CO2 Emissions, Energy Consumption and Economic Growth Nexus in MENA countries: Evidence from Simultaneous Equations Models

Omri, Anis (2013): CO2 Emissions, Energy Consumption and Economic Growth Nexus in MENA countries: Evidence from Simultaneous Equations Models. Published in: Energy Economics , Vol. 40, (16 September 2013): pp. 657-664.

Abstract

This paper examines the nexus between CO2 emissions, energy consumption and economic growth using simultaneous-equations models with panel data of 14 MENA countries over the period 1990-2011. Our empirical results show that there exists bidirectional causal relationship between energy consumption and economic growth. However, the results support the occurrence of unidirectional causality from energy consumption to CO2 emissions without any feedback effects, and there exists bidirectional causal relationship between economic growth and CO2 emissions for the region as a whole. The study suggests that environmental and energy policies should recognize the differences in the nexus between energy consumption and economic growth in order to maintain sustainable economic growth in MENA region.

• Item Type: MPRA Paper
• Language: English
• Keywords: Carbon dioxide emissions, Energy consumption, Economic growth.
• Subjects: C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O44 - Environment and Growth; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy

References

Altinay, G., Karagol, E., 2004. Structural break, unit root and causality between energy consumption and GDP in Turkey. Energy Economics 26, 985–994.

Andersson, R., Quigley, J.M., Wilhelmsson, M., 2009. Urbanization, productivity, and innovation: evidence from investment in higher education. Journal of Urban Studies 66, 2–15.

Ang, J.B., 2007. CO2 emissions, energy consumption, and output in France. Energy Policy 35, 4772–4778.

Ang, J., 2008. Economic development, pollutant emissions and energy consump- tion in Malaysia. Journal of Policy Modeling 30, 271–278.

Apergis, N., Payne, J.E., 2009. CO2 emissions, energy usage, and output in Central America. Energy Policy 37, 3282–3286.

Apergis N., Payne, J.E. 2010. Renewable energy consumption and economic growth: evidence from a panel of OECD countries, Energy Policy 38, 656–660.

Arouri, M.H., Ben Youssef, A., M’henni, H., Rault, C., 2012. Energy consumption, economic growth and CO2 emissions in Middle East and North African countries. Energy policy 45, 342-349.

Batliwala, S., Reddy, A.K., 1993. Energy consumption and population. International Energy Initiative. 25/5 Borebank Road, Benson Town, Bangalore, India, pp. 1–10.

Belloumi, M., 2009. Energy consumption and GDP in Tunisia: cointegration and causality analysis. Energy Policy 37, 2745–2753.

Chang, C.C. 2010. A multivariate causality test of carbon dioxide emissions, energy consumption and economic growth in China. Applied Energy 87, 3533-3537.

De Mello, Jr., L.R. (1997). Foreign Direct Investment in Developing Countries and Growth: A Selective Survey. The Journal of Development Studies 34, 1, 1-34.

Dickey, D.A., Fuller, W.A. 1979. Distribution of the Estimators for AutoRegressive Time Series with a Unit Root. Journal of the American Statistical Association 74, 427-431.

Dinda, S. 2004. Environmental Kuznets curve hypothesis: A survey. Ecological Economics 49, 431–455.

Fodha, M., Zaghdoud, O., 2010. Economic growth and environmental degradation in Tunisia: an empirical analysis of the environmental Kuznets curve. Energy Policy 38, 1150–1156.

Friedl, B., Getzner, M. 2003. Determinants of CO2 emissions in a small open economy. Ecological Economics 45, 133–148.

Ghosh, S., 2010. Examining carbon emissions-economic growth nexus for India: a multivariate cointegration approach. Energy Policy 38, 2613-3130.

Grossman, G., Krueger, A., 1991. Environmental impacts of a North American free trade agreement. National Bureau of Economics Research Working Paper, No. 3194, NBER, Cambridge.

Halicioglu, F., 2009. An econometric study of CO2 emissions, energy consumption, income and foreign trade in Turkey. Energy Policy 37, 1156–1164.

Holtz-Eakin, D., Selden, T.M., 1995. Stoking the fires?: CO2 emissions and economic growth. Journal of Public Economics 57, 85–101.

Hossain, M.S.., 2011. Panel estimation for CO2 emissions, energy consumption, economic growth, trade openness and urbanization of newly industrialized countries. Energy Policy 39, 6991–6999.

Islam, F., Shahbaz, M., U. Ahmed, A., Alam, M.M., 2013. Financial development and energy consumption nexus in Malaysia: A multivariate time series analysis. Economic Modelling 30, 335–441.

Jaunky, V.C., 2010. The CO2 emissions-income nexus: evidence from rich countries. Energy Policy 39,1228–1240.

Jayanthakumaran, K., Verma, R., Liu, Y., 2012. CO2 emissions, energy consumption, trade and income: A comparative analysis of China and India. Energy Policy 42, 450–460.

