Do oil consumption and economic growth intensify environmental degradation? Evidence from developing economies

The purpose of this article is to empirically investigate the impact of economic growth, oil consumption, financial development, industrialization and trade openness on carbon dioxide (CO₂) emissions, particularly in relation to major oil-consuming developing economies. This study utilizes annual data from 1980 to 2012 on a panel of 18 developing countries. Our empirical analysis employs robust panel cointegration tests and a vector error correction model (VECM) framework. The empirical results of three panel cointegration models suggest that there is a significant long-run equilibrium relationship among economic growth, oil consumption, financial development, industrialization, trade openness and CO₂ emissions. Similarly, results from VECMs show that economic growth, oil consumption and industrialization have a short-run dynamic bidirectional feedback relationship with CO₂ emissions. Long-run (error-correction term) bidirectional causalities are found among CO₂ emissions, economic growth, oil consumption, financial development and trade openness. Our results confirm that economic growth and oil consumption have a significant impact on the CO₂ emissions in developing economies. Hence, the findings of this study have important policy implications for mitigating CO₂ emissions and offering sustainable economic development.     

CO2 emissions,output, energy consumption,and trade in Tunisia

This article contributes to the literature by investigating the dynamic relationship between carbon dioxide (CO₂) emissions, output (GDP), energy consumption, and trade using the bounds testing approach to cointegration and the ARDL methodology for Tunisia over the period 1971–2008. The empirical results reveal the existence of two causal long-run relationships between the variables. In the short-run, there are three unidirectional Granger causality relationships, which run from GDP, squared GDP and energy consumption to CO₂ emissions. To check the stability in the parameter of the selected model, CUSUM and CUSUMSQ were used. The results also provide important policy implications.     

Impact of FDI and trade on environmental quality in the CAFTA-DR region

This study investigates the relationship between foreign direct investment (FDI), trade and industrial emissions in member countries of the Central American Free Trade Agreement–Dominican Republic (CAFTA-DR) between 1979 and 2010. Our model is based on extant literature about the Environmental Kuznets’ Curve framework. In this study, we consider sulphur dioxide (SO₂), nitrogen oxides (NO_x) and carbon dioxide (CO₂) as our dependent variables. Our key independent variables are FDI and trade. Our study finds evidence that foreign investment and trade have had a negative impact on our selected emissions. However, our models also estimate turning points which are below the current GDP per capita values for all CAFTA-DR member countries. This is an encouraging trend in terms of the potential reduction in emissions in the region.     

Input-output analysis of carbon emissions embodied in China-Japan trade

Energy-related CO₂ emissions embodied in international trade have been widely studied by researchers all over the world. By using the bilateral trade input–output (BTIO) approach, this study investigates the CO₂ emissions embodied in China–Japan trade during 1995–2009 and attempts to identify the driving forces for the change in CO₂ emissions embodied in China’s exports to Japan during that period by using structural decomposition analysis (SDA). Result shows that CO₂ emissions embodied in China’s exports increased by about 100% from 1995 to 2009, whereas those embodied in China’s imports increased by about 500% during the same period. Result of this research also reveals that the scale effect had a large influence on the increase in CO₂ emissions embodied in China–Japan trade. The technical effect greatly decreased CO₂ emissions embodied in China’s exports to Japan, but obviously increased those embodied in imports. The influence of the structural effect was relatively small and insignificant in the change of CO₂ emissions embodied in China’s exports to Japan, but was notable in the change of emissions embodied in imports.     

Co-optimization of enhanced oil recovery and carbon sequestration

In this paper, we present an economic analysis of CO₂-enhanced oil recovery (EOR). This technique entails injection of CO₂ into mature oil fields in a manner that reduces the oil's viscosity, thereby enhancing the rate of extraction. As part of this process, significant quantities of CO₂ remain sequestered in the reservoir. If CO₂ emissions are regulated, oil producers using EOR should therefore be able to earn revenues from sequestration as well as from oil production. We develop a theoretical framework that analyzes the dynamic co-optimization of oil extraction and CO₂ sequestration, through the producer's choice of the fraction of CO₂ in the injection stream at each moment. We find that the optimal fraction of CO₂ is likely to decline monotonically over time, and reach zero before the optimal termination time. Numerical simulations, based on an ongoing EOR project in Wyoming, confirm this result. We also find that cumulative sequestration is less responsive to the carbon tax than to the oil price. Only at very high taxes does a tradeoff between revenues from oil output and sequestration arise.     

