Does Energy Consumption, Economic Growth, and Foreign Direct Investment Contribute to CO2 Emission? Evidence from Bangladesh

Md Asiful Islam ,Md Shaddam Hossain ,Mahbubur Rahman ,Iqbal Hossain ,Habiba Sultana

doi:10.7176/jesd/12-12-05

Md Asiful Islam , Md Shaddam Hossain + Show 3 more

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https://doi.org/10.7176/jesd/12-12-05

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Abstract

This work used the Johansen Cointegration Test and the Vector Error Correction Model (VECM) cointegration methodology to assess the long-run cointegrating relationship and short-run dynamics in Bangladesh between energy consumption economic growth, foreign direct investment, urbanization, population growth, and carbon emissions. To assess the long-term association between these variables, we examined data from 1972 to 2014, and empirical estimation revealed that all factors are significant at the 1% level of significance in the case of Bangladesh. Thus, energy consumption, economic growth, foreign direct investment, urbanization, population growth, and carbon emissions all have shown the predicted sign and are statistically significant, indicating that increased energy consumption, gross domestic product, and population increase all are responsible for increased carbon emissions in Bangladesh. Higher FDI inflows, on the other hand, cut per capita carbon emissions in Bangladesh. On the other hand, the empirical outcome has revealed that there is no substantial causal association between carbon emissions and urbanization. Keywords: CO 2 ; FDI; GDP; population growth; energy consumption; VECM DOI: 10.7176/JESD/12-12-05 Publication date: June 30 th 2021

Highlights

Over the past several decades, the most critical global issues are air pollution and global warming
Ln CO2,t, ln GDPt, ln ENGt, ln Foreign direct investment (FDI) t, ln POPGt, and lnURt are the logarithmic forms of CO2 emissions, gross domestic product, energy consumption, foreign direct investment, population growth, and urban population, respectively
5.3 Findings and Recommendations The findings show that lnFDI has a statistically significant negative impact on CO2 emissions

Summary

Introduction

Over the past several decades, the most critical global issues are air pollution and global warming. As a result, knowing the reasons for emerging nations' CO2 emissions is critical for policymakers. According to the environmental Kuznets curve (EKC) hypothesis, economic growth and environmental pollution have a reversed U-shaped connection. According to this theory, environmental contamination rises in the early phases of economic development before declining in the later stages (Ozturk and Acaravci 2010). There is a paucity of research on applying the EKC to nations with different characteristics such as energy consumption, population growth, urbanization, and foreign direct investments (FDI). Foreign direct investment (FDI) is critical to the economic progress of emerging nations that lack adequate resources to invest. Being damaging FBI may be transmitted inefficient industrial technologies, which can assist countries in minimizing air pollution (Stretesky and Lynch 2009)

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