Kraft, J., Kraft, A., 1978. On the relationship between energy and GNP. Journal of Energy and Development 3, 401–403.

Lean, H.H., Smyth, R., 2010. CO2 emissions, electricity consumption and output in ASEAN. Applied Energy 87,1858–1864.

Lee, W.J., 2013. The contribution of foreign direct investment to clean energy use, carbon emissions and economic growth. Energy Policy 55, 483–489.

Lorde, T., Waithe, K., Francis, B., 2010. The importance of electrical energy for economic growth in Barbados. Energy Economics 32, 1411–1420.

Lotfalipour, M.R., Falahi, M.A., Ashena,M., 2010. Economic growth, CO2 emissions, and fossil fuels consumption in Iran. Energy 35,5115–5120. Managi, S., Jena, P.R., 2008. Environmental productivity and Kuznets curve in India. Ecological Economics 65, 432–440.

Menyah, K., Wolde-Rufael, Y., 2010. Energy consumption, pollutant emissions and economic growth in South Africa. Energy Economics 32, 1374–1382.

Odhiambo, N.M., 2009. Energy consumption and economic growth nexus in Tanzania: an ARDL bounds testing approach, Energy Policy 37, 617-622.

Oh, W., Lee, K., 2004. Causal relationship between energy consumption and GDP: the case of Korea 1970–1999. Energy Economics 26, 51–59.

Ozturk, I., Acaravci, A., 2010. CO2 emissions, energy consumption and economic growth in Turkey. Renewable and Sustainable Energy Reviews14,3220–3225.

Pao, H.T., 2009. Forecast of electricity consumption and economic growth in Taiwan by state space modeling. Energy 34, 1779–1791.

Phillips, P. C. B. and Perron, P., 1988. Testing for a unit root in time series regression, Biometrika 752, 335–346.

Saboori, B., Sulaiman, J., Mohd, S., 2012. Economic growth and CO2 emissions in Malaysia: A cointegration analysis of the Environmental Kuznets Curve. Energy policy 51, 184–191.

Richmond, A.K., Kaufmann, R.K., 2006. Is there a turning point in the relationship between income and energy use and/or carbon emissions? Ecological. Econonomics 56, 176–189.

Sadorsky, P., 2010. The impact of financial development on energy consumption in emerging economies. Energy Policy 38, 2528–2535.

Sadorsky, P., 2011. Financial development and energy consumption in Central and Eastern European frontier economies. Energy Policy 39, 999–1006.

Sari, R., Ewing, B.T., Soytas, U., 2008. The relationship between disaggregate energy consumption and industrial production in the United States: an ARDL approach. Energy Economics 30, 2302–2313.

Shahbaz, M., Zeshan, M., Afza, T., 2012. Is energy consumption effective to spur economic growth in Pakistan? New evidence from bounds test to level relationships and Granger causality tests. Economic Modelling 29, 2310–2319.

Shahbaz, M., Lean, H.H., 2012. Does financial development increase energy consumption? The role of industrialization and urbanization in Tunisia. Energy Policy 40, 473–479.

Shahabaz, M., Khan, S., Tahir M.I., 2013. The dynamic links between energy consumption, economic growth, financial development and trade in China: Fresh evidence from multivariate framework analysis. Energy economics 40, 8–21.

Sharma, S.S., 2010. The relationship between energy and economic growth: Empirical evidence from 66 countries. Applied Energy 87, 3565–3574.

Sharma, S.S., 2011. Determinants of carbon dioxide emissions: empirical evidence from 69 countries. Applied Energy 88, 376–382.

Soytas, U., Sari, R., Ewing, B.T., 2007. Energy consumption, income, and carbon emissions in the United States. Ecological Economics 62, 482–489.

Soytas, U., Sari, R., 2009. Energy consumption, economic growth, and carbon emissions: challenges faced by an EU candidate member. Ecological Economics 68, 2706–2712.

Stern, D.I., 1993. Energy growth in the USA: a multivariate approach. Energy Economics 15, 137–150.

Stern, D.I., Enflo, K., 2013. Causality between energy and output in the long-run. Energy economics 39, 135–146.

Wang, S.S., Zhou, D.Q., Zhou, P., Wang, Q.W. 2011. CO2 emissions, energy consumption and economic growth in China: A panel data analysis. Energy Policy 39, 4870-4875.

Wong, S.L., Chang, Y., Chia, W-M., 2013. Energy consumption, energy R&D and real GDP in OECD countries with and without oil reserves. Energy economics 40, 51-60.

Yuan, J., Zhao, C., Yu, S., Hu, Z., 2007. Electricity consumption and economic growth in China: cointegration and co-feature analysis. Energy Economics 29, 1179–1191.

Zhang, X-P., Cheng, X-M., 2009. Energy consumption, carbon emissions, and economic growth in China. Ecological Economics 68, 2706–2712.