A nexus between sustainability, energy utilisation and economic growth at aggregate and disaggregate level: a case of India

Abstract

Purpose The growth of the Indian economy is accompanied by the rising trend of energy utilisation and its devastating effect on the environment. It is vital to understand the nexus between energy utilisation, climate and environment degradation and growth to devise a constructive policy framework for achieving the goal of sustainable growth. This study aims to analyse the long- and short-run association and direction of association between energy utilisation, carbon emission and growth of the Indian economy in the presence of structural break. Design/methodology/approach The study probes the association and direction of association between variables at both aggregate (total energy utilisation, total carbon emission and gross domestic product [GDP]) and disaggregates level (coal utilisation and coal emission, oil utilisation and oil emission, natural gas utilisation and natural gas emission along with GDP) over the time period of 50 years, i.e. 1971–2020. Autoregressive distributed lag model is used to examine the association between the variables and presence of structural break is confirmed with the help of Zivot–Andrews unit root test. To check the direction of association, vector error correction model Granger causality is performed. Findings Aggregate carbon emissions are affected positively by aggregate energy consumption and GDP in both short and long run. Bidirectional causality exists between total emissions and GDP, whereas a unidirectional causality runs from energy consumption towards carbon emission and GDP in the long run. At disaggregate level, consumption of coal energy impacts positively, whereas GDP influences coal emission negatively in the long run only. Furthermore, consumption of oil and GDP influences oil emissions positively in the long run. Lastly, natural gas is the energy source that has the fewest emissions in both short and long run. Originality/value There is a rapidly growing body of research on the connections and cause-and-effect relationships between energy use, economic growth and carbon emissions, but it has not conclusively proved how important the presence of structural breaks or changes within the economy is in shaping the outcomes of the aforementioned variables, especially when focusing on the Indian economy. By including the impact of structural break on the association between energy use, carbon emission and growth, where energy use and carbon emission are evaluated at both aggregate and disaggregate level, the current study aims to fill this gap in Indian literature.