Determinants of CO2 emission for post-Soviet Union independent countries

Abstract

This article analyses the determinants of CO2 emission for 15 post-Soviet Union independent (PSI) countries given their recent transition to market-based economies and their relatively high levels of corruption. The direct and indirect effects of economic growth on CO2 emission for the PSI countries are derived using a multiple-equation generalized method of moment (GMM) approach to account for simultaneity among corruption, growth and CO2 emission. A linear relationship between gross domestic product (GDP) and CO2 emission was observed from the analysis. Furthermore, GDP influences CO2 emission directly, but also indirectly through its impact on corruption. Similarly, corruption affects CO2 emission directly, as well as indirectly through its impact on GDP. Political democracy and economic freedom increase CO2 emission indirectly through their impact on economic growth. Improved energy efficiency and the EU climate policy reduce CO2 emission, while inflows of foreign direct investment tend to increase CO2 emission.Policy relevanceFirst, PSI countries need to invest more in efficient energy technologies to mitigate CO2 emission levels significantly. Second, PSI policies aimed at reducing deforestation (thereby increasing population density) may help mitigate carbon emission. Third, PSI countries would be well served to recognize the detrimental effects of foreign direct investment before embarking on a misguided policy path that attracts such inflows at any cost.