Carbon Emissions and Income Trajectory in Eight Heterogeneous Countries: The Role of Trade Openness, Energy Consumption and Population Dynamics

Abstract

This paper examines the long-run and dynamic temporal relationships between economic growth, energy consumption, population density, trade openness, and carbon dioxide    (CO₂) emissions in Brazil, China, Egypt, Japan, Mexico, Nigeria, South Korea, and South Africa based on the environment Kuznets curve (EKC) hypothesis. We employ the ARDL Bounds test to cointegration and CUSUM and CUSUMSQ tests to ensure long-run cointegration and parameter stability.  The estimated results show that the inverted U-shaped EKC hypothesis holds in Japan and South Korea.  In the other six countries, the long-run relationship between economic growth and CO₂ emissions follows an N-shaped trajectory and the estimated turning points are much higher than the sample mean. In addition, the results indicate that energy consumption Granger-causes both CO₂ emissions and economic growth in all the countries.  An important implication of our findings is that it would be ill-advised for the policy decision makers to adopt the EKC postulate as the conceptual basis for policies favoring economic growth unconditionally. A wide range of policy initiatives that would induce increased demand for better environment quality and its sustainability should be explored in tandem with measures to spur economic growth.