Relationship between energy intensity and CO2 emissions: Does economic policy matter?

Abstract

AbstractIn an environment with economic policy uncertainty, the policies of energy efficiency are probably compromised due to weak regulation measures. Inconsistent economic policies may lead to higher energy consumption, which damages the environment. However, works of literature are silent on the role of economic policy uncertainty in carbon emission and energy nexus. Hence, the study is an attempt to investigate the role of economic policy uncertainty in the relationship between energy intensity and carbon dioxide (CO2) emissions in the United States by using annual data spanning from 1985 to 2017. A recent time series method proposed by Jordan and Philips (2018) is employed to get robust and consistent estimation results in the study. Empirical results reveal that (a) higher energy intensity contributes to pollution, (b) economic policy uncertainty adversely affects environmental quality, (c) economic policy uncertainty strengthens the detrimental effect of energy intensity on CO2 emissions.