Investigating the relationship between economic growth, energy consumption, and carbon dioxide (CO₂) emissions: a comparative analysis of South Asian nations and G-7 countries

This study provides a novel perspective for examining the relationship between economic growth, energy consumption, and carbon dioxide (CO₂) emissions by comparing developing countries, particularly those in the South Asian region, with developed regions represented by the G-7 countries. The analysis is based on datasets spanning from 1996 to 2021. We use various analytical methodologies, including panel regression models, simultaneous regression models, and panel autoregressive distributed lag (ARDL) models to provide a comprehensive understanding of these complex relationships. The findings indicate that energy consumption strongly drives economic growth in both G-7 and South Asian countries. Furthermore, CO₂ emissions are found to have a positive impact on economic growth in both regions. It is also observed that higher per capita gross domestic product (GDP) encourages greater energy consumption in both regions. Additionally, CO₂ emissions positively influence energy consumption in both groups. The findings also highlight that financial development and population growth positively affect energy consumption in South Asian countries. As for CO₂ emissions, the results indicate that per capita GDP positively contributes to increased pollution in both regions, coupled with the fact that higher energy consumption aligns with higher CO₂ emissions. In G-7 countries, renewable electricity is linked with reduced CO₂ emissions. In light of these findings, policymakers are advised to prioritize sustainable economic growth by promoting energy-efficient technologies and renewable energy sources. Furthermore, promoting the use of renewable energy sources can contribute to reducing CO₂ emissions and supporting environmental preservation.