Abstract
This study examines the impact of energy consumption, financial development, globalization, economic growth, and urbanization on carbon dioxide emissions in the presence of Environmental Kuznets Curve (EKC) model for BRICS economies, by using a family of econometric techniques robust to heterogeneity and cross-sectional dependence. Results from LM test, CIPS and CADF unit root test, Westerlund Cointegration test, the Dynamic seemingly unrelated regression (DSUR), and Dumitrescu-Hurlin Granger causality test show that (i) the data is cross sectionally dependent and heterogeneous; (ii) carbon dioxide emissions, energy consumption, financial development, globalization, economic growth, square of GDP and urbanization have integration of order one; (iii) the examined variables are co-integrated; (iv) energy consumption and financial development contribute to the carbon dioxide emissions whereas globalization and urbanization have negative but insignificant relationship with carbon dioxide emissions; (v) supports the EKC hypothesis in BRICS economies; (vi) bidirectional causality exists among energy consumption, financial development, economic growth and square of GDP with carbon dioxide emissions whereas globalization and urbanization have unidirectional relationship with carbon dioxide emissions. Since these panel techniques account for heterogeneity and cross-sectional dependence in their estimation procedure, the empirical results are robust and reliable for policy recommendations. Furthermore, this study also uses time series tests (ADF, P-P, and FMOLS) to find the empirical results for each of the country and finds mixed results. Empirical findings directed towards some important policy implications.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
Notes
IMF, BRICS cooperation center at Beijing normal university; designed by Pamela tobey
Goa Declaration at Eighth BRICS Summit, 2016. http://www.mea.gov.in/bilateraldocuments.htm?dtl/27491/Goa+Declaration+at+8th+BRICS+Summit
World development indicators
References
Ali S, Waqas H, Najid A (2015) Analyzing the dynamics of energy consumption, liberalization, financial development, poverty and carbon emissions in Pakistan. J Appl Environ Biol Sci. 5:166–183
Arrow K, Bolin B, Costanza R, Dasgupta P, Folke C, Holling CS, Jansson BO, Levin S, Mäler KG, Perrings C, Pimentel D (1995) Economic growth, carrying capacity, and the environment 1. Ecol Econ 268:520–521. https://doi.org/10.1016/0921-8009(95)00059-3
Baek J (2015) Environmental Kuznets curve for CO<inf>2</inf> emissions: the case of Arctic countries. Energy Econ 50:13–17. https://doi.org/10.1016/j.eneco.2015.04.010
Bekhet HA, Matar A, Yasmin T (2017) CO2 emissions, energy consumption, economic growth, and financial development in GCC countries: dynamic simultaneous equation models. Renew Sust Energ Rev 70:117–132. https://doi.org/10.1016/j.rser.2016.11.089
Bonga-Bonga L (2016) Uncovering equity market contagion among BRICS countries: an application of the multivariate GARCH model. Q Rev Econ Finance 67:36–44. https://doi.org/10.1016/j.qref.2017.04.009
Boutabba MA (2014) The impact of financial development, income, energy and trade on carbon emissions: evidence from the Indian economy. Econ Model 40:33–41. https://doi.org/10.1016/j.econmod.2014.03.005
Breusch TS, Pagan AR (1980) The Lagrange multiplier test and its applications to model specification in econometrics. Rev Econ Stud 47:239. https://doi.org/10.2307/2297111
Chen L, De Lombaerde P (2014) Testing the relationships between globalization, regionalization and the regional hubness of the BRICs. J Policy Model 36:S111–S131. https://doi.org/10.1016/j.jpolmod.2013.10.011
Delhi N (2012) The BRICS report. Oxford University Press, Oxford
Dickey DA, Fuller WA (1981) Likelihood ratio statistics for autoregressive time series with a unit root. Econometrica 49:1057–1072