Environmental Kuznets Curve with Adjusted Net Savings as a Trade‐Off Between Environment and Development

The Environmental Kuznets Curve (EKC) hypothesises that emissions first increase at low stages of development then decrease once a certain threshold has been reached. The EKC concept is usually used with per capita Gross Domestic Product as the explanatory variable. As others, we find mixed evidence, at best, of such a pattern for CO₂ emissions with respect to per capita GDP. We also show that the share of manufacture in GDP and governance/institutions play a significant role in the CO₂ emissions–income relationship. As GDP presents shortcomings in representing income, development in a broad perspective or human well‐being, it is then replaced by the World Bank's Adjusted Net Savings (ANS, also known as Genuine Savings). Using the ANS as an explanatory variable, we show that the EKC is generally empirically supported for CO₂ emissions. We also show that human capital and natural capital are the main drivers of the downward sloping part of the EKC.     

CO2 emissions, research and technology transfer in China

Although the economy of China has grown very strongly over the last few decades, this spectacular performance has come at the expense of rapid environmental deterioration. Amidst animated debate on the issue of global warming, this study attempts to explore the determinants of CO₂ emissions in China using aggregate data for more than half a century. Adopting an analytical framework that combines the environmental literature with modern endogenous growth theories, the results indicate that CO₂ emissions in China are negatively related to research intensity, technology transfer and the absorptive capacity of the economy to assimilate foreign technology. Our findings also indicate that more energy use, higher income and greater trade openness tend to cause more CO₂ emissions.     

Time-varying correlations in oil,gas and CO2 prices: an application using BEKK,CCC and DCC-MGARCH models

Previous literature has identified oil and gas prices as being the main drivers of CO₂ prices in a univariate Generalized Autoregressive Conditional Heteroscedasticity (GARCH) econometric framework (Alberola et al., 2008; Oberndorfer, 2009). By contrast, we argue in this article that the interrelationships between energy and emissions markets shall be modelled in a Vector Autoregressive (VAR) and Multivariate GARCH (MGARCH) framework, so as to reflect the dynamics of the correlations between the oil, gas and CO₂ variables overtime. Using the Baba–Engle–Kraft–Kroner (BEKK), Constant Conditional Correlation (CCC) and Dynamic Conditional Correlation MGARCH (DCC-MGARCH) models on daily data from April 2005 to December 2008, we highlight significant own-volatility, cross-volatility spillovers, and own persistent volatility effects for nearly all markets, indicating the presence of strong Autoregressive Conditional Heteroscedasticity (ARCH) and GARCH effects. Besides, we provide strong empirical evidence of time-varying correlations in the range of [?0.3;?0.3] between oil and gas, [?0.05;?0.05] between oil and CO₂, and [?0.2;?0.2] between gas and CO₂, that have not been considered by previous studies. These findings are of interest for traders and utilities in the energy sector, but also for a broader applied economics audience.     

The effectiveness of anti-leakage policies in the European Union: results for Austria

