Nexus between economic growth, energy use, agricultural productivity, and carbon dioxide emissions: new evidence from Nepal

Abstract

Global climate change, exacerbated by greenhouse gas (GHG) emissions, notably carbon dioxide (CO2) emissions, provides huge risks to the environment, development, and sustainability. This study empirically investigated the dynamic impacts of economic growth, fossil fuel energy use, renewable energy use, and agricultural productivity on CO2 emissions in Nepal. Time series data from 1990 to 2019 were utilized by applying the autoregressive distributed lag (ARDL) bounds testing approach followed by the Dynamic Ordinary Least Squares (DOLS) method. The ARDL bounds test revealed evidence of cointegration among the variables. The DOLS findings revealed that an increase in economic growth and fossil fuel energy use by 1% for each variable would increase CO2 emissions by 0.61% and 0.67%, respectively. Conversely, a 1% increase in renewable energy use and agricultural productivity may lead to CO2 emissions reduction by 3.65% and 0.41% in the long run. The estimated results are robust to alternative estimators such as fully modified least squares (FMOLS) and canonical cointegrating regression (CCR). In addition, the pairwise Granger causality test was utilized to capture the causal linkage between the variables. This article put forward policy recommendations aimed at sustainable development by establishing strong regulatory policy instruments to reduce environmental degradation.