Nexus of biomass energy, key determinants of economic development and environment: A fresh evidence from Asia

Abstract

The rising trend in environmental pollution in current years has elevated the demand for clean energy to reduce environmental stress, and the newly developed biomass energy source is contributing well in this regard. This paper quantifies, if biomass energy consumption is performing as the main driver for economic development and clean energy source to decrease the pollution levels. Associations among carbon emission, economic development, and biomass energy have been estimated by using the Common correlated effects mean group, and Panel vector autoregressive techniques for 38 countries of Asia from 1990 to 2017. Granger causality and Impulse-response functions are also measured. A closer look at the results shows that 1% increase in biomass consumption will increase CO2 emission by 1.698%. The study also found support for the presence of an N-shaped relationship between per capita income and emission and found trade openness and urbanization as the contributors to environmental pollution. Outcomes provide empirical evidence that there is bidirectional causality between real economic growth to inflation and financial development to inflation in the first model. The second model also showed bidirectional causality between real economic growth to financial development and inflation, and inflation to trade openness. The findings show that biomass energy consumption is acting as the key driver for economic development and performing as a non-clean energy source in decreasing pollution.