Energy-Consumption and Economic-Growth on Carbon-Dioxide-Emissions: History
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Subjects: Environmental Sciences
Contributor:
Oluyomi A. Osobajo
,
Afolabi Otitoju
,
Martha Ajibola Otitoju
,
Adekunle Oke

This study explored the effect of energy consumption and economic growth on CO2 emissions. The relationship between energy consumption, economic growth and CO2 emissions was assessed using regression analysis (the pooled OLS regression and fixed effects methods), Granger causality and panel cointegration tests. Data from 70 countries between 1994–2013 were analysed. The result of the Granger causality tests revealed that the study variables (population, capital stock and economic growth) have a bi-directional causal relationship with CO2 emissions, while energy consumption has a uni-directional relationship. Likewise, the outcome of the cointegration tests established that a long-run relationship exists among the study variables (energy consumption and economic growth) with CO2 emissions. However, the pooled OLS and fixed methods both showed that energy consumption and economic growth have a significant positive impact on CO2 emissions. Hence, this study supports the need for a global transition to a low carbon economy primarily through climate finance, which refers to local, national, or transnational financing, that may be drawn from public, private and alternative sources of financing. This will help foster large-scale investments in clean energy, that are required to significantly reduce CO2 emissions.

  • climate change
  • climate finance
  • economic growth
  • CO2 emissions
  • energy consumption
Environmental issues have taken leading discussions in our contemporary times in both developing and developed economies due to environmental deterioration. This further raises concerns about climate change and global warming, which arises mainly from the emission of greenhouse gases [1]. These changes are often linked to natural causes (i.e., continental drifts, volcanic activities, solar radiation and ocean currents) and direct and indirect human activities, which affect the global atmospheric composition and variability of the natural climate. However, scholars have argued that the increase in human activities due to the emergence of industrialization, the increase in the growth of the global population and the need to meet up with such transformations are the main causes of climate change [2,3]. Also, human activities such as deforestation for agricultural and commercial purposes, burning of fossil fuel and changes in the use of land due to population growth are contributing significantly to a surge in greenhouse gas emissions. Despite the contribution of industrialization in promoting economic growth by increasing the amount of goods and services produced, shaping lives and making the society a better place, it left us with an issue of increasing greenhouse emissions.
In today’s world, the demand for energy due to the growing population and urbanization is on the increase [4]. This is essential to keep pace with the rapid disruptions and transformation in global economies. Energy is pivotal to human lives and to the social, economic and environmental development of the global economy. It is likely impossible to produce, deliver, or use mainstream commodities without consuming energy. Hence, Yildirim [5] observed that insufficient energy would negatively impact the performance of different sectors of the economy such as transport and a country’s social life. However, the increase in the consumption of energy is becoming a threat to the global ecosystem. This has given rise to more prolonged droughts, rising sea levels and the rising occurrence of heatwaves, which are of grave negative impacts on the environment. Although there is an awareness about the consequences of human activities, Urry [3] observed that there is a rise in the emission level of greenhouse gases such as Carbon dioxide (CO2) into the atmosphere.
Likewise, the need for economic growth has led to environmental degradation, which is often a resultant effect of development and industrialization in both developing and developed countries. The economic growth of any country is dependent on different factors, which may impose negative impacts on the environment such as unsustainable natural resource exploitation, environmental pollution and climate change [6]. Also, the rapid increase in urbanization in many countries has fast-tracked economic growth with the resultant effect of an increase in energy consumption. Hence, the key issue that many countries are facing is the level of carbon dioxide in the environment that is increasing significantly due to energy consumption and economic growth. According to Kasman and Dunman [7], a majority of the energy originates from fossil fuels such as coal and natural oil and gas, which also has resulted in an increase of CO2 emissions level. This has further prompted scholars to argue that CO2 emission is invisible, and its effect may take years to materialise [8].
Although several factors such as population size, the carbon intensity of energy, economic growth, clean nuclear energy use, fossil energy consumption, renewable energy, urbanization and other air pollutants (PM10, PM2.5, SO2, NO2, CO, B(a)P) [9,10] have been identified to be responsible for the growth in the global CO2 emissions level, the aim of this study is to explain the impact of energy consumption and economic growth on CO2 emissions. Given the rapid global economic growth resulting in increased energy consumption, understanding the relationship between these variables is essential to ensure a balance between energy consumption, economic growth and CO2 emissions. Also, it will help direct focus on addressing the threats (i.e., preventing a 40°C world) posed by the changes in global climate.

This entry is adapted from the peer-reviewed paper 10.3390/su12197965

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