The effect of urbanization, energy consumption, and foreign direct investment on the carbon dioxide emission in the SSEA (South and Southeast Asian) region

Abstract

This study examines the relationship between urbanization, energy consumption, foreign direct investment (FDI), and carbon dioxide (CO2) emission of 17 countries in the South and Southeast Asian (SSEA) region during the period 1980–2012. In order to find out the intensity of CO2 emission in 17 countries, we classify the total sample countries into three sub-groups, namely high, middle, and low-income countries. These three sub-panels are constructed based on their gross national income per capita of countries. Pedroni cointegration result shows that urbanization; primary energy consumption, FDI, and CO2 emission are cointegrated in all sub-groups of countries, regardless of their levels of national income per capita. Furthermore, while incorporating the fossil fuel energy consumption in place of primary energy consumption in the alternative specification of regression, the result suggests a cointegrating relationship between fossil fuel energy consumption, FDI, urbanization, and CO2 emission in middle-income countries. Nevertheless, Westerlund cointegration results are more or less in the line of Pedroni results. Furthermore, the results reveal that primary energy consumption, fossil fuel energy consumption, and FDI are substantially affecting the CO2 emission in the SSEA region. Moreover, the empirical findings suggest that in middle-income countries, both primary and fossil fuel energy consumption are considerably increasing the CO2 emission, and leading to greenhouse gas problem in the SSEA region.