The Relationship between Economic Growth and CO<sub>2</sub> Emissions and the Effects of Energy Consumption on CO<sub>2</sub> Emission Patterns in Nigerian Economy

Abstract

This paper is an effort to fill the gap in the energy literature with an in-depth country study for Nigeria. In order to find the main driving forces affecting short and long run CO2 emission patterns and the relationship between economic growth and CO2 emissions in Nigerian economy over the period 1980-2009, this paper uses the Standard Version of Granger and the Restricted VAR Model (VECM) for the analysis. Earlier research focused on investigating the impact of energy consumption and out put on carbon emissions without taking the components of energy consumption (disaggregating energy consumption according to source) into account. This paper examines the impacts of selected variables such as GDP per capita, electricity per capita, natural gas per capita, crude oil per capita, and fuel woods per capita on the emission trends. Applying the ADF and PP-test to determine the stationary state of our data, the result shows that the variables are not stationery at their level except carbon emissions and crude oil. Therefore, a co integrating test was carried out to test the existence of a long run relationship in our data. The result suggests that there exists a long run relationship among the variables. As such we apply the Vector Error Correction Model (VECM) to determine the effects of energy carriers’ variables on carbon emissions as well as on out put. More also, in order to consolidate our findings; we applied the Impulse Response Function and Variance decomposition. The analysis on the impacting factors show that for the Nigerian economy the carbon emissions patterns have greater effects on the levels of economic in the short run but a neutral hypothesis holds in long run. In addition, our analysis reveals that electricity and gas consumption cause economic growth both in the short and long run but only fuel woods influences it in the long run. Further more, our results provide evidence that natural gas influences carbon emissions in the long run while fuel woods influences carbon emissions in the short run. These findings are expected to shed a light on the Nigerian policy making in coping with climate change.