Abstract
This article revisits the carbon dioxide (CO2) emissions-GDP causal relationships in the Middle Eastern and North African (MENA) countries by employing the Rossi (Economet Theor 21:962–990, 2005) instability-robust causality test. We show evidence of significant causality relationships for all considered countries within the instability context, whereas the standard Granger causality test fails to detect causal links in any direction, except for Egypt, Iran, and Morocco. An important policy implication resulting from this robust analysis is that the income is not affected by the cuts in the CO2 emissions for only two MENA countries, the UAE and Syria.
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Padilla and Serrano (2006) analyzed the relationship between CO2 emission inequalities and income inequalities across countries for the period 1971–1999 by employing the common tools used in income distribution analysis. They also show that income inequality has significant power in explaining the inequality in CO2 emissions across countries.
The EKC hypothesis postulates that environmental degradation and economic development are linked by an inverted U-shaped relationship according to which at low-income levels we might see a positive relation between national income and pollution (e.g., carbon dioxide, sulfur dioxide, nitrogen oxide, and water pollutants) and at high levels of income a negative relation between the two variables.
Some studies have examined the long-run link between CO2 emissions and growth in the MENA region using cointegration and panel cointegration tests (Fodha and Zaghdoud 2010; Al-Mulali 2011; Arouri et al. 2012), but none of them considers directly the impact of instabilities on the causality between variables.
Let I t = (x t ε t , x t − 1 ε t − 1, …) be the history of (x t ε t ) at the time t∈Z. Roughly speaking, Gordin’s condition implies that the impact of I t − n on the conditional expectation of(x t ε t ) vanishes as n → ∞ and also that the conditional expectations of (x t ε t ) do not vary too much in time (Hayashi 2000, p.403).
Data are obtained from the World Development Indicators.
For concision purpose, we do not report the complete summary statistics here, but they can be made entirely available under request addressed to the corresponding author.
Because the structural change in a time series is of great importance for the stationary analysis, we also carry out the Zivot and Andrews (1992) unit root test which is robust to the presence of a potential structural break. The results, not reported here for concision purpose, are consistent with those from the ADF and PP tests.
The QLR is also known as Andrews’ sup-F statistic.
Arouri et al. (2012) study the relationship between CO2 emissions, energy consumption, and real GDP for 12 MENA countries over the period of 1981–2005 and find, from the recent bootstrap panel unit root tests and cointegration techniques, that energy consumption has a positive correlation with CO2 emissions.
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The first author thanks Barbara Rossi for the helpful clarifications on the code used in Rossi (2005).
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El Montasser, G., Ajmi, A.N. & Nguyen, D.K. Carbon emissions—income relationships with structural breaks: the case of the Middle Eastern and North African countries. Environ Sci Pollut Res 25, 2869–2878 (2018). https://doi.org/10.1007/s11356-017-0725-4
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DOI: https://doi.org/10.1007/s11356-017-0725-4