Energy conservation and sustainable economic growth: The case of Latin America and the Caribbean

Publisher Summary This chapter discusses the financial development and economic growth in underdeveloped countries. An observed characteristic of the process of economic development over time, in a market-oriented economy using the price mechanism to allocate resources, is an increase in the number and variety of financial institutions and a substantial rise in the proportion not only of money but also of the total of all financial assets relative to GNP and to tangible wealth. Typical statements indicate that the financial system somehow accommodates—or, to the extent that it malfunctions, it restricts—growth of real per capita output. Such an approach places emphasis on the demand side for financial services; as the economy grows it generates additional and new demands for these services, which bring about a supply response in the growth of the financial system. In this view, the lack of financial institutions in underdeveloped countries is simply an indication of the lack of demand for their services.

Most authors apply the Granger causality-VECM (vector error correction model), and Toda–Yamamoto procedures to investigate the relationships among fossil fuel consumption, emissions, and economic growth, though they ignore the group joint effects and nonlinear behaviour among the variables. In order to circumvent the limitations and bridge the gap in the literature, this paper combines cointegration and linear and nonlinear Granger causality in multivariate settings to investigate the long-run equilibrium, short-run impact, and dynamic causality relationships among economic growth, emissions, and fossil fuel consumption in China from 1965–2016. Using the combination of the newly developed econometric techniques, we obtain many novel empirical findings that are useful for policy makers. For example, cointegration and causality analysis imply that increasing emissions not only leads to immediate economic growth, but also future economic growth, both linearly and nonlinearly. In addition, the findings from cointegration and causality analysis in multivariate settings do not support the argument that reducing emissions and/or fossil fuel consumption does not lead to a slowdown in economic growth in China. The novel empirical findings are useful for policy makers in relation to fossil fuel consumption, emissions, and economic growth. Using the novel findings, governments can make better decisions regarding energy conservation and emission reductions policies without undermining the pace of economic growth in the long run.

We investigate causal links between human capital, foreign direct investment (FDI), trade openness, domestic investment, and economic growth for the case of Pakistan. In a multivariate vector autoregressive (VAR) framework, we apply Johansen and Juselius co-integration, Granger causality, and vector error correction model (VECM) using annual data from 1980 to 2017. Results of the co-integration analysis indicate the positive association among human capital, trade openness, foreign direct investment, and economic growth for the long run. Granger causality reveals that bidirectional causality exists between human capital and trade openness, human capital and economic growth, and foreign direct investment and trade openness. The unidirectional results of Granger causality analysis reveal that human capital and domestic investment influence economies growth through FDI, and trade openness influences economic growth through domestic investment. The most obvious finding to emerge from this empirical investigation is that human capital and trade openness enhance domestic and foreign investment, which leads to the economic growth of Pakistan.

This chapter presents an analysis on energy consumption and economic growth nexus for Bangladesh. The relationship between economic growth and energy consumption has received significant attention in the economic growth literature (see, for example, Mozumder and Marathe, 2007). This is because while energy is an impetus for economic growth, excessive energy consumption is also detrimental to environmental sustainability (Jafari et al., 2012). As such, there have been growing concerns in countries around the world, including Bangladesh, to explore alternative energy sources and energy conservation options. Rapid economic growth together with an increasing population has resulted in a notable increase in energy consumption in Bangladesh (Islam and Khan, 2016). Given that there is a potential trade-off between economic growth and energy consumption, it is vital to investigate the interrelationship between energy consumption and other economic activities in Bangladesh as the country is also focusing on energy conservation while achieving rapid economic growth and tackling other socio-economic challenges. This chapter, using Autoregressive Distributed Lag (ARDL) and Vector Error Correction Model (VECM) frameworks, investigates the causal relationship between energy consumption, Gross Domestic Production (GDP), Gross Capital Formation (GFC), and total labour force in Bangladesh during 1990–2014. The results reveal that GDP and GFC positively contribute to energy consumption, while an increase in the labour force reduces energy consumption. It was also found that, in Bangladesh, energy positively influences GFC. Nevertheless, no evidence was found to argue that energy consumption has a positive impact on GDP and an adverse impact on the labour force. As the results also indicate that there is only a unidirectional causality running from GDP to energy consumption (conservation hypothesis) in the short run as well as in the long run, energy conservation policies could be implemented in Bangladesh with limited or no adverse impact on the economy (GDP).

