Abstract
The current study is an effort to investigate the relationship between technological innovation, structural changes, and carbon dioxide emission (CO2) along with the energy use and economic growth in the context of environmental Kuznets curve (EKC) over a period from 1985 to 2016. The study adopted the Zivot Andrews unit root test to check for the level of stationarity of the study variables. Based on the stationarity level, the study adopted autoregressive distributed lag (ARDL) approach to cointegration to investigate the presence of long- and short-run associations, simultaneously. To confirm the outcome of the ARDL bounds test in the presence of structural breaks, the study further applied the Gregory Hansen test of cointegration. The results reveal that industry value added in Malaysia has no significant impact on CO2 emissions. The results further posit that improvement in technology can lead to a cleaner environment. Regardless of improvements in technology and insignificant pressure of industrial activities towards environment, the results are not in the favour of the EKC hypothesis neither under the conventional turning point formula nor under the new turning point formula. The results reveal that long-run CO2 emission is bidirectionally related to energy use, structural changes, and technological innovation. The short-run results indicate bidirectional causalities between energy consumption, structural change, and CO2 emissions. The study suggests that the government should overhaul the structure of the energy in Malaysia to overcome both the losses in the production process and to reduce carbon emissions by inspiring the induction of environment-friendly and efficient technologies in the production process and a shift towards more services sector economy. The outcomes of the study are according to the theory of ecological modernization.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
References
Ahmed, K., Rehman, U. M., & Ozturk, I. (2017). What drives carbon dioxide emissions in the long-run ? Evidence from selected south Asian countries. Renewable and Sustainable Energy Reviews, 70, 1142–1153. https://doi.org/10.1016/j.rser.2016.12.018.
Al Mamun, M., Sohag, K., Hannan Mia, M. A., Salah Uddin, G., Ozturk, I., Mamun, A., et al. (2014). Regional differences in the dynamic linkage between CO2 emissions, sectoral output and economic growth. Renewable and Sustainable Energy Reviews, 38, 1–11. https://doi.org/10.1016/j.rser.2014.05.091.
Alam, J. (2015). Impact of agriculture, industry and service sector’ s value added in the GDP on CO2 emissions of selected south Asian countries. World Review of Business Research, 5(2), 39–59.
Ali, W., Abdullah, A., & Azam, M. (2016). The dynamic linkage between technological innovation and carbon dioxide emissions in Malaysia: an autoregressive distributed lagged bound approach. International Journal of Energy Economics and Policy, 6(3), 389–400.
Ali, W., Abdullah, A., & Azam, M. (2017a). The dynamic relationship between structural change and CO2 emissions in Malaysia: A cointegrating approach. Environmental Science and Pollution Research, 24(14), 12723–12739. https://doi.org/10.1007/s11356-017-8888-6.
Ali, W., Abdullah, A., & Azam, M. (2017b). Re-visiting the environmental Kuznets curve hypothesis for Malaysia: Fresh evidence from ARDL bounds testing approach. Renewable and Sustainable Energy Reviews. https://doi.org/10.1016/j.rser.2016.11.236.
Al-Mulali, U., & Ozturk, I. (2015). The effect of energy consumption, urbanization, trade openness, industrial output, and the political stability on the environmental degradation in the MENA (Middle East and North African) region. Energy, 84, 382–389. https://doi.org/10.1016/j.energy.2015.03.004.
Ang, J. B. (2009). CO2 emissions, research and technology transfer in China. Ecological Economics, 68(13261), 23. https://doi.org/10.1016/j.ecolecon.2009.05.002.
Ang, J. B. (2010). Research, technological change and financial liberalization in South Korea. Journal of Macroeconomics, 32(1), 457–468. https://doi.org/10.1016/j.jmacro.2009.06.002.
Azam, M. (2016). Does environmental degradation shackle economic growth? A panel data investigation on 11 Asian countries. Renewable and Sustainable Energy Reviews, 65, 175–182. https://doi.org/10.1016/j.rser.2016.06.087.
Azam, M., & Khan, A. Q. (2016). Testing the environmental Kuznets curve hypothesis: A comparative empirical study for low, lower middle, upper middle and high income countries. Renewable and Sustainable Energy Reviews, 63, 556–567. https://doi.org/10.1016/j.rser.2016.05.052.
