Analysis of Causality between Economic Growth and Carbon Emissions: The Case of Mexico 1971-2011
This paper analyzes the Environmental Kuznets Curve (EKC) hypothesis to test the causality relationship between economic activity, trade openness and carbon dioxide emissions in Mexico (1971-2011). The results achieved in this research show that there are three long-run relationships between production, trade openness, energy consumption and carbon dioxide emissions. The EKC hypothesis was not verified in this research. Indeed, it was found evidence of a short-term unidirectional causality from GDP and GDP squared to carbon dioxide emissions, from GDP, GDP squared and TO to EC, and bidirectional causality between TO and GDP. Finally, it was found evidence of long-term unidirectional causality from all variables to carbon emissions. These results suggest that a reduction in energy consumption, economic activity, or an increase in trade openness would reduce pollution.
[1] U. Al-Mulali, C.F. Tang and I. Ozturk, “Estimating the Environment Kuznets Curve hypothesis: Evidence from Latin America and Caribean countries”, Renewable and Sustainable Energy Reviews, vol. 50, pp. 918-924, 2015.
[2] A.S. Alshehry and M. Belloumi, “Energy consumption, carbon dioxide emissions and economic growth: The case of Saudi Arabia;” Renewable and Sustainble Energy Reviews, vol. 41, pp. 237-247, 2015.
[3] W. Antweiler, B.R. Copeland and M.S. Taylor, “Is free trade good for the environment?”, American Economic Review, vol. 91, pp. 877-908, 2001.
[4] N. Apergism and J.E. Payne, “CO2 emissions, energy usage, and output in Central America”, Energy Policy, vol. 37, pp. 3282-3286, 2009.
[5] W. Beckerman, “Economic growth and the environment: whose growth? Whose environment?”, World Development, vol. 20, pp. 481–496, 1992.
[6] J.L. Caviglia-Harris, D. Chambers and J.R. Kahn, “Taking the “U” out of Kuznets: A comprehensive analysis of the EKC and environmental degradation”, Ecological Economics, vol. 68, pp. 1149-1159, 2009.
[7] C.C. Chang, “A multivariate causality test of carbón dioxide emissions, energy consumption and economic growth in China”, Applied Energy, vol. 87, pp. 3533-3537, 2010.
[8] W.N. Cowan, T. Chang, R. Inglesi-Lotz and R. Gupta (2014), “The nexus of electricity, economic growth and CO2 emissions in the BRICS countries”, Energy Policy, vol. 66, pp. 359-368, 2014.
[9] D.A. Dickey and W.A. Fuller, “Likelihood Ratio Tests for Autoregressive Time Series with a Unit Root”, Econometrica, vol. 49, pp. 1057-1072, 1981.
[10] S. Dinda, “Environmental Kuznets curve hypothesis: a survey”, Ecological Economics, vol. 49, no. 4, pp. 431–455, 2004.
[11] R.F. Engle and C.W.J. Granger, “Co-integration and error correction: Representation, estimation, and testing”, Econometrica, vol. 55, pp. 251-276, 1987.
[12] V. Esteve and C. Tamarit, “Threshold cointegration and nolinear adjustment between CO2 and income: The Environmental Kuznets Curve in Spain, Energy Economics, vol. 34, no. 6, pp. 1857-2007, 2012.
[13] S. Farhani, S. Mrizak, A. Chaibi and Chr. Rault, “The environmental Kuznets curve and sustainability: A panel data analysis”, Energy Policy, vol. 71, pp. 189-198, 2014.
[14] J. Fosten, B. Morley and T. Taylor, “Dynamic misspecification in the environmental Kuznets curve: Evidence from CO2 and SO2 emissions in the United Kingdom”, Ecological Economics, vol. 76, pp. 25-33, 2012.
[15] C.W.J Granger, “Some recent development in a concept of causality”, Journal of Econometrics, vol. 39, pp. 199-211, 1988.
[16] B. Jebli and B. Youssef, “Economic growth, combustible renewables and waste consumption, and CO2 emissions in North Africa”, Environmental Science and Pollution Research, vol. 22, no. 20, pp. 16022-16030, 2015.
[17] S. Johansen, “Statistical analysis of co-integration vectors”, Journal of Economic Dynamics and Control, vol. 12, pp. 231-254, 1988.
[18] J. Lee and M. Strazicich, “Minimum Lagrange Multiplier unit root test with two structural breaks”, Review of Economics and Statistics, vol. 85, pp. 1082-1089, 2003
[19] J. Lee and M. Strazicich, “Minimum LM unit root test with one structural breaks”, Manuscript, Department of Economics, Appalachian State University, pp. 1-16, 2004.
