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Value addition in the services sector and its heterogeneous impacts on CO2 emissions: revisiting the EKC hypothesis for the OPEC using panel spatial estimation techniques

Environmental Science and Pollution Research volume 27, pages 38951–38973 (2020)Cite this article

Abstract

This study examines the Environmental Kuznets Curve (EKC) hypothesis in the context of 12 members of the OPEC by utilizing data on both the aggregate gross value added and the services’ sectoral value-added between 1992 and 2015. This empirical work contributes to the literature by applying the panel spatial techniques which resulted in the findings as follows. Firstly, the results verify the authenticity of the EKC hypothesis for the aggregate level of gross value added as perceived from its inverted-U shaped association with CO2 emissions. Secondly, the disaggregated analysis affirms the heterogeneity of the validity of the EKC hypothesis across the subsectors within the services sector; this justifies the importance of analyzing the EKC hypothesis from a comprehensive (disaggregated) perspective for unearthing key sector-specific policy implications. The results reveal that the EKC hypothesis holds only in the context of construction services only but not for the cases of restaurant services, tourism and transportation services. These key findings call for effective measures to be undertaken to address the adverse environmental impacts that can be attributed to thse three sub-sectors for which the EKC did not hold. In line with the overall findings from the empirical exercises, it is recommended that the concerned OPEC members reduce their monotonic dependency on the consumption of fossil fuels, oil in particular, and gradually incorporate renewable energy resources into the energy-mix particularly within their respective services sector.

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Notes

  1. For an in-depth understanding of the dynamics of spatial regression models see Srinivasan (2017).

  2. COP15 refers to the 2015 United Nations Climate Change Conference.

  3. The subsectors under the services sector were classified in accordance with the International Standard Industrial Classification (ISIC) of all economic activities.

  4. The selection of the subsectors of the specific service was based on data availability. Additionally, to compare the possible differences in the results, the EKC analysis is also done in the context of the manufacturing sector’s contribution to the value-added. The corresponding results are provided in the latter portion of the appendix.

  5. To ensure brevity the findings in the context of the EKC analysis for the manufacturing sector is not discussed elaborately.

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Author information

Affiliations

  1. School of Business and Economics, North South University, Dhaka, Bangladesh

    Muntasir Murshed

  2. Department of Accounting and Finance, KIMEP University, Almaty, Kazakhstan

    Mira Nurmakhanova

  3. Scholars School System, Leeds Trinity University, Leeds, UK

    Mohamed Elheddad

  4. Faculty of Economics, Misurata University, Misurata City, Libya

    Mohamed Elheddad

  5. Birmingham Business School, University of Birmingham, Birmingham, UK

    Rizwan Ahmed

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  1. Muntasir Murshed
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  2. Mira Nurmakhanova
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  3. Mohamed Elheddad
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  4. Rizwan Ahmed
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Correspondence to Muntasir Murshed.

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Appendix

Appendix

Figure 1
figure 1

A graphical illustration of the energy sector in the major OPEC countries. Algeria (ALG), Angola (ANG), Ecuador (ECU), Iran (IRN), Iraq (IRQ), Kuwait (KUW), Libya (LIB), Nigeria (NIG), Qatar (QAT), Saudi Arabia (SAR), United Arab Emirates (UAE) and Venezuela (VEN). Source: World Development Indicators (World Bank 2019)

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Figure 2
figure 2

The sectoral value added distribution of the OPEC countries in 2015. The sectoral value added for Libya is not included in the figure due to data unavailability at the specified year. Source: World Development Indicators (World Bank 2019)

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Table 16 Trends in per capita CO2 emissions (metric tons)
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Table 17 A summary of the literature that has acknowledged the sectoral contributions to the in assessing the EKC hypothesis
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Table 18 The definition, unit of measurement and data sources concerning the data set used
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Table 19 Test for model selection for manufacturing sector
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Table 20 Estimation results of dynamic SAR model for manufacturing sector
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Table 21 Short-run and long-run direct, indirect, and total marginal effects for manufacturing
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Murshed, M., Nurmakhanova, M., Elheddad, M. et al. Value addition in the services sector and its heterogeneous impacts on CO2 emissions: revisiting the EKC hypothesis for the OPEC using panel spatial estimation techniques. Environ Sci Pollut Res 27, 38951–38973 (2020). https://doi.org/10.1007/s11356-020-09593-4

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Keywords

  • OPEC
  • EKC
  • Services sector
  • Panel spatial econometric methods