Dickey DA, Fuller WA, Dickey DA, Fuller WA (1979) Distribution of the estimators for autoregressive time series with a unit root distribution of the estimators for autoregressive time series with a unit root. J Am Stat Assoc 74:427–431
Dinda S (2004) Environmental Kuznets curve hypothesis: a survey. Ecol Econ 49:431–455. https://doi.org/10.1016/j.ecolecon.2004.02.011
Dogan E, Seker F (2016) An investigation on the determinants of carbon emissions for OECD countries: empirical evidence from panel models robust to heterogeneity and cross-sectional dependence. Environ Sci Pollut Res 23:14646–14655. https://doi.org/10.1007/s11356-016-6632-2
Dogan E, Turkekul B (2016) CO2emissions, real output, energy consumption, trade, urbanization and financial development: testing the EKC hypothesis for the USA. Environ Sci Pollut Res 23:1203–1213. https://doi.org/10.1007/s11356-015-5323-8
Dreher A (2006) Does globalization affect growth? Evidence from a new index of globalization. Appl Econ 38:1091–1110. https://doi.org/10.1080/00036840500392078
Dumitrescu EI, Hurlin C (2012) Testing for Granger non-causality in heterogeneous panels. Econ Model 29:1450–1460. https://doi.org/10.1016/j.econmod.2012.02.014
Farhani S, Ozturk I (2015) Causal relationship between CO2 emissions, real GDP, energy consumption, financial development, trade openness, and urbanization in Tunisia. Environ Sci Pollut Res 22:15663–15676. https://doi.org/10.1007/s11356-015-4767-1
Furuoka F (2015a) Financial development and energy consumption: evidence from a heterogeneous panel of Asian countries. Renew Sust Energ Rev 52:430–444. https://doi.org/10.1016/j.rser.2015.07.120
Furuoka F (2015b) The CO2 emissions—development nexus revisited. Renew Sust Energ Rev 51:1256–1275. https://doi.org/10.1016/j.rser.2015.07.049
Gengenbach C, Palm FC, Urbain JP (2010) Panel unit root tests in the presence of cross-sectional dependencies: comparison and implications for modelling. Econ Rev 29:111–145. https://doi.org/10.1080/07474930903382125
Grossman GM, Krueger AB (1991) Environmental impacts of a north American free trade agreement. Natl Bur Econ Res Work Pap Ser No. 3914:1–57. https://doi.org/10.3386/w3914
Grossman GM, Krueger AB (1995) Economic growth and the environment. The Quarterly Journal of Economics 110:353–377. https://doi.org/10.2307/2118443
Harris RDF, Tzavalis E (1999) Inference for unit roots in dynamic panels where the time dimension is fixed. J Econ 91:201–226. https://doi.org/10.1016/S0304-4076(98)00076-1
Heidari H, Turan Katircioǧlu S, Saeidpour L (2015) Economic growth, CO2emissions, and energy consumption in the five ASEAN countries. Int J Electr Power Energy Syst 64:785–791. https://doi.org/10.1016/j.ijepes.2014.07.081
Im KS, Pesaran MH, Shin Y (2003) Testing for unit roots in heterogeneous panels. J Econ 115:53–74. https://doi.org/10.1016/S0304-4076(03)00092-7
Jalil A, Feridun M (2011) The impact of growth, energy and financial development on the environment in China: a cointegration analysis. Energy Econ 33:284–291. https://doi.org/10.1016/j.eneco.2010.10.003
Jaunky VC (2011) The CO2emissions-income nexus: evidence from rich countries. Energy Policy 39:1228–1240. https://doi.org/10.1016/j.enpol.2010.11.050
Javid M, Sharif F (2016) Environmental Kuznets curve and financial development in Pakistan. Renew Sust Energ Rev 54:406–414. https://doi.org/10.1016/j.rser.2015.10.019
Kasman A, Duman YS (2015) CO2 emissions, economic growth, energy consumption, trade and urbanization in new EU member and candidate countries: a panel data analysis. Econ Model 44:97–103. https://doi.org/10.1016/j.econmod.2014.10.022
Kraft J, Kraft A (1978) On the relationship between energy and GNP author ( s ): John Kraft and Arthur Kraft stable URL : http://www.jstor.org/stable/24806805 on the relationship between energy and GNP. J Energy Dev 3:401–403
