Energy production, carbon emissions and economic growth in lower-middle income countries

Abstract

Purpose The persistent rise in the global discharges of carbon (CO 2 ) emissions and the likely undesirable consequences of this practice on the global atmosphere attracts the attention of policy makers and researchers to argue on the causes and perpetrators of CO 2 emissions at international level. The purpose of this paper is to examine the relationship between economic growth, energy production, capital formation, foreign direct investment (FDI) and CO 2 emissions in the LMI and Middle East and North African (MENA) countries for the period 1980–2011. Design/methodology/approach Two separate autoregressive distributed lag (ARDL) models were estimated for both the LMI and MENA countries, for the period 1980–2011. Furthermore, a fully modified OLS (FMOLS) was estimated for the two regions over the same period. Findings The results indicated that for the lower-middle income countries, there is a positive significant relationship between energy production and CO 2 emissions. In the long run while in the short run, FDI and EGP are positively related to CO 2 emissions while gross capital formation (GCF) has a negative impact on the CO 2 emissions in the short run over the same period. Similarly, for the MENA countries, there is a positive relationship between EGP, GCF and CO 2 emissions in both the short run and the long run. Furthermore, the estimated group mean FMOLS indicated that apart from GDP, all other variables have significant positive impact on CO 2 emissions. Research limitations/implications The study covers only the period 1980–2011. This was because of limited available data during the study. Practical implications The study recommended the adoption of green technology by FDI firms and also in the process of energy production such as in crude oil production. Originality/value The study carried out a complex analysis where simultaneously all the countries of LMI and MENA regions where considered. Furthermore, separate analysis where conducted for each of the LMI and MENA regions using ARDL model. Variable representing energy production was included in the analysis which was not considered by previous studies. Lastly, FMOLS was estimated for the pooled of LMI and MENA countries which further distinguished the study from the relevant previous studies.