Azam, M., Qayyum, A., Bakhtyar, B., & Emirullah, C. (2015). The causal relationship between energy consumption and economic growth in the ASEAN-5 countries. Renewable and Sustainable Energy Reviews, 47, 732–745. https://doi.org/10.1016/j.rser.2015.03.023.
Begum, R. A., Sohag, K., Abdullah, S. M. S., & Jaafar, M. (2015). CO2 emissions, energy consumption, economic and population growth in Malaysia. Renewable and Sustainable Energy Reviews, 41(JANUARY), 594–601. https://doi.org/10.1016/j.rser.2014.07.205.
Brock, W. A., & Taylor, M. S. (2005). Economic growth and the environment. In P. A. Ghion & S. N. Durlauf (Eds.), Handbook of economic growth (Vol. 1, pp. 1749–1821)., Part B Amsterdam: Elsevier. https://doi.org/10.1016/S1574-0684(05)01028-2.
Bruyn, D., & Sander, M. (1997). Explaining the environmental Kuznets curve: structural change and international agreements in reducing sulphur emissions. Environment and Development Economics, 2(4), 485–503. https://doi.org/10.1017/S1355770X97000260.
Charfeddine, L., & Khediri, K. B. (2016). Financial development and environmental quality in UAE: Cointegration with structural breaks. Renewable and Sustainable Energy Reviews, 55(August), 1322–1335. https://doi.org/10.1016/j.rser.2015.07.059.
Chèze, B., Gastineau, P., & Chevallier, J. (2011). Forecasting world and regional aviation jet fuel demands to the mid-term (2025). Energy Policy, 39(9), 5147–5158.
Copeland, B., & Taylor, S. (2004). Trade and the environment: Theory and evidence. World Trade Review, 3(2), 330–332. https://doi.org/10.1017/S1474745604221905.
De Bruyn, S. M., Van Den Bergh, J. C. J. M., & Opschoor, J. B. (1998). Economic growth and emissions: Reconsidering the empirical basis of environmental Kuznets curves. Ecological Economics, 25(2), 161–175. https://doi.org/10.1016/S0921-8009(97)00178-X.
de Jesus, D. S. V., & de Jesus, D. S. V. (2013). Fifth brics summit. http://bricspolicycenter.org/homolog/arquivos/PAVBRICS.pdf. Retrieved 28 July 2019.
Dinda, S. (2004). Environmental Kuznets curve hypothesis: A survey. Ecological Economics. https://doi.org/10.1016/j.ecolecon.2004.02.011.
Dogan, E., & Turkekul, B. (2016). CO2 emissions, real output, energy consumption, trade, urbanization and financial development: Testing the EKC hypothesis for the USA. Environmental Science and Pollution Research, 23(2), 1203–1213. https://doi.org/10.1007/s11356-015-5323-8.
Engle, R. F., & Granger, C. W. (1987). Co-integration and error correction: representation, estimation, and testing. Econometrica: Journal of the Econometric Society, 55(2), 251–276.
Farabi, A., Abdullah, A., & Setianto, R. H. (2019). Energy consumption, carbon emissions and economic growth in Indonesia and Malaysia. International Journal of Energy Economics and Policy, 9(3), 338–345.
Fields, G. (2004). Territories of profit: Communications, capitalist development, and the innovative enterprises of G. F. Swift and Dell Computer. Stanford, CA: Stanford University Press.
Govindaraju, V. G. R. C., Tang, C. F., Govindaraju, C. V. G. R., & Tang, C. F. (2013). The dynamic links between CO2 emissions, economic growth and coal consumption in China and India. Applied Energy, 104, 310–318. https://doi.org/10.1016/j.apenergy.2012.10.042.
Hatzigeorgiou, E., Polatidis, H., & Haralambopoulos, D. (2011). CO2 emissions, GDP and energy intensity: A multivariate cointegration and causality analysis for Greece, 1977–2007. Applied Energy, 88(4), 1377–1385. https://doi.org/10.1016/j.apenergy.2010.10.008.
He, F. S., Goh, G., Gan, G., Al-mulali, U., & Adebola, S. S. (2019). The influences of economic indicators on environmental pollution in Malaysia. International Journal of Energy Economics and Policy, 9(2), 123–131.