Levin A, Lin CF, Chu CSJ (2002) Unit root tests in panel data: asymptotic and finite-sample properties. J Econ 108:1–24. https://doi.org/10.1016/S0304-4076(01)00098-7
Li T, Wang Y, Zhao D (2016) Environmental Kuznets curve in China: new evidence from dynamic panel analysis. Energy Policy 91:138–147. https://doi.org/10.1016/j.enpol.2016.01.002
Mark NC, Ogaki M, Sul D (2005) Dynamic seemingly unrelated cointegrating regressions. 72:797–820
Nassani AA, Aldakhil AM, Qazi Abro MM, Zaman K (2017) Environmental Kuznets curve among BRICS countries: spot lightening finance, transport, energy and growth factors. J Clean Prod 154:474–487. https://doi.org/10.1016/j.jclepro.2017.04.025
Ozturk I, Acaravci A (2013) The long-run and causal analysis of energy , growth , openness and fi nancial development on carbon emissions in Turkey. Energy Econ 36:262–267. https://doi.org/10.1016/j.eneco.2012.08.025
Pao HT, Tsai CM (2010) CO2emissions, energy consumption and economic growth in BRIC countries. Energy Policy 38:7850–7860. https://doi.org/10.1016/j.enpol.2010.08.045
Pao HT, Tsai CM (2011) Multivariate granger causality between CO2emissions, energy consumption, FDI (foreign direct investment) and GDP (gross domestic product): evidence from a panel of BRIC (Brazil, Russian Federation, India, and China) countries. Energy 36:685–693. https://doi.org/10.1016/j.energy.2010.09.041
Pesaran MH (2007) A simple panel unit root test in the presence of cross-section dependence. J Appl Econ 47:36–37. https://doi.org/10.1002/jae.951
Pesaran MH, Ullah A, Yamagata T (2006) A bias-adjusted test of error cross section dependence
Phillips PC, Hansen BE (1990) Statistical inference in instrumental variables regression with I (1) processes. Rev Econ Stud 57:99–125. https://doi.org/10.2307/2297545
Phillips PC, Perron P (1988) Testing for a unit root in time series regression. Biometrika 75:335–346. https://doi.org/10.1093/biomet/75.2.335
Radulescu IG, Panait M, Voica C (2014) BRICS countries challenge to the world economy new trends. Procedia Econ Financ 8:605–613. https://doi.org/10.1016/S2212-5671(14)00135-X
Riti JS, Yang S, Song D, Kamah M (2017) The contribution of energy use and financial development by source in climate change mitigation process: a global empirical perspective. J Clean Prod 148:882–894. https://doi.org/10.1016/j.jclepro.2017.02.037
Saboori B, Sulaiman J (2013a) 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
Saboori B, Sulaiman J (2013b) CO2emissions, energy consumption and economic growth in association of southeast Asian nations (ASEAN) countries: a cointegration approach. Energy 55:813–822. https://doi.org/10.1016/j.energy.2013.04.038
Sadorsky P (2011) Financial development and energy consumption in central and eastern European frontier economies. Energy Policy 39:999–1006. https://doi.org/10.1016/j.enpol.2010.11.034
Salahuddin M, Alam K, Ozturk I, Sohag K (2017) The effects of electricity consumption, economic growth, financial development and foreign direct investment on CO2 emissions in Kuwait. Renew Sust Energ Rev 81:1–9. https://doi.org/10.1016/j.rser.2017.06.009
Samargandi N, Kutan AM (2016) Private credit spillovers and economic growth: evidence from BRICS countries. J Int Financ Mark Inst Money 44:56–84. https://doi.org/10.1016/j.intfin.2016.04.010
Shahbaz M, Kumar Tiwari A, Nasir M (2013a) The effects of financial development, economic growth, coal consumption and trade openness on CO2 emissions in South Africa. Energy Policy 61:1452–1459. https://doi.org/10.1016/j.enpol.2013.07.006
Shahbaz M, Ozturk I, Afza T, Ali A (2013b) Revisiting the environmental Kuznets curve in a global economy. Renew Sust Energ Rev 25:494–502. https://doi.org/10.1016/j.rser.2013.05.021
