Energy consumption, agriculture, forestation and CO₂ emission nexus: an application to OECD countries

Abstract

The Environmental Kuznets Curve (EKC) hypothesis has been used to explain the relationship between environmental degradation and economic condition. This study formulates an augmented EKC framework to incorporate the effect of agriculture, forestation and energy consumption on CO2 emission and estimates the model using the data from 24 OECD countries between 1990 and 2018. The study utilizes individual-country analysis and panel dynamic analysis for the empirical investigation. The results show a positive relationship between CO2 emission and fossil fuel use – a 1% increase in fossil fuel consumption will increase CO2 emission by 0.76%, and a negative relationship with renewable energy – a 1% increase in renewable energy consumption will reduce CO2 emission by 0.14%. The impact of forest cover and agricultural production on CO2 emission is mixed at the single-country level. The panel fixed-effect results reveal that a 1% increase in agricultural production and forest cover leads to a 0.04% and 0.63% increase in CO2 emission, respectively. There is also strong evidence supporting the presence of the EKC hypothesis. The global CO2 emission reduction strategies, such as carbon taxes and emission trading schemes, must acknowledge and incorporate the interplay among -key macro-level variables revealed in this study to enhance their effectiveness.