Hettige, H., Mani, M., & Wheeler, D. (2000). Industrial pollution in economic development: The environmental Kuznets curve revisited. Journal of Development Economics, 62(2), 445–476. https://doi.org/10.1016/S0304-3878(00)00092-4.
IPCC. (1995). Climate change 1995: A report of the intergovernmental panel on climate change. UNFCC.
Itkonen, J. V. A. (2012). Problems estimating the carbon Kuznets curve. Energy, 39(1), 274–280. https://doi.org/10.1016/j.energy.2012.01.018.
Jaffe, A. B., Newell, R. G., & Stavins, R. N. (2003). Technological change and the environment. Handbook of Environmental Economics, 1(November), 461–516. https://doi.org/10.1016/S1574-0099(03)01016-7.
Jaunky, V. C. (2011). The CO2 emissions-income nexus: Evidence from rich countries. Energy Policy, 39(3), 1228–1240. https://doi.org/10.1016/j.enpol.2010.11.050.
Jayanthakumaran, K., Verma, R., & Liu, Y. (2012). CO2 emissions, energy consumption, trade and income: A comparative analysis of China and India. Energy Policy, 42(June 2011), 450–460. https://doi.org/10.1016/j.enpol.2011.12.010.
Johansen, S., & Juselius, K. (1990). Maximum likelihood estimation and inference on cointegration—with appucations to the demand for money. Oxford Bulletin of Economics and Statistics. https://doi.org/10.1111/j.1468-0084.1990.mp52002003.x.
Jones, C. I. (2002). Introduction to economic growth (2nd ed.). New York: W. W. Norton & Company.
Kaika, D., & Zervas, E. (2013). The environmental Kuznets Curve (EKC) theory—part a: concept, causes and the CO2 emissions case. Energy Policy, 62, 1392–1402. https://doi.org/10.1016/j.enpol.2013.07.131.
Kijima, M., Nishide, K., & Ohyama, A. (2010). Economic models for the environmental Kuznets curve: A survey. Journal of Economic Dynamics and Control, 34(7), 1187–1201. https://doi.org/10.1016/j.jedc.2010.03.010.
López, R. E., Anríquez, G., & Gulati, S. (2007). Structural change and sustainable development. Journal of Environmental Economics and Management, 53, 307–322. https://doi.org/10.1016/j.jeem.2006.10.003.
Luukkanen, J., Panula-Ontto, J., Vehmas, J., Liyong, L., Kaivo-oja, J., Häyhä, L., et al. (2015). Structural change in Chinese economy: Impacts on energy use and CO2 emissions in the period 2013–2030. Technological Forecasting and Social Change, 94, 303–317. https://doi.org/10.1016/j.techfore.2014.10.016.
McMillan, M., & Rodrik, D. (2011). Globalization, structural change and productivity growth. Making globalization socially sustainable. http://www.nber.org/papers/w17143. Retrieved 3 Dec 2017.
Ministry of Natural Resources and Environment Malaysia. (2010). Environmental requirements : A guide for investors.
Muhammad, S. (2012). Multivariate granger causality between CO2 emissions, energy intensity, financial development and economic growth: evidence from Portugal. MPRA
Narayan, P. K. (2005). The saving and investment nexus for China: evidence from cointegration tests. Applied Economics, 37(17), 1979–1990.
Narayan, P. K., & Smyth, R. (2005). Electricity consumption, employment and real income in Australia evidence from multivariate Granger causality tests. Energy Policy, 33(9), 1109–1116. https://doi.org/10.1016/j.enpol.2003.11.010.
Newell, R. G., & Pizer, W. A. (2008). Indexed regulation. Journal of Environmental Economics and Management, 56(3), 221–233. https://doi.org/10.1016/j.jeem.2008.07.001.
Ozturk, I., & Acaravci, A. (2010). CO2 emissions, energy consumption and economic growth in Turkey. Renewable and Sustainable Energy Reviews, 14(9), 3220–3225. https://doi.org/10.1016/j.rser.2010.07.005.
Panayotou, T. (2000). Economic growth and the environment. CID Working Paper No. 56. https://doi.org/10.1111/j.1475-4932.1987.tb00650.x
Panayotou, T. (2003). Economic growth and the environment 2003. Economic survey of Europe. In UNECE (Vol. 2).
