Economic growth in selected G20 countries: How do different pollution emissions matter?

Abstract

This study incorporates pollutant emissions into the growth model with the presence of institutional quality and exports as control variables. The individual impact of carbon dioxide, nitrogen oxides and sulphur dioxide on G20 countries’ real GDP for the period of 1995–2014 is investigated using pooled mean group (PMG) estimator and fully modified ordinary least square (FMOLS) estimator. Our results suggest a positive relationship between all the pollutant emissions and economic growth in the long run, indicating that environmental degradation is favourable to growth. It is also confirmed that CO2 emissions have the greatest impact on real GDP. Furthermore, institutional quality and economic growth are found to be positively related, confirming the importance of institutional quality in contributing to economic growth. The results also reveal that a positive relationship does exist between exports and economic growth. Similar results are obtained using PMG and FMOLS estimators, indicating that our findings are robust. Our study recommends effective mitigation and adaptation strategies in reducing the threats associated with global climate change.