With the third trading period of the EU emissions trading scheme (EU ETS) starting in 2013, the system of allocating emission allowances will significantly change: In contrast to the previous two trading periods, auctioning of the allowances should now be the rule rather than the exception. Accompanying this policy change, concerns over competitiveness of energy intensive, trade exposed sectors as well as over limited environmental effectiveness via the channel of carbon leakage, have regained prominence. In this paper, we thus explore the impacts of potential EU policies to counter losses in international competitiveness and carbon leakage from the perspective of Austria. Based on numerical simulations with a computable general equilibrium model, we evaluate three policy options: an input subsidy for carbon allowances (thus reflecting the planned partially free allocation mechanism in the third EU ETS phase), a subsidy for domestic production, and an export rebate based on sectoral CO₂ costs. Our results show that each policy has the potential to support domestic production in exposed sectors relative to a full auctioning scenario and thus increase competitiveness. However, none is imperatively effective at reducing Austria’s net carbon emissions: while the carbon trade balance is improved and hence leakage declines, the tradability of emission permits within the EU ETS allows CO₂ emissions from Austria’s ETS output to increase. A cost benefit analysis indicates that the two policies promoting domestic output and exports are more cost effective than the CO₂ input subsidy.     

The carbon footprint of UK households 1990-2004: A socio-economically disaggregated, quasi-multi-regional input-output model

This paper presents a socio-economically disaggregated framework for attributing CO₂ emissions to people's high level functional needs. Based around a quasi-multi-regional input-output (QMRIO) model, the study, in theory, takes into account all CO₂ emissions that arise from energy used in production of goods and services to satisfy UK household demand, whether the emissions occur in the UK or abroad. Results show that CO₂ emissions attributable to households were 15% above 1990 levels in 2004, and that although absolute decoupling occurred between household expenditure and CO₂ during the UK's switch from coal to gas in the early 1990s, since then only slight relative decoupling is evident. The proportion of CO₂ that arises outside UK borders in support of UK consumption is rising, and reducing these emissions is particularly problematic in a global trading system. Investigation into the carbon footprint of different segments of the UK population shows wide variation: the segment with the highest carbon footprint emits 64% more CO₂ than the segment with the lowest. Results show that recreation and leisure are responsible for over one quarter of CO₂ emissions in a typical UK household in 2004. We conclude that expanding lifestyle aspirations are significant factors in driving household CO₂ emissions, but the study also emphasizes that attention must be paid to the infrastructures and institutions that result in considerable amounts of CO₂ being locked up in basic household activities through which people meet their everyday needs for subsistence, protection, and communication with family and friends. The findings highlight the sheer scale of the challenge facing UK policy-makers, and suggest that policies should be targeted towards segments of society responsible for the highest carbon footprints.     

International trade and the geographical separation between income and enabled carbon emissions

In this paper we study how international trade allows the geographical separation between the place where carbon emissions occur and the place where income from those emissions is derived. We do so by studying the carbon emissions enabled by the primary inputs of products downstream along the production chain. We find that 18% of global carbon emissions are enabled abroad and that Developed Economies, Fossil Fuel Exporters and Asia account for 80% of the downstream emissions enabled by international trade. Both Developed Economies and Fossil Fuel Exporters exhibit a positive trade balance of enabled emissions while for Asia the opposite is true. Developed Economies and Fossil Fuel Exporters enable emissions mainly through the export of manufactured products (690 Mt) and fossil fuels (684 Mt), respectively, while Asia exhibits an outflow of enabled emissions through the import of fossil fuels (209 Mt). The measurement of enabled emissions allows the understanding of how a region's income is derived from carbon emissions occurring abroad.     

Empirical study on the determinants of CO2 emissions: evidence from OECD countries

This article empirically investigates the Environmental Kuznets Curve (EKC) for CO₂ emissions in the cases of 11 OECD countries by taking into account the role of nuclear energy in electricity production. The autoregressive distributed lag approach to cointegration is employed as the estimation method. Our results indicate that energy consumption has a positive impact on CO₂ emissions in most countries in the study. However, the impact of trade is not statistically significant. The results provide evidence for the role of nuclear power in reducing CO₂ emissions only in some countries. Additionally, although the estimated long-run coefficients of income and its square satisfy the EKC hypothesis in Finland, Japan, Korea and Spain, only Finland's EKC turning point is inside the sample period of the study, providing poor evidence in support of the EKC hypothesis.     

