Revisiting the Environmental Kuznets Curve in a Global Economy

Shahbaz, Muhammad and Ozturk, Ilhan and Afza, Talat and Ali, Amjad (2013): Revisiting the Environmental Kuznets Curve in a Global Economy.

Abstract

The present study deals with an empirical investigation between CO2 emissions, energy intensity, economic growth and globalization using annual data over the period of 1970-2010 for Turkish economy. We applied unit root test and cointegration approach in the presence of structural breaks. The direction of causality between the variables is investigated by applying the VECM Granger causality approach. Our results confirmed the existence of cointegration between the series. The empirical evidence reported that energy intensity, economic growth (globalization) increase (condense) CO2 emissions. The results also validated the presence of Environmental Kuznets curve (EKC). The causality analysis shows bidirectional causality between economic growth and CO2 emissions. This implies that economic growth can be boosted at the cost of environment.

• Item Type: MPRA Paper
• Language: English
• Keywords: Carbon dioxide emissions, EKC, economic growth
• Subjects: Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q56 - Environment and Development ; Environment and Trade ; Sustainability ; Environmental Accounts and Accounting ; Environmental Equity ; Population Growth

References

[1]. Ozturk I, Acaravci A. CO2 emissions, energy consumption and economic growth in Turkey. Renewable and Sustainable Energy Reviews 2010; 14: 3220-3225.

[2]. Zivot E, Andrews D. Further evidence of great crash, the oil price shock and unit root hypothesis. Journal of Business and Economic Statistics 1992; 10: 251-270.

[3]. Johansson P-O, Kriström B. On a clear day you might see an environmental Kuznets curve. Environmental and Resource Economics 2007; 37: 77-90.

[4]. Stern DI. The rise and fall of the environmental Kuznets curve. World Development 2004; 32: 1419-1439.

[5]. Wagner M. The carbon Kuznets curve: A cloudy picture emitted by bad econometrics? Resource and Energy Economics 2008; 30: 388-408.

[6]. Ozturk I. A literature survey on energy–growth nexus. Energy Policy 2010; 38: 340-349.

[7]. Altinaya G, Karagol E. Structural break, unit root, and the causality between energy consumption and GDP in Turkey, Energy Economics 2004; 26: 985-994.

[8]. Lise W, Montfort KV. Energy consumption and GDP in Turkey: Is there a co‐integration relationship? Energy Economics 2007; 29: 1166-1178

[9]. Soytas U, Sari R. The relationship between energy and production: Evidence from Turkish manufacturing industry. Energy Economics 2007; 29: 1151-1165.

[10]. Jober T, Karanfil F. Formation and deformation of the environmental Kuznets curve for CO2 emissions. Crisis, Innovation And Sustainable Development, Blandine Laperche, Nadine Levratto , Dimitri Uzunidis (Ed.); 2012; 243-258.

[11]. Erdal G, Erdal H, Esengun K. The causality between energy consumption and economic growth in Turkey. Energy Policy 2008; 36: 3838-3842.

[12]. Kaplan M, Ozturk I, Kalyoncu H. Energy Consumption And Economic Growth In Turkey: Cointegration And Causality Analysis, Romanian Journal Of Economic Forecasting 2011; 2: 31-41.

[13]. Akbostanci E, Asık ST, Tunc GI. The relationship between income and environment in Turkey: Is there an environmental Kuznets curve? Energy Policy 2009; 37: 861-867.

[14]. Halicioglu F, An econometric study of CO2 emissions, energy consumption, income and foreign trade in Turkey. Energy Policy 2009; 37: 1156-1164.

[15]. Soytasa U, Saria R. Energy consumption, economic growth, and carbon emissions: Challenges faced by an EU candidate member. Ecological Economics 2009; 68: 1667-1675.

[16]. Kaygusuz K. Energy and environmental issues relating to greenhouse gas emissions for sustainable development in Turkey. Renewable and Sustainable Energy Reviews 2009; 13: 253-270.

[17]. Jobert T, Karanfil F, Tykhonenko A. (2011). Environmental Kuznets Curve for carbon dioxide emissions: lack of robustness to heterogeneity? Working Paper, Université Nice Sophia Antipolis.

[18]. Joberta T, Karanfil K. Sectoral energy consumption by source and economic growth in Turkey. Energy Policy 2007; 35: 5447–5456.

[19]. Lisea W. Decomposition of CO2 emissions over 1980–2003 in Turkey. Energy Policy 2006; 34: 1841–1852.

[20]. Ozturk I, Kaplan M, Kalyoncu H. The causal relationship between energy consumption and GDP in Turkey. Energy & Environment 2013; Forthcoming.

[21]. Grossman GM, Krueger AB. (1991). Environmental impacts of a North American free trade agreement. NBER working paper 3914, Nov. 1991

[22]. Dinda S. (2008). Impact of globalization on environment: how do we measure and analyze it? ISEE 2006.

