Synergy between sectoral output, energy and CO2 emission: a panel cointegration analysis of South Asia

Abstract

PurposeThe purpose of this study is to investigate the synergy between sectoral output, energy use and CO2 emission with other factors for a panel of South Asian economies including Afghanistan, Bangladesh, Bhutan, India, Pakistan, Maldives, Nepal and Sri Lanka.Design/methodology/approachThe analysis is done using annual panel data from 1980–2019 using dynamic ordinary least squares (DOLS), fully modified OLS (FMOLS) and Toda-Yamamoto techniques.FindingsEmpirical findings reveal the existence of a statistically significant long-run cointegrating relationship between energy use, sectoral output such as agricultural, industry and service gross domestic product (GDP), globalization, urbanization and CO2 emission. DOLS and FMOLS result posits that in the case of the South Asian region agriculture GDP does not contribute to increasing CO2 emission while service and industrial GDP is responsible for increasing CO2 emission along with urban population, energy use and to some extent globalization. More remarkably, the contribution of the service GDP is greater than the other two sectoral outputs in increasing CO2 emission with a feedback hypothesis.Practical implicationsAs CO2 emission is a global phenomenon with a cross-boundary effect, these empirical findings might contribute to formulating implementable energy and environmental policies to sustain growth, as well as to protect the environment in the regional context.Originality/valueThe study contributes to the literature by providing an empirical investigation of South Asia incorporating the contribution of sectoral output to understand the potential contribution of each sector on energy and emission. This is the first study on the South Asian context from the perspective of sectoral output, energy and emission.