO2 emissions and energy consumption in Iran for the period 1965–2008 based on the EKC Hypothesis. The VECM technique is exploited for the empirical analysis. This study has been completed in two stages. In the first stage, we examine how the variables are related in the long-run, and at the second stage, survey the dynamic causal relationships between the variables. The empirical results have provided evidence for the existence of a strong long-run relationship between CO2 emissions, energy consumption and real GDP in Iran. Moreover, the results indicate that the increase of GDP and energy consumption simultaneously will increases CO2 emissions and also based on preliminary results, the energy consumption effects are greater than GDP effects on CO2 emission. A short run Granger causality test suggests bidirectional causality between CO2 emissions and energy consumption, unidirectional causality from GDP to CO2 emissions, and unidirectional causality from GDP to energy consumption. In addition, these causalities confirmed that in the long run there are unidirectional relations from CO2 emissions to GDP and from energy consumption to GDP.