In this paper we examined the interaction between greenhouse gas emissions, nuclear energy, coal energy, urban agglomeration, and economic growth in Pakistan by utilizing time series data during 1972–2019. The stationarity of the variables was tested through unit root tests, while the ARDL (autoregressive distributed lag) method with long and short-run estimations was applied to reveal the linkages between variables. A unidirectional association between all variables was revealed by performing a Granger causality test under the vector error correction model (VECM) that was extracted during the short-run estimate. Furthermore, the stepwise least squares technique was also utilized to check the robustness of the variables. The findings of long-run estimations showed that GHG emissions, coal energy, and urban agglomeration have an adversative association with economic growth in Pakistan, while nuclear energy showed a dynamic association with the economic growth. The outcomes of short-run estimations also show that nuclear energy has a constructive association with economic growth, while the remaining variables exposed an adversative linkage to economic growth in Pakistan. Similarly, the Granger causality test under the vector error correction model (VECM) outcomes exposes that all variables have unidirectional association. Furthermore, the outcomes of the stepwise least squares technique reveals that GHG emissions and coal energy have an adverse association with economic growth, and variables nuclear energy and urban agglomeration have a productive linkage to the economic growth in Pakistan. GHG emissions are no doubt an emerging issue globally; therefore, conservative policies and financial support are needed to tackle this issue. Despite the fact that Pakistan contributes less to greenhouse gas emissions than industrialized countries, the government must implement new policies to address this problem in order to contribute to environmental sustainability while also enhancing economic development.

The relationship between carbon dioxide emissions and economic growth is analyzed and the results show that there exists a long-run equilibrium relationship between carbon dioxide emissions and economic growth to clear some people’s mind of doubts that energy conservation and carbon dioxide emissions reduction policy will hamper the economic development. When GDP increases, the carbon dioxide emission will increase too. Causality analysis shows that the unidirectional causal relationship exists and the direction is from GDP to carbon dioxide emission. The result implies that when a certain technique of carbon dioxide emissions reduction is used, it can not only reduce the carbon dioxide amount but promote the growth of GDP. Energy conservation and carbon dioxide reduction can form a new economic growth industry. To fulfill the promise of carbon dioxide emissions reduction to the world, China should make policies based on the relationship between carbon emissions and economic growth.

The main purpose of the current study is to investigate if tourism affects economic growth of China. The data set has been acquired from the Beijing Municipal Bureau of Statistics, and the time span of the data set takes into account a 20-year time period, from 2000 to 2019. To determine the strength of the above-mentioned relationship previous models that have been used for this research are mainly VAR (vector auto-regression) and VECM (vector error correction) models. The VAR and VECM models have been conducted together with the Granger causality test. The internal revenue generated from tourism-related activities is taken as being the main indicator for the tourism industry, while economic growth is determined by GDP (gross domestic product). We support the above-mentioned notion, as we found that a strong relationship exists between the development of the tourism industry and economic growth. Moreover, our analysis also indicates that this industry has a major impact on long-term economic growth in the region as well. This study thus provides further support to the existing literature on the topic of tourism and the impact that tourism-related activities have upon economic development and growth. The existence and the impact of tourism-related activities upon long-term economic growth were confirmed by the results of the VAR models. At the same time, the unidirectional results of VECM models have confirmed the existence of economic growth in the short term. In our case, the cardinal relationship between the development of the tourism industry and the economic growth in the Beijing region of China have managed to provide strong empirical support to the earlier stated notions and to the literature alike.

This paper explores the link between energy consumption, trade openness and economic growth in Nigeria between 1971 and 2015 using Vector error correction model (VECM). The result of Johansen co-integration test shows that the three series are co-integrated, hence long-run relationship was established among them. Causality analysis in VECM shows that there is a long run causality from economic growth and trade openness to energy consumption as well as from economic growth and energy consumption to trade openness. The results of the short run causality indicate the Granger causality from economic growth to trade openness only. These outcomes suggest that trade openness could be boosted by improving production in all sectors of the economy and not the other way round. Also, decisive improvement in economic activities would lead to increase in energy use in the country as the size of the current energy consumption is too weak to cause economic expansion in Nigeria. Furthermore, due to the huge energy gap between demand and supply, Nigerian government should utilise the low carbon energy options towards a sustainable economic growth trajectory.Keywords: Economic growth; Vector error correction model; Energy consumption; Co-integration; Trade opennessJEL Classifications: C01, F14, F41, Q43DOI: https://doi.org/10.32479/ijeep.11617

