The Nexus of CO2 Emissions, Energy Consumption, Economic Growth, and Trade-Openness in WTO Countries

Abstract

This paper analyzes the dynamic relationship between CO2 emissions, energy consumption, GDP, and trade-openness from 1971 to 2013, based on the Environmental Kuznets Curve (EKC) hypothesis for 70 WTO countries. Using recently developed second-generation panel data methods, the empirical results support the EKC hypothesis for the high-, middle-, and lower-income panels used. Concerning the energy consumption and economic growth nexus, the causality results support the conversion hypothesis for the high-income panel, whereas the neutrality hypothesis holds for the lower- and middle-income panels. Based on the causality results, trade-openness does not positively impact CO2 emissions, GDP leads CO2 emissions, and trade-openness causes energy consumption within any income panel. The net effect of economic growth, however, could help to stabilize future CO2 emissions within any income panel.