Shahbaz M, Solarin SA, Mahmood H, Arouri M (2013c) Does financial development reduce CO2 emissions in Malaysian economy? A time series analysis. Econ Model 35:145–152. https://doi.org/10.1016/j.econmod.2013.06.037
Shahbaz M, Khraief N, Uddin GS, Ozturk I (2014) Environmental Kuznets curve in an open economy: a bounds testing and causality analysis for Tunisia. Renew Sust Energ Rev 34:325–336. https://doi.org/10.1016/j.rser.2014.03.022
Shahbaz M, Mallick H, Mahalik MK, Loganathan N (2015) Does globalization impede environmental quality in India? Ecol Indic 52:379–393. https://doi.org/10.1016/j.ecolind.2014.12.025
Shahbaz M, Mahalik MK, Shah SH, Sato JR (2016a) Time-varying analysis of CO2 emissions, energy consumption, and economic growth nexus: statistical experience in next 11 countries. Energy Policy 98:33–48. https://doi.org/10.1016/j.enpol.2016.08.011
Shahbaz M, Shahzad SJH, Ahmad N, Alam S (2016b) Financial development and environmental quality: the way forward. Energy Policy 98:353–364. https://doi.org/10.1016/j.enpol.2016.09.002
Shahbaz M, Solarin SA, Ozturk I (2016c) Environmental Kuznets curve hypothesis and the role of globalization in selected African countries. Ecol Indic 67:623–636. https://doi.org/10.1016/j.ecolind.2016.03.024
Shahbaz M, Khan S, Ali A, Bhattacharya M (2017a) The impact of globalization on co 2 emissions in China. Singap Econ Rev 62. https://doi.org/10.1142/S0217590817400331
Shahbaz M, Nasreen S, Ahmed K, Hammoudeh S (2017b) Trade openness–carbon emissions nexus: the importance of turning points of trade openness for country panels. Energy Econ 61:221–232. https://doi.org/10.1016/j.eneco.2016.11.008
Shahbaz M, Shahzad SJH, Kumar M (2017c) Is globalization detrimental to CO2 emissions in Japan? New Threshold Analysis
Shahbaz M, Shahzad SJH, Mahalik MK, Hammoudeh S (2017d) Does globalisation worsen environmental quality in developed economies? Environ Model Assess 1–16. https://doi.org/10.1007/s10666-017-9574-2
Shahzad SJH, Kumar RR, Zakaria M, Hurr M (2017) Carbon emission, energy consumption, trade openness and financial development in Pakistan: a revisit. Renew Sust Energ Rev 70:185–192. https://doi.org/10.1016/j.rser.2016.11.042
Solarin SA, Al-Mulali U, Musah I, Ozturk I (2017) Investigating the pollution haven hypothesis in Ghana: an empirical investigation. Energy 124:706–719. https://doi.org/10.1016/j.energy.2017.02.089
Stern DI (2004) The rise and fall of the environmental Kuznets curve. World Dev 32:1419–1439. https://doi.org/10.1016/j.worlddev.2004.03.004
Stern DI (2010) Between Estimates of the Environmental Kuznets Curve. CAMA Working Paper No.4/2010. https://doi.org/10.2139/ssrn.1668123
Tamazian A, Chousa JP, Vadlamannati KC (2009) Does higher economic and financial development lead to environmental degradation: evidence from BRIC countries. Energy Policy 37:246–253. https://doi.org/10.1016/j.enpol.2008.08.025
Tang CF, Tan BW (2015) The impact of energy consumption, income and foreign direct investment on carbon dioxide emissions in Vietnam. Energy 79:447–454. https://doi.org/10.1016/j.energy.2014.11.033
Westerlund J (2007) Testing for error correction in panel data. Oxf Bull Econ Stat 69:709–748. https://doi.org/10.1111/j.1468-0084.2007.00477.x
Xiong L, Tu Z, Ju L (2016) Reconciling regional differences in financial development and carbon emissions : a dynamic panel data approach. Energy Procedia. https://doi.org/10.1016/j.egypro.2017.03.716
Author information
Authors and Affiliations
Corresponding author
Additional information
Responsible editor: Philippe Garrigues
Rights and permissions
About this article
Cite this article
Haseeb, A., Xia, E., Danish et al. Financial development, globalization, and CO2 emission in the presence of EKC: evidence from BRICS countries. Environ Sci Pollut Res 25, 31283–31296 (2018). https://doi.org/10.1007/s11356-018-3034-7
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s11356-018-3034-7