Economic growth, CO2 emissions, and energy consumption in the five ASEAN countries

Abstract

This paper investigates the relationship between economic growth, carbon dioxide (CO2) emissions, and energy consumption with an aim to test the validity of the Environmental Kuznets Curve (EKC) hypothesis in five ASEAN (Association of South East Asian Nations) countries (Indonesia, Malaysia, Philippines, Singapore, and Thailand) by applying the panel smooth transition regression (PSTR) model as a new econometric technique. The PSTR model is more flexible and appropriate for describing cross-country heterogeneity and time instability. Our empirical results strongly rejected the null hypothesis of linearity, and the test for no remaining nonlinearity indicated a model with one transition function and two threshold parameters. The first regime (levels of GDP per capita below 4686 USD) showed that environmental degradation increases with economic growth while the trend was reversed in the second regime (GDP per capita above 4686 USD). The results also showed that energy consumption with either the first or the second regime lead to increase CO2. The overall results support the validity of the EKC hypothesis in the ASEAN countries.