Does geopolitical risk escalate CO2 emissions? Evidence from the BRICS countries.

Abstract

High levels of CO2 emissions are extensively cited as one of the main global concerns nowadays. Therefore, researchers have been investigating the factors that affect CO2 emissions. In the prior literature, several social, economic, and political drivers of CO2 emissions have been investigated; however, there is a dearth of the literature on the impact of geopolitical risks (GPR) on CO2 emissions. Hence, the objective of this study is to explore the impact of GPR on CO2 emissions in the case of the BRICS countries while controlling the effects of population, GDP, non-renewable energy, and renewable energy consumption. The study uses the recently developed GPR index, proposed by Caldara and Iacoviello (2018), and the AMG (augmented mean group) estimator method. The findings document that GPR escalates CO2 emissions. That is, a 1% increase in GPR escalates CO2 emissions by 13%. Moreover, it also reports that renewable energy consumption impedes CO2 emissions. In contrast, GDP, population, and non-renewable energy consumption surge CO2 emissions. The study also proposes a few policy implications based on the findings: (1) policymakers and government officials should try to limit GPR through peace treaties, agreements, and negotiations; (2) share of renewable energy in total energy consumption should be increased in order to plunge CO2 emissions.