CO2 emissions, energy consumption and economic growth in Association of Southeast Asian Nations (ASEAN) countries: A cointegration approach

Abstract

This study examines the cointegration and causal relationship between economic growth, carbon dioxide (CO2) emissions and energy consumption in selected Association of Southeast Asian Nations (ASEAN) countries for the period 1971–2009. The recently developed Autoregressive Distributed Lag (ARDL) methodology and Granger causality test based on Vector Error-Correction Model (VECM) were used to conduct the analysis. There was cointegration relationship between variables in all the countries under the study with statistically significant positive relationship between carbon emissions and energy consumption in both the short and long-run. The long-run elasticities of energy consumption with respect to carbon emissions are higher than the short-run elasticities. This implies that carbon emissions level is found to increase in respect to energy consumption over time in the selected ASEAN countries. A significant non-linear relationship between carbon emissions and economic growth was supported in Singapore and Thailand for the long-run which supports the Environmental Kuznets Curve (EKC) hypothesis. The Granger causality results suggested a bi-directional Granger causality between energy consumption and CO2 emissions in all the five ASEAN countries. This implies that carbon emissions and energy consumption are highly interrelated to each other. All the variables are found to be stable suggesting that all the estimated models are stable over the study period.