The link between environmental quality, economic growth, and energy use: new evidence from five OPEC countries

Abstract

This paper aims to explore the relationships between environmental quality, economic growth, and energy use. A panel data set of 25 years (1990–2014) for five OPEC countries (Algeria, Nigeria, Indonesia, Saudi Arabia, and Venezuela) is used, and panel unit root tests, panel cointegration tests, panel Granger causality tests, fully modified ordinary Least square (FMOLS), and dynamic ordinary least square (DOLS) methods are employed as estimation strategies. Our results show that in the long-run, there are two-way causal relationships between GDP and energy consumption for all countries. Bidirectional causal relationships between GDP and CO2 emissions are also observed in all countries except Algeria. The same relationships are also observed between energy consumption and CO2 emissions in all countries with an exception in Venezuela where unidirectional causality running from CO2 to energy consumption is found. The impact of GDP on the CO2 emissions is the highest in Saudi Arabia followed by Venezuela, Nigeria, and Indonesia. The effect of energy use on the CO2 emissions is the greatest in Algeria followed by Indonesia and Nigeria.