Time-varying analysis of CO2 emissions, energy consumption, and economic growth nexus: Statistical experience in next 11 countries

Abstract

This paper detects the direction of causality among carbon dioxide (CO2) emissions, energy consumption, and economic growth in Next 11 countries for the period 1972–2013. Changes in economic, energy, and environmental policies as well as regulatory and technological advancement over time, cause changes in the relationship among the variables. We use a novel approach i.e. time-varying Granger causality and find that economic growth is the cause of CO2 emissions in Bangladesh and Egypt. Economic growth causes energy consumption in the Philippines, Turkey, and Vietnam but the feedback effect exists between energy consumption and economic growth in South Korea. In the cases of Indonesia and Turkey, we find the unidirectional time-varying Granger causality running from economic growth to CO2 emissions thus validates the existence of the Environmental Kuznets Curve hypothesis, which indicates that economic growth is achievable at the minimal cost of environment. The paper gives new insights for policy makers to attain sustainable economic growth while maintaining long-run environmental quality.