The causal relationship between energy consumption and gross domestic product in Hong Kong from 1992 to 2015 is investigated in this study. Different from the previous studies focusing on the causal relationship between total energy consumption and total gross domestic product per capita, this study further investigates the causal relationship from sectoral perspective, including residential, commercial, industrial and transportation sectors. For each sector, the time series data of sectoral energy consumption and sectoral per capita value added are collected. To conduct the Granger causality test, the unit root test is first applied to analyse the stationarity of time series. The cointegration test is then employed to examine whether causal relationship exists in long-term. Finally, based on the aforementioned tests, both vector error correction model and vector autoregression model can be selected to determine the Granger causality between time series. It is interesting to find that the sectoral energy consumption and corresponding sectoral per capita value-added exhibit quite different causal relationships. For both residential sector and commercial sectors, a unidirectional causal relationship is found running from the sectoral per capita value added to sectoral energy consumption. Oppositely, for industrial sector and transportation sector, a unidirectional causal relationship is found running from sectoral energy consumption to sectoral per capita value added. Regarding the Granger causality test results, the indicative suggestions on energy conservation policies, energy efficiency policies and greenhouse gas emission reduction policies are discussed based on the background of Hong Kong’s economic structure and fuel types.

Elucidating the complex mechanism between urbanization, economic growth, carbon dioxide emissions is fundamental necessary to inform effective strategies on energy saving and emission reduction in China. Based on a balanced panel data of 31 provinces in China over the period 1997–2010, this study empirically examines the relationships among urbanization, economic growth and carbon dioxide (CO2) emissions at the national and regional levels using panel cointegration and vector error correction model and Granger causality tests. Results showed that urbanization, economic growth and CO2 emissions are integrated of order one. Urbanization contributes to economic growth, both of which increase CO2 emissions in China and its eastern, central and western regions. The impact of urbanization on CO2 emissions in the western region was larger than that in the eastern and central regions. But economic growth had a larger impact on CO2 emissions in the eastern region than that in the central and western regions. Panel causality analysis revealed a bidirectional long-run causal relationship among urbanization, economic growth and CO2 emissions, indicating that in the long run, urbanization does have a causal effect on economic growth in China, both of which have causal effect on CO2 emissions. At the regional level, we also found a bidirectional long-run causality between land urbanization and economic growth in eastern and central China. These results demonstrated that it might be difficult for China to pursue carbon emissions reduction policy and to control urban expansion without impeding economic growth in the long run. In the short-run, we observed a unidirectional causation running from land urbanization to CO2 emissions and from economic growth to CO2 emissions in the eastern and central regions. Further investigations revealed an inverted N-shaped relationship between CO2 emissions and economic growth in China, not supporting the environmental Kuznets curve (EKC) hypothesis. Our empirical findings have an important reference value for policy-makers in formulating effective energy saving and emission reduction strategies for China.

Relationships among energy consumption, pollution emission, and economic growth in Nepal

This paper investigates the long run relationship between oil price, energy consumption and macroeconomic performance in Malaysia. The sample period is from (1980-2005) and the time series are subjected to various shortcomings such as autocorrelation, multicollinearity problems and host of other problems; data were first tested for their residuals. The results reveal that there is an evidence for a stable long-run relationship between the oil price, employment, economic growth and growth rate of energy consumption and also substantial short run interactions among them. Also, this paper indicates that the changes of world oil prices also affect the total energy consumption in Malaysia but reverse does not hold in Malaysia context. The linkages and causal effects among the oil price, energy consumption and macroeconomic performance have important policy implications on the benefits of energy conservation and regulation of macroeconomic policy. Given the dominant effects of oil price on energy consumption, better response and right mechanism of energy conservation policies should exist to curb the non renewable energy use and to shift extensively to the inter fuel substitution towards indigenous resources, mainly renewable energy. The most important findings here indicated that the growth of energy used has significant impacts on employment growth and present energy conservation policy especially energy saving policy and energy efficiency initiatives has significant impact on economic growth in Malaysia.

Energy conservation policies are very much in line with the social development goals proposed by the United Nations. Energy conservation is also significant from Bangladesh perspective. A country like Bangladesh usually faces severe challenges in ensuring energy security employing indigenous energy resources in an environmentally friendly manner. For the promotion of conservation policies, the government has already started working jointly with the World Bank, Asian Development Bank, and many other international donor agencies and prepared an action plan to enhance the energy conservation policies to save 15 and 20% of total energy by 2021 and 2030, respectively. It is expected that the energy conservation policies in Bangladesh could save energy by reducing unnecessary use of energy which not only ensures future energy supply but also accelerates the pace of the economic activities.

Electricity consumption and real GDP causality nexus: Evidence from ARDL bounds testing approach for 11 MENA countries

Empirical Study on the Relationship between Economic Growth and Carbon Emissions in Resource-dependent Cities Based on Vector Autoregression Model