An analysis of China's climate policy using the China-in-Global Energy Model

The primary approach to address climate change in China has been the use of CO₂ intensity targets coupled with targets for low carbon energy deployment. We evaluate the impact of extending similar targets through 2050 on China's energy use profile and CO₂ emissions trajectory using the China-in-Global Energy Model (C-GEM). The C-GEM is a global computable equilibrium model that includes energy and economic data provided by China's statistical agencies, calibration of savings, labor productivity, and capital productivity dynamics specific to China's stage of development, and regional aggregation that resolves China's major trading partners. We analyze the combined impact of extending CO₂ intensity targets, implemented via a cap-and-trade program, and low carbon energy policies (directives for nuclear power expansion and feed-in tariffs for wind, solar, and biomass energy) through 2050. Although with the policy, simulated CO₂ emissions are around 43% lower in 2050 relative to a reference (No Policy) counterfactual, China's CO₂ emissions still increase by over 60% between 2010 and 2050. Curbing the rise in China's CO₂ emissions will require fully implementing a CO₂ price, which will need to rise to levels higher than $25/ton in order to achieve China's stated goal of peaking CO₂ emissions by 2030.     

The income–pollution relationship and the role of income distribution: An analysis of Swedish household data

The main purpose of this study is to analyze the relationship between pollution and income at household level. The study is motivated by the recent literature emphasizing the importance of income distribution for the aggregate relation between pollution and income. The main findings from previous studies are that if the individual pollution–income relationship is non-linear, then aggregate pollution for, say, a whole country, will depend not only on average income, but also on how income is distributed. To achieve our objective we formulate a model for determining the choice of consumption of goods in different types of household. Furthermore we link the demand model to emission functions for various goods. The theoretical analysis shows that without imposing very restrictive assumptions on preferences and the emission functions, it is not possible to determine a priori the slope or the curvature of the pollution–income relation. The empirical analysis shows that, given the model used, the pollution–income relation has a positive slope in Sweden and is strictly concave for all three pollutants under study (CO₂, SO₂, NO_x), at least in the neighbourhood of the observed income for an average household. We also show that altering the prevailing income distribution, holding average income constant, will affect aggregate emissions in the sense that an equalization of incomes will give rise to an increase in emissions. One implication is then that the development of aggregate pollution due to growth depends not only on the income level, but also on how growth is distributed.     

Economic growth and carbon emissions: evidence from CIVETS countries

ABSTRACT

This paper examines whether a long-run relationship exists between CO₂ emissions and selected variables: real gross domestic product per capita, inward stock of foreign direct investments, gross fixed capital formation, industry, value added and energy use per capita for Colombia, Indonesia, Viet Nam, Egypt, Turkey and South Africa countries in the period of 1989–2016. We used panel unit root testing, followed by panel cointegration tests and panel causality. The results clearly prove the existence of a bidirectional long-run causal relationship between all the variables except between CO₂ emissions and GDP and CO₂ emissions and GFCF. Major finding of the short-run causality analysis is that CO₂ emission in the short run does not result in changes of other variables. On the other hand, all variables except foreign direct investments (FDI) cause the changes in the CO₂ emissions, and there is a positive bidirectional causal relationship between GDP and FDI, between GFCF and FDI, and between GFCF and IVA. Finally, positive unidirectional causal relationship also exists, running from GDP to IVA, GDP to ENUSE, IVA to FDI and ENUSE to FDI.     

Climate policy and the optimal extraction of high‐ and low‐carbon fossil fuels

Abstract. We study how restricting CO₂ emissions affects resource prices and depletion over time. We use a Hotelling‐style model with two non‐renewable fossil fuels that differ in their carbon content (e.g., coal and natural gas) and in addition are imperfect substitutes in final good production. We show that an economy facing a CO₂ flow‐constraint may substitute towards the relatively dirty input. As the economy tries to maximize output per unit of emissions it is not only carbon content that matters: productivity matters as well. With an announced constraint the economy first substitutes towards the less productive input such that more of the productive input is available when constrained. Preliminary empirical results suggest that it is cost‐effective to substitute away from dirty coal to cleaner oil or gas, but to substitute from natural gas towards the dirtier input oil.     