[23]. Shahbaz M, Lean HH, Shabbir MS. Environmental Kuznets Curve hypothesis in Pakistan: Cointegration and Granger causality. Renewable and Sustainable Energy Reviews 2012a; 16: 2947-2953.

[24]. Wheeler D. (2000). Racing to the bottom? Foreign investment and air quality in developing countries. World Bank working paper.

[25]. Copeland BR, Taylor MS. Trade and environment: a partial synthesis. American Journal of Agricultural Economics 1995; 77: 765-771.

[26]. Copeland BR, Taylor MS. Trade, growth and the environment. Journal of Economic Literature 2004; 7-71.

[27]. Birdsall N, Wheeler D. Trade policy and industrial pollution in Latin America: where are the pollution havens? in Patrick ed. International trade and the environment, World Bank Discussion Papers, no. 159. Washington, D.C.: World Bank, 1992, pages 159-67.

[28]. Lee H, Roland-Holst D. The environment and welfare implications of trade and tax policy. Journal of Development Economics 1997; 52: 65-82.

[29]. Jones LE, Rodolfo EM. (1995). A positive model of growth and pollution controls. NBER working paper 5205.

[30]. Antweiler W, Copeland BR, Taylor MS. Is free trade good for the environment? American Economic Review 2001; 91: 877- 908.

[31]. Liddle B. Free trade and the environment-development system. Ecological Economics 2001; 39: 21-36.

[32]. Dean JM. Testing the impact of trade liberalization on the environment: theory and evidence. Canadian Journal of Economics 2002; 35: 819-842.

[33]. Magani S. Trade Liberalization and the Environment: Carbon Dioxide for 1960-1999. Economics Bulletin 2004; 17: 1-5.

[34]. McAusland C. Trade, Politics, and the Environment: Tailpipe vs. Smokestack. Journal of Environmental Economics and Management 2008; 55: 52-71.

[35]. Frankel JA. (2009). Environmental Effects of International Trade, Expert Report No. 31 to Sweden’s Globalisation Council.

[36]. Dreher A. Does globalization affect growth? Evidence from a new index of globalization. Applied Economics 2006; 38: 1091-1110.

[37]. Shahbaz M, Mutascu M, Azim P. Environmental Kuznets curve in Romania and the role of energy consumption. Renewable and Sustainable Energy Reviews 2013; 18: 165-173.

[38]. Dickey DA, Fuller WA. Distribution of the estimators for autoregressive time series with a unit root, Journal of the American Statistical Association 1979; 74: 427-431.

[39]. Phillips PCB, Perron P. Testing for a unit root in time series regression, Biometrika 1988; 75: 335-346.

[40]. Kwiatkowski D, Phillips P, Schmidt P, Shin Y. Testing the null hypothesis of stationary against the alternative of a unit root: how sure are we that economic time series have a unit root? Journal of Econometrics 1992; 54: 159-178.

[41]. Elliot G, Rothenberg TJ, Stock JH. Efficient tests for an autoregressive unit root. Econometrica 1996; 64: 813-836.

[42]. Ng S, Perron P. Lag length selection and the construction of unit root test with good size and power. Econometrica 2001; 69: 1519-1554.

[43]. Sen A. On unit root tests when the alternative is a trend break stationary process. Journal of Business and Economic Statistics 2003; 21: 174-184.

[44]. Pesaran MH, Shin Y, Smith R. Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics 2001; 16: 289-326.

[45]. Lütkepohl H. Structural vector autoregressive analysis for cointegrated variables. AStA Advances in Statistical Analysis 2006; 90: 75-88.

[46]. Johansen S, Juselies K. Maximum likelihood estimation and inferences on cointegration. Oxford Bulletin of Economics and Statistics 1990; 52: 169-210.

[47]. Narayan PK. The savings and investment nexus for China: evidence from cointegration tests. Applied Economics 2005; 37: 1979-1990.

[48]. Gregory AW, Hansen BE. Residual-based tests for cointegration in models with regime shifts. Journal of Econometrics 1996; 70: 99-126.

[49]. Shahbaz M. Does trade openness affect long run growth? Cointegration, causality and forecast error variance decomposition tests for Pakistan. Economic Modelling 2012; 29: 2325-2339.

[50]. Leow YGA. Reexamination of the exports in Malaysia’s economic growth: after Asian financial crisis, 1970-2000. International Journal of Management Sciences 2004; 11: 79-204.

[51]. Shahbaz M, Zeshan M, Afza T. Is energy consumption effective to spur economic growth in Pakistan? new evidence from bounds test to level relationships and Granger causality tests. Economic Modelling 2012; 29: 2310-2319.

[52]. Leitão NC. (2013). The environmental Kuznets curve and globalization: the empirical evidence for Portugal, Spain, Greece and Ireland. Energy Economics Letters 2013; 1:15-23.