Impact of hydropower consumption, foreign direct investment and manufacturing performance on CO2 emissions in the ASEAN-4 countries

Abstract

PurposeThe continuous increase in the discharges of carbon emissions (CO2) in the global atmosphere and the likely negative consequences of this practice on the atmosphere draw the attention of researchers and policymakers to argue on the causes and perpetrators of CO2 emissions. This paper aims to examine the impacts of hydropower consumption, FDI and manufacturing performance on CO2 emissions in the Association of southeast Asian nations (ASEAN)-4 countries.Design/methodology/approachThe study uses the data on variables, such as hydro-power consumption, FDI, manufacturing value added and CO2 emissions spanning the period 1980–2015. Autoregressive Distributive Lag Bound test approach was used to assess the relationships among the variables.FindingsThe long run estimation of elasticities for all the countries indicates that the coefficient of hydro power consumption was found to be significantly related to CO2 emissions only in Malaysia. Additionally, the coefficients manufacturing performance were found to be significant in influence the amount of CO2 emission in all the ASEAN-4 countries. Furthermore, the coefficients of FDI inflows were found to be significant in explaining CO2 emissions in Malaysia and the Philippines, respectively. In the short run, the estimated results show that all the variables were found to be significant in explaining CO2 emissions in the countries under study.Research limitations/implicationsSingapore is excluded from the ASEAN-4 due to insufficient data on hydro energy consumption.Practical implicationsThe study recommends that as Hydro power energy is a clean source of renewable electricity. Its consumption indicates a negative relationship with CO2 emissions. The countries should emphasize more on the use of hydro source of energy than the other sources which increase the rate of CO2 emissions in the atmosphere.Originality/valueAs most of the relevant previous studies did not consider the simultaneous impact of hydro energy consumption, FDI and manufacturing value added on CO2 emissions in the ASEAN-4, this study is an important contribution to the existing relevant literature.