Global resilience to climate change: Examining global economic and environmental performance resulting from a global carbon dioxide market

In this study, we investigated global economic and environmental resilience in the presence of climate change. In particular, we examine the possibility of mitigating carbon dioxide (CO₂) emissions without stressing standards of living. Here, we set up a cross-country CO₂ market constrained by a quota, where CO₂ is optimally re-allocated based on relative shadow prices of the pollutant. The objective is to stabilize global emissions without hindering global incomes and in the process achieve a single CO₂ price. We introduce a re-allocation model that takes into account each country’s underlying polluting technology. The model solutions are then used to investigate whether a single, global price for CO₂ is attainable. Our results suggest that global CO₂ emissions could stabilize without stressing global incomes, with a global CO₂ market achieving equilibrium. With a CO₂ market, countries would then have the incentive to consider adopting, improving, or investing in additional abatement technologies to move beyond current capabilities, while continuing to increase standards of living.     

Lifestyles, technology and CO2 emissions in China: A regional comparative analysis

With rapid economic development, higher income levels, urbanization and other socio-economic drivers, people's lifestyles in China have changed remarkably over the last 50 years. This paper uses the IPAT model (where I = Impact representing CO₂ emissions, P = Population, A = Affluence, and T = emission intensity) to analyze how these main drivers contributed to the growth of CO₂ emissions over this time period. Affluence or lifestyle change has been variously recognized as one of the key factors contributing to CO₂ emissions. Through comparative analysis of the development of five regions in China, we trace lifestyle changes since the foundation of the People's Republic of China (PRC) in 1949 until 2002. We find that household consumption across the five regions follows similar trajectories, driven by changes in income and the increasing availability of goods and services, although significant differences still exist between and within regions due to differential policies in China and different possibilities for social mobility. There are considerable differences between the southeast and northwest and between urban and rural areas. We also found that technological improvements have not been able to fully compensate for the increase of emissions due to population growth and increasing wealth, which is also in line with results from other studies. Finally, this paper emphasizes that developing countries such as China, which is home to 22% of the world population and a growing middle class, and which is on a fast track to modernization, need to ensure that people's lifestyles are changing towards more sustainable ways of living. China has been investing heavily in infrastructure and thus creating the emissions of tomorrow. Thus investing, for example, in public transport and low energy building today will help reduce emissions in the future and will support more sustainable lifestyles.     

CO2 emissions,economic growth,energy consumption,trade and urbanization in new EU member and candidate countries: A panel data analysis

This paper investigates the causal relationship between energy consumption, carbon dioxide emissions, economic growth, trade openness and urbanization for a panel of new EU member and candidate countries over the period 1992–2010. Panel unit root tests, panel cointegration methods and panel causality tests are used to investigate this relationship. The main results provide evidence supporting the Environmental Kuznets Curve hypothesis. Hence, there is an inverted U-shaped relationship between environment and income for the sampled countries. The results also indicate that there is a short-run unidirectional panel causality running from energy consumption, trade openness and urbanization to carbon emissions, from GDP to energy consumption, from GDP, energy consumption and urbanization to trade openness, from urbanization to GDP, and from urbanization to trade openness. As for the long-run causal relationship, the results indicate that estimated coefficients of lagged error correction term in the carbon dioxide emissions, energy consumption, GDP, and trade openness equations are statistically significant, implying that these four variables could play an important role in adjustment process as the system departs from the long-run equilibrium.     

Does financial development reduce CO2 emissions in Malaysian economy? A time series analysis

This study deals with the question whether financial development reduces CO₂ emissions or not in case of Malaysia. For this purpose, we apply the bounds testing approach to cointegration between the variables. We establish the presence of significant long-run relationships between CO₂ emissions, financial development, energy consumption and economic growth. The empirical evidence also indicates that financial development reduces CO₂ emissions. Energy consumption and economic growth add in CO₂ emissions. The Granger causality analysis reveals the feedback hypothesis between financial development and CO₂ emissions, energy consumption and CO₂ emissions and, between CO₂ emissions and economic growth.