The Impact of Economic Growth on CO2 Emissions and Energy Consumption (In the Gulf Cooperation Council Countries)

Abstract

This paper aimed to examine the validity of the environmental Kuznets curve (EKC) hypothesis and study the causality relationship using time series data for the period 1990–2014. These examinations included three main variables, which are carbon dioxide (CO2) emissions, energy consumption, and gross domestic product (GDP) per capita among the Gulf Cooperation Council (GCC) countries. This paper used a Granger causality and vector auto-regression (VAR) test to detect the direction of causality within the three variables. There was a repeated unidirectional causality going from GDP per capita—representing the economic growth—to energy consumption over the six GCC countries. On the other hand, the UAE was the only country that holds the inverted U-shaped curve of the EKC hypothesis among the GCC countries when using the vector error correction model (VECM). The suggested recommendations are to set energy policies to reduce energy consumption and control CO2 emissions. These can be adopted by GCC countries without much concern about their effects on economic growth.KeywordsGCCEnergy consumptionCausality testEnvironmental Kuznets curve