The Effects of Energy Consumption and CO2 Emissions on Economic Growth: A Panel Cointegration Analysis for BRICS Countries

Document Type : Research Paper

Authors

1 Department of Economics, Faculty of Economics and Management, University of Sfax, Tunisia

2 Department of Economics, Al Imam Mohammad Ibn Saud Islamic University, Riyadh, Saudi Arabia

10.22059/ier.2024.373728.1007964

Abstract

The need to ensure the sustainability of natural resources is an environmental issue that occupies a significant place in economies. For this reason, the energy used to produce goods and services reduces a country’s economic growth. This study examines the long-term relationship between energy consumption and economic growth in the BRICS countries. The analysis covers a long period from 1995 to 2019. It relies on different econometric techniques, namely panel unit root tests (stationarity) and Kao panel cointegration tests (cointegration). Therefore, to estimate long-run relationships, panel regression estimators, fully modified ordinary least squares and dynamic ordinary least squares estimators are used. The estimation results showed the existence of a cointegrating relationship. Moreover, energy consumption positively affects the economic growth in BRICS countries. In addition, the paper includes a sensitivity analysis that assesses the effect of GDP growth on CO2 emissions in the BRICS countries. It also provides a regression analysis to create an EKC curve. This curve evaluates sensitivity and highlights the impact of renewable energy use in controlling and reducing CO2 emissions, thus confirming the EKC theory. Consequently, it can be concluded that rising CO2 emissions are a major concern for the BRICS countries, leading them to increase biomass energy production. Based on the results, this empirical study suggests implementing strong regulatory policy instruments to increase spending in order to protect economic stability and improve energy efficiency. This empirical study suggests implementing strong regulatory policy instruments to increase spending on protecting economic stability in order to improve energy efficiency.

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