Short and Long-Run Causal Effects of CO2 Emissions, Energy Use, GDP and Population Growth: Evidence from India Using the ARDL and VECM Approaches

Abstract

This paper investigates the nexus between CO2 emissions (CO2E), GDP, energy use (ENU), and population growth (PG) in India from 1980–2018 by comparing the “vector error correction” model (VECM) and “auto regressive distributed lag” (ARDL). We applied the unit root test, Johansen multi-variate cointegration, and performed a Variance decomposition analysis using the Cholesky approach. The VECM and ARDL-bound testing approaches to cointegration suggest a long-term equilibrium nexus between GDP, energy use, population growth and CO2E. The empirical outcomes show the existence of a long-term equilibrium nexus between the variables. The Granger causality results show that short-term bi-directional causality exists between GDP and ENU, while a uni-directional causality between CO2E and GDP, CO2E and ENU, CO2E and PG, and PG and ENU. Evidence from variance decomposition indicates that 58.4% of the future fluctuations in CO2E are due to changes in ENU, 2.8% of the future fluctuations are due to changes in GDP, and 0.43% of the future fluctuations are due to changes in PG. Finally, the ARDL test results indicate that a 1% increase in PG will lead to a 1.4% increase in CO2E. Our paper addresses some important policy implications.

Pathways to decarbonization in India: the role of environmentally friendly tourism development

“…Energy is believed to be a key influencer of both economic growth and CO 2 emissions (Manigandan et al 2021 ; Alam et al 2020 ; Pachiyappan et al 2021 ). In recent years, a plethora of studies have investigated the beneficial role of REC in the correction of CO 2 emissions (Murshed 2022 ; Kurramovich et al 2022 ).…”

Environmental sustainability with the role of green innovation and economic growth in India with bootstrap ARDL approach

“…The summary of the literature review is listed in Table 1. Based on this literature review, we conclude that most studies use ARDL and nonlinear ARDL models; for example, Pachiyappan et al (2021) apply a nonlinear ARDL model to show the nonlinear relationships between environmental pollution, carbon emissions, and health expenditure in India. The results show that positive carbon emissions and environmental degradation impact health spending in the long and short runs, while negative environmental pollution and carbon emissions decrease expenditure on health.…”

Is trade, energy consumption and economic growth threat to environmental quality in Bahrain–evidence from VECM and ARDL bound test approach

“…Other variables such as urbanization (Hossain, 2011); foreign direct investment (Hamid et al. , 2020); interest rate (Karanfil, 2009); population growth (Pachiyappan et al. , 2021); and industrialization (Cole et al.…”

“…Future research might build on this work by examining the relationship between renewable and nonrenewable energy use, economic-growth and carbon emissions (Hamid et al, 2021). Other variables such as urbanization (Hossain, 2011); foreign direct investment (Hamid et al, 2020); interest rate (Karanfil, 2009); population growth (Pachiyappan et al, 2021); and industrialization (Cole et al, 2011) could be included in the model as potential determinants of carbon emissions to investigate the relationship between economic-growth, energy intensity and CO 2 .…”