Multivariate Granger causality between CO₂ emissions, energy consumption, FDI (foreign direct investment) and GDP (gross domestic product): Evidence from a panel of BRIC (Brazil, Russian Federation, India, and China) countries

This paper addresses the impact of both economic growth and financial development on environmental degradation using a panel cointegration technique for the period between 1980 and 2007, except for Russia (1992–2007). In long-run equilibrium, CO₂ emissions appear to be energy consumption elastic and...

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Bibliographic Details
Published in:Energy (Oxford) 2011, Vol.36 (1), p.685-693
Main Authors: Pao, Hsiao-Tien, Tsai, Chung-Ming
Format: Article
Language:English
Subjects:
air pollution
Air pollution caused by fuel industries
Applied sciences
business enterprises
carbon dioxide
developing countries
Economic data
Energy
Energy economics
energy efficiency
energy use and consumption
Energy. Thermal use of fuels
environmental protection
Exact sciences and technology
foreign direct investment
gas emissions
General, economic and professional studies
General. Regulations. Norms. Economy
gross domestic product
Methodology. Modelling
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Summary:This paper addresses the impact of both economic growth and financial development on environmental degradation using a panel cointegration technique for the period between 1980 and 2007, except for Russia (1992–2007). In long-run equilibrium, CO₂ emissions appear to be energy consumption elastic and FDI inelastic, and the results seem to support the Environmental Kuznets Curve (EKC) hypothesis. The causality results indicate that there exists strong bidirectional causality between emissions and FDI and unidirectional strong causality running from output to FDI. The evidence seems to support the pollution haven and both the halo and scale effects. Therefore, in attracting FDI, developing countries should strictly examine the qualifications for foreign investment or to promote environmental protection through the coordinated know-how and technological transfer with foreign companies to avoid environmental damage. Additionally, there exists strong output-emissions and output-energy consumption bidirectional causality, while there is unidirectional strong causality running from energy consumption to emissions. Overall, the method of managing both energy demand and FDI and increasing both investment in the energy supply and energy efficiency to reduce CO₂ emissions and without compromising the country’s competitiveness can be adopted by energy-dependent BRIC countries.
ISSN:0360-5442
DOI:10.1016/j.energy.2010.09.041