The Nexus between Carbon Emissions, Energy Use, Economic Growth and Financial Development: Evidence from Central and Eastern European Countries

Alina Georgiana Manta,Jenica Popescu,Marius Dalian Doran,Daniel Cîrciumaru,Nicoleta Mihaela Florea,Roxana Maria Bădîrcea

doi:10.3390/su12187747

Alina Georgiana Manta, Jenica Popescu + Show 4 more

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https://doi.org/10.3390/su12187747

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Journal: Sustainability	Publication Date: Sep 19, 2020
Citations: 47	License type: CC BY 4.0

Affiliation: University of Craiova

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The aim and novelty of this study consist of estimating the nexus between CO2 (carbon dioxide) emissions, energy use, economic growth, and financial development for ten Central and Eastern European countries (CEEC) over the 2000–2017 period, starting from Environmental Kuznets Curve (EKC) theory. The Fully Modified Ordinary Least Squares (FMOLS) method was used for testing the cointegration relationship. Granger causality estimation based on the Vector Error Correction Model (VECM) and Pairwise Granger causality test were applied to identify the causality relationships between the variables and to identify the direction of causality. The implementation of the tests led to significant conclusions. In the long run, the levels of CO2 emissions and energy use do not have any influence on economic growth. Furthermore, there is a bidirectional causality among economic growth in terms of GDP and financial development variables. Thus, increasing financial development will generate more CO2 emissions and more energy use, and increasing economic growth will lead to rising financial development. In the short run, increasing financial development will generate more CO2 emissions and will lead to increased energy use and economic growth. Also, a bidirectional causality is being revealed between financial development and CO2 emissions. This indicates that financial development may help to reduce CO2 emissions.

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Extreme climate change developments impact health and infrastructure, diminishing wealth, and lowering productivity
Note: lnCO2 is the natural logarithm of CO2 emissions, lnEC is the natural logarithm of the energy use, lnGDP is the natural logarithm of real gross domestic product per capita, lnGDP2 is square of the natural logarithm of real gross domestic product per capita, lnBD is the natural logarithm of bank deposits to Gross Domestic Product (GDP)
Note: lnCO2 is the natural logarithm of CO2 emissions, lnEC is the natural logarithm of the energy use, lnGDP is the natural logarithm of real gross domestic product per capita, lnGDP2 is square of the natural logarithm of real gross domestic product per capita, lnBD is the natural logarithm of bank deposits to GDP, LLC is Levin-Lin-Chu test, p is p-value

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Extreme climate change developments impact health and infrastructure, diminishing wealth, and lowering productivity. These unfortunate circumstances could affect economic activity and trade, redirecting the productive working capital like technology to rebuild and replace. Physical impacts already have an outcome on the economy and on the financial system. Specialists and researchers [2] forewarn that if no action is taken to reduce emissions, the physical impact of climate change on the international economy will be significant. These studies suggest that medium global revenues may be reduced by up to a quarter. Many scientists have pointed out that continuous emissions at high levels would result in warming of 1.5 ◦C between 2030 and 2052 [3]

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