Parry, I. W., Pizer, W. A., & Fischer, C. (2003). How large are the welfare gains from technological innovation induced by environmental policies? Journal of Regulatory Economics, 23(3), 237–255.
Pao, H.-T., & Tsai, C.-M. (2011). Modeling and forecasting the CO2 emissions, energy consumption, and economic growth in Brazil. Energy, 36(5), 2450–2458. https://doi.org/10.1016/j.energy.2011.01.032.
Pesaran, M., & Pesaran, B. (1997). Working with Microfit 4.0: Interactive economic analysis. Oxford: Oxford University Press.
Pesaran, M. H., Shin, Y., & Smith, R. J. (1999). Bound testing approaches to the analysis of long run relatioships. Edinburgh School of Economics Discussion Paper Series Number 46. https://doi.org/10.1002/jae.616
Popp, D. (2005). Lessons from patents: Using patents to measure technological change in environmental models. Ecological Economics, 54(2–3), 209–226. https://doi.org/10.1016/j.ecolecon.2005.01.001.
Saboori, B., & Sulaiman, J. (2013). Environmental degradation, economic growth and energy consumption: Evidence of the environmental Kuznets curve in Malaysia. Energy Policy, 60, 892–905. https://doi.org/10.1016/j.enpol.2013.05.099.
Saudi, M. H. M., Sinaga, O., & Jabarullah, N. H. (2019). The role of renewable, non-renewable energy consumption and technology innovation in testing environmental Kuznets curve in Malaysia. International Journal of Energy Economics and Policy, 9(1), 299–307.
Schumpeter, J. A. (1942). Capitalism, socialism and democracy. New York: Harpers.
Sebri, M., & Ben-Salha, O. (2014). On the causal dynamics between economic growth, renewable energy consumption, CO2 emissions and trade openness: Fresh evidence from BRICS countries. Renewable and Sustainable Energy Reviews, 39, 14–23.
Shafik, N., & Bandyopadhyay, S. (1992). Economic growth and environmental quality: Time series and cross section evidence Policy. Research Working Paper No. WPS904, The World Bank.
Shahbaz, M., Solarin, S. A., Mahmood, H., & Arouri, M. (2013). Does financial development reduce CO2 emissions in Malaysian economy? A time series analysis. Economic Modelling, 35(40603), 145–152. https://doi.org/10.1016/j.econmod.2013.06.037.
Smulders, S., & Bretschger, L. (2000). Explaining environmental Kuznets curves: How pollution induces policy and new technologies. ECONSTAR Working paper.
Sohag, K., Ara, R., Mastura, S., Abdullah, S. S. M. S., Begum, R. A., Abdullah, S. S. M. S., et al. (2015). Dynamics of energy use, technological innovation, economic growth and trade openness in Malaysia. Energy, 90(July), 1497–1507. https://doi.org/10.1016/j.energy.2015.06.101.
Tan, C., & Tan, S. (2018). Energy consumption, Co2 emissions and economic growth: A causality analysis for malaysian industrial sector. International Journal of Energy Economics and Policy, 8(4), 254–258.
WDI. (2019). https://databank.worldbank.org/source/world-development-indicators.
Weitzman, M. L. (1997). Sustainability and technical progress. The Scandinavian Journal of Economics, 99(1), 1–13. https://doi.org/10.1111/1467-9442.00043.
Yeh, S., Rubin, E., Yeh, S., Rubin, E. E., Hounshell, D. A., & Taylor, M. R. (2011). Uncertainties in technology experience curves for energy-economic models. Modeling the Economics of …, 91(919), 36. http://www.ourenergypolicy.org/wp-content/uploads/2012/06/mitigation.pdf#page=87. Retrieved 5 Dec 2017.
Acknowledgments
This study is not funded.
Author information
Authors and Affiliations
Corresponding author
Additional information
Publisher's Note
Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
Rights and permissions
About this article
Cite this article
Ali, W., Rahman, I.U., Zahid, M. et al. Do technology and structural changes favour environment in Malaysia: an ARDL-based evidence for environmental Kuznets curve. Environ Dev Sustain 22, 7927–7950 (2020). https://doi.org/10.1007/s10668-019-00554-7
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s10668-019-00554-7