How economic growth, sustainable energy and carbon emission impact each other? New insights from India using ARDL approach

• Published date: 01 September 2023
• Author: Jasvinder Kaur,Kamaljit Singh,Rashmi Chaudhary,Simmi Vashishtha
• Date: 01 September 2023
• DOI: http://doi.org/10.1111/opec.12280

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OPEC Energy Rev. 2023;47:216–238.wileyonlinelibrary.com/journal/opec

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INTRODUCTION

Energy is an indispensable factor in sustaining the development of countries. The Indian Government has established 

enthusiastic short to medium- term resource goals to achieve sustainable development. The increased focus on sustain-

able energy (SE) sources can be attributed to factors like high dependency on coal and natural sources, excessive fossil 

fuel combustion and environmental consequences of carbon emissions (IEA,2019). On 1st November 2021, in the 26th 

meeting ofthe Conference of the Parties (COP26) at the United Nations Climate Summit in Glasgow, India's Prime 

Minister declared a new goal of ‘Net Zero Emission’ by 