Economic globalization and energy consumption patterns in Organisation for Economic Co-operation and Development economies

Abstract

This study examines the impact of economic globalization on the patterns of energy consumption for 24 Organisation for Economic Co-operation and Development (OECD) economies from 1995 to 2015. We employ Westerlund cointegration, which shows a long-run association between economic globalization and energy consumption patterns. Furthermore, cross-sectional autoregressive distributed lag models (CS-ARDL) results explain the short-run and long-run relationship between the series. The results further explain that economic globalization reduces oil and coal consumption while accelerating gas consumption in OECD economies. We additionally employ the Eberhardt augmented mean group test to verify consistency with CS-ARDL results. The empirical evidence of this study suggests that OECD economies’ policymakers should prioritize economic globalization in framing policies related to energy consumption. Furthermore, allocating funds for better technology related to high polluting fuels should be one of the crucial considerations arising from this study. Finally, we recommend economic globalization as an important indicator to address the issues related to OECD economics’ environmental and ecological footprints.