CO2 Emissions in Asia–Pacific Region: Do Energy Use, Economic Growth, Financial Development, and International Trade Have Detrimental Effects?

Abstract

Global warming has become the main concern in the current world; increased CO2 emissions are believed to be the main reason for this climate change. Therefore, this study investigates the impacts of energy consumption, economic growth, financial development, and international trade on the CO2 emissions of 17 Asia–Pacific countries. Using unbalanced panel data for 61 years (1960–2020), the Driscoll and Kraay’s standard error and panel-corrected standard error (PCSE) models are employed to observe the effect of the studied variables on the CO2 emissions. The obtained results reveal that energy consumption, financial development, economic growth, and international trade have adverse effects on the environment of the panel countries by increasing the CO2 emissions, whereas the square of economic growth reduces it, and results eventually confirm the evidence of the presence of the environmental Kuznets curve (EKC) hypothesis. Bidirectional causality is found between international trade and CO2 emissions, and unidirectional causal association from CO2 emissions to energy consumption and economic growth is also revealed. To maintain sustainable economic growth and to improve environmental quality, an increase in green energy consumption is being recommended.