Response of Carbon Dioxide Emissions to Output Shocks in Large Asian Emitters

Subject Areas : Environmental Economics

Somayeh Azami ¹ , Fatemeh Abasi ²

1 - Associate Professor, Department of Economics, Razi University, Kermanshah, Iran. *(Corresponding Author)
2 - M.A. student, Department of Economics, Razi University, Kermanshah, Iran.

Received: 2023-03-14 Accepted : 2023-09-13 Published : 2023-11-22

Keywords: Environmental degradation, Carbon dioxide emissions, Output, PNARDL model, Asymmetry.,

Abstract :

Background and Objective: According to Kaya's identity, there is a relationship between carbon dioxide (CO2) emission and output. The aim of this study is to investigate the non-linear or asymmetric effect of output on CO2 emissions. Material and Methodology: The PNARDL model is used to investigate the response of carbon dioxide emissions to output shocks in major Asian polluters; India, Japan, Iran, Saudi Arabia and South Korea in the time interval of 1960-2020. Findings: Examining the time path shows that CO2 emissions and GDP of countries are co-movement. The tests show the long-run relationship between these two variables. The non-linear causality test indicates the existence of a one-way causal relationship from positive and negative output shocks to CO2 emissions. In the long-run, CO2 emissions increase as output increases and decrease as output decreases. Short-run dynamics show that positive output shocks of the current and past period significantly lead to an increase in CO2 emissions. Negative output shocks of the current and past periods significantly increase and decrease CO2 emissions, respectively. The estimation of the adjustment speed coefficient indicates that the adjustment towards the long-run equilibrium is slow. Discussion and Conclusion: Investigating the relationship between output and CO2 emissions plays an important role in environmental policies. The speed of adjustment (from short-run to long-run) is slow and the short-run impact of negative output shocks of the current period on emissions should be taken into consideration by the environmental policy makers of the studied countries. In the conditions of output reduction, strict environmental policies should not be stopped immediately. Considering the positive and significant effect of positive production shocks on emissions in the short-run and in the long-run, it is recommended to increase energy efficiency and increase the share of renewable energy in the total energy consumption of countries (substitution of renewable energy instead of fossil energy).

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