Does geopolitical risk escalate CO₂ emissions? Evidence from the BRICS countries

Abstract

High levels of CO₂ emissions are extensively cited as one of the main global concerns nowadays. Therefore, researchers have been investigating the factors that affect CO₂ emissions. In the prior literature, several social, economic, and political drivers of CO₂ emissions have been investigated; however, there is a dearth of the literature on the impact of geopolitical risks (GPR) on CO₂ emissions. Hence, the objective of this study is to explore the impact of GPR on CO₂ emissions in the case of the BRICS countries while controlling the effects of population, GDP, non-renewable energy, and renewable energy consumption. The study uses the recently developed GPR index, proposed by Caldara and Iacoviello (2018), and the AMG (augmented mean group) estimator method. The findings document that GPR escalates CO₂ emissions. That is, a 1% increase in GPR escalates CO₂ emissions by 13%. Moreover, it also reports that renewable energy consumption impedes CO₂ emissions. In contrast, GDP, population, and non-renewable energy consumption surge CO₂ emissions. The study also proposes a few policy implications based on the findings: (1) policymakers and government officials should try to limit GPR through peace treaties, agreements, and negotiations; (2) share of renewable energy in total energy consumption should be increased in order to plunge CO₂ emissions.