[20] A. Leitão, “Corruption and the environmental Kuznets Curve: Empirical evidence for sulfur”, Ecological Economics, vol. 69, pp. 2191-2201, 2010.
[21] M. Meng, J. Lee and J.E. Payne, “RALS-LM unit root test with trend breaks and non-normal errors: application to the Prebisch-Singer hypothesis, Working Paper, Department of Economics, Finance, and Legal Studies, University of Alabama, pp. 1-28.
[22] P.K. Narayan, “The saving and investment nexus for China: evidence from cointegration test”, Applied Economic, vol. 37, pp. 1979-1990, 2005
[23] N.P. Narayan and S. Narayan, “Carbon dioxide emissions and economic growth: Panel data evidence from developing countries”, Energy Policy, vol. 38, pp. 661-666, 2010.
[24] S. Nasreen and S. Anwar, “Causal relationship between trade openness, economic growth and energy consumption: A panel data analysis of Asian countries”, Energy Policy, vol. 69, pp.82-91, 2014
[25] O.A. Onafowora and O. Owoye, “Bounds testing approch to analysis of the environment Kuznets curve hypothesis”, Energy Economics, vol. 44, pp. 47-62, 2014.
[26] I. Ozturk and A. Acaravci (2013), “The long-run and causal analysis of energy, growth, openness and financial development on carbon emissions in Turkey”, Energy Economics, vol. 36, pp. 262-267, 2013.
[27] I. Ozturk and U. Al-Mulali, “Investigating the validity of the environmental Kuznets curve hypothesis in Cambodia”, Ecological Indicators, vol. 57, pp. 324-330, 2015.
[28] T. Panayotou, “Empirical Tests and Policy Analysis of Environmental Degradation at Different Stages of Economic Development”, Working Paper WP238, Technology and Employment Programme, 1993.
[29] H.T. Pao and C.M. Tsai, “Multivariate Granger causality between CO2 emissions, energy consumption, FDI (foreign direct invest) and GDP (gross domestic product): Evidence from a panel of BRIC (Brazil, Russian Federation, India, and China) countries”, Energy, vol. 36, pp. 685-693, 2011.
[30] M.H. Pesaran, Y. Shin and R. Smith 2001, “Bounds testing approaches to the analysis of level relationships”, Journal of Applied Econometrics, vol. 16, pp. 289-326, 2001.
[31] P.C.B. Phillip and P. Perron, “Testing for a Unit Roots in a Time Series Regression”, Biometrika, vol. 75, pp. 335-346, 1988.
[32] P. Sephton and J. Mann, “Further evidence of an Environmental Kuznets Curve in Spain”, Energy Economics, vol. 36, pp. 177-181, 2013.
[33] S. Shafiei and R.A. Salim, “Non-renewable and renewable energy consumption and CO2 emissions in OECD countries: A comparative analysis”, Energy Policy, vol. 66, pp. 547-556, 2014.
[34] M.I. Shahbaz, T. Afza, y A. Ali, “Revisiting environmental Kuznets curve in a global economy”, Renewable and Sustainable Energy Reviews, vol. 25, pp. 494-502, 2013.
[35] M.N. Shahbaz, M.N. Khraief, G.S. Uddin and I. Ozturk, “Environmental Kuznets curve in an open economy: A bounds testing and causality analysis for Tunisia”, Renewable and Sustainable Energy Reviews, vol. 34, pp. 325-336, 2014.
[36] U. Soytas, R. Sari and B.T. Ewing, “Energy consumption, income, and cabon emissions in the United States”, Ecological Economics, vol. 62, pp. 482-489, 2007.
[37] U. Soytas and R. Sari, “Energy consumption, economic growth, and carbon emissions: Challenges faced by an EU candidate member”, Ecological Economics, vol. 68, pp. 1667-1675, 2009.
[38] K.M. Wang, “Modelling the nonlinear relationship between CO2 emissions from oil and economic growth”, Economic Modelling, vol. 29, pp. 1537-1547, 2012.
[39] World Bank, 2016. http://datos.bancomundial.org/. Accessed on 19/08/2016.
[40] X.P. Zhang and X.M. Cheng, “Energy consumption, carbon emissions, and economic growth in China”, Ecological Economics, vol. 68, pp. 2706-2712, 2009.
[1] U. Al-Mulali, C.F. Tang and I. Ozturk, “Estimating the Environment Kuznets Curve hypothesis: Evidence from Latin America and Caribean countries”, Renewable and Sustainable Energy Reviews, vol. 50, pp. 918-924, 2015.
[2] A.S. Alshehry and M. Belloumi, “Energy consumption, carbon dioxide emissions and economic growth: The case of Saudi Arabia;” Renewable and Sustainble Energy Reviews, vol. 41, pp. 237-247, 2015.
[3] W. Antweiler, B.R. Copeland and M.S. Taylor, “Is free trade good for the environment?”, American Economic Review, vol. 91, pp. 877-908, 2001.
[4] N. Apergism and J.E. Payne, “CO2 emissions, energy usage, and output in Central America”, Energy Policy, vol. 37, pp. 3282-3286, 2009.
[5] W. Beckerman, “Economic growth and the environment: whose growth? Whose environment?”, World Development, vol. 20, pp. 481–496, 1992.
[6] J.L. Caviglia-Harris, D. Chambers and J.R. Kahn, “Taking the “U” out of Kuznets: A comprehensive analysis of the EKC and environmental degradation”, Ecological Economics, vol. 68, pp. 1149-1159, 2009.
[7] C.C. Chang, “A multivariate causality test of carbón dioxide emissions, energy consumption and economic growth in China”, Applied Energy, vol. 87, pp. 3533-3537, 2010.
[8] W.N. Cowan, T. Chang, R. Inglesi-Lotz and R. Gupta (2014), “The nexus of electricity, economic growth and CO2 emissions in the BRICS countries”, Energy Policy, vol. 66, pp. 359-368, 2014.
[9] D.A. Dickey and W.A. Fuller, “Likelihood Ratio Tests for Autoregressive Time Series with a Unit Root”, Econometrica, vol. 49, pp. 1057-1072, 1981.
[10] S. Dinda, “Environmental Kuznets curve hypothesis: a survey”, Ecological Economics, vol. 49, no. 4, pp. 431–455, 2004.
[11] R.F. Engle and C.W.J. Granger, “Co-integration and error correction: Representation, estimation, and testing”, Econometrica, vol. 55, pp. 251-276, 1987.
[12] V. Esteve and C. Tamarit, “Threshold cointegration and nolinear adjustment between CO2 and income: The Environmental Kuznets Curve in Spain, Energy Economics, vol. 34, no. 6, pp. 1857-2007, 2012.
[13] S. Farhani, S. Mrizak, A. Chaibi and Chr. Rault, “The environmental Kuznets curve and sustainability: A panel data analysis”, Energy Policy, vol. 71, pp. 189-198, 2014.
[14] J. Fosten, B. Morley and T. Taylor, “Dynamic misspecification in the environmental Kuznets curve: Evidence from CO2 and SO2 emissions in the United Kingdom”, Ecological Economics, vol. 76, pp. 25-33, 2012.
[15] C.W.J Granger, “Some recent development in a concept of causality”, Journal of Econometrics, vol. 39, pp. 199-211, 1988.
[16] B. Jebli and B. Youssef, “Economic growth, combustible renewables and waste consumption, and CO2 emissions in North Africa”, Environmental Science and Pollution Research, vol. 22, no. 20, pp. 16022-16030, 2015.
[17] S. Johansen, “Statistical analysis of co-integration vectors”, Journal of Economic Dynamics and Control, vol. 12, pp. 231-254, 1988.
[18] J. Lee and M. Strazicich, “Minimum Lagrange Multiplier unit root test with two structural breaks”, Review of Economics and Statistics, vol. 85, pp. 1082-1089, 2003
[19] J. Lee and M. Strazicich, “Minimum LM unit root test with one structural breaks”, Manuscript, Department of Economics, Appalachian State University, pp. 1-16, 2004.
[20] A. Leitão, “Corruption and the environmental Kuznets Curve: Empirical evidence for sulfur”, Ecological Economics, vol. 69, pp. 2191-2201, 2010.
[21] M. Meng, J. Lee and J.E. Payne, “RALS-LM unit root test with trend breaks and non-normal errors: application to the Prebisch-Singer hypothesis, Working Paper, Department of Economics, Finance, and Legal Studies, University of Alabama, pp. 1-28.
[22] P.K. Narayan, “The saving and investment nexus for China: evidence from cointegration test”, Applied Economic, vol. 37, pp. 1979-1990, 2005
[23] N.P. Narayan and S. Narayan, “Carbon dioxide emissions and economic growth: Panel data evidence from developing countries”, Energy Policy, vol. 38, pp. 661-666, 2010.
[24] S. Nasreen and S. Anwar, “Causal relationship between trade openness, economic growth and energy consumption: A panel data analysis of Asian countries”, Energy Policy, vol. 69, pp.82-91, 2014
[25] O.A. Onafowora and O. Owoye, “Bounds testing approch to analysis of the environment Kuznets curve hypothesis”, Energy Economics, vol. 44, pp. 47-62, 2014.
[26] I. Ozturk and A. Acaravci (2013), “The long-run and causal analysis of energy, growth, openness and financial development on carbon emissions in Turkey”, Energy Economics, vol. 36, pp. 262-267, 2013.
[27] I. Ozturk and U. Al-Mulali, “Investigating the validity of the environmental Kuznets curve hypothesis in Cambodia”, Ecological Indicators, vol. 57, pp. 324-330, 2015.
[28] T. Panayotou, “Empirical Tests and Policy Analysis of Environmental Degradation at Different Stages of Economic Development”, Working Paper WP238, Technology and Employment Programme, 1993.
[29] H.T. Pao and C.M. Tsai, “Multivariate Granger causality between CO2 emissions, energy consumption, FDI (foreign direct invest) and GDP (gross domestic product): Evidence from a panel of BRIC (Brazil, Russian Federation, India, and China) countries”, Energy, vol. 36, pp. 685-693, 2011.
[30] M.H. Pesaran, Y. Shin and R. Smith 2001, “Bounds testing approaches to the analysis of level relationships”, Journal of Applied Econometrics, vol. 16, pp. 289-326, 2001.
[31] P.C.B. Phillip and P. Perron, “Testing for a Unit Roots in a Time Series Regression”, Biometrika, vol. 75, pp. 335-346, 1988.
[32] P. Sephton and J. Mann, “Further evidence of an Environmental Kuznets Curve in Spain”, Energy Economics, vol. 36, pp. 177-181, 2013.
[33] S. Shafiei and R.A. Salim, “Non-renewable and renewable energy consumption and CO2 emissions in OECD countries: A comparative analysis”, Energy Policy, vol. 66, pp. 547-556, 2014.
[34] M.I. Shahbaz, T. Afza, y A. Ali, “Revisiting environmental Kuznets curve in a global economy”, Renewable and Sustainable Energy Reviews, vol. 25, pp. 494-502, 2013.
[35] M.N. Shahbaz, M.N. Khraief, G.S. Uddin and I. Ozturk, “Environmental Kuznets curve in an open economy: A bounds testing and causality analysis for Tunisia”, Renewable and Sustainable Energy Reviews, vol. 34, pp. 325-336, 2014.
[36] U. Soytas, R. Sari and B.T. Ewing, “Energy consumption, income, and cabon emissions in the United States”, Ecological Economics, vol. 62, pp. 482-489, 2007.
[37] U. Soytas and R. Sari, “Energy consumption, economic growth, and carbon emissions: Challenges faced by an EU candidate member”, Ecological Economics, vol. 68, pp. 1667-1675, 2009.
[38] K.M. Wang, “Modelling the nonlinear relationship between CO2 emissions from oil and economic growth”, Economic Modelling, vol. 29, pp. 1537-1547, 2012.
[39] World Bank, 2016. http://datos.bancomundial.org/. Accessed on 19/08/2016.
[40] X.P. Zhang and X.M. Cheng, “Energy consumption, carbon emissions, and economic growth in China”, Ecological Economics, vol. 68, pp. 2706-2712, 2009.
@article{"International Journal of Earth, Energy and Environmental Sciences:74506", author = "Mario Gómez and José Carlos Rodríguez", title = "Analysis of Causality between Economic Growth and Carbon Emissions: The Case of Mexico 1971-2011", abstract = "This paper analyzes the Environmental Kuznets Curve (EKC) hypothesis to test the causality relationship between economic activity, trade openness and carbon dioxide emissions in Mexico (1971-2011). The results achieved in this research show that there are three long-run relationships between production, trade openness, energy consumption and carbon dioxide emissions. The EKC hypothesis was not verified in this research. Indeed, it was found evidence of a short-term unidirectional causality from GDP and GDP squared to carbon dioxide emissions, from GDP, GDP squared and TO to EC, and bidirectional causality between TO and GDP. Finally, it was found evidence of long-term unidirectional causality from all variables to carbon emissions. These results suggest that a reduction in energy consumption, economic activity, or an increase in trade openness would reduce pollution.
", keywords = "Energy consumption, environmental Kuznets curve, economic growth, causality, co-integration.", volume = "10", number = "12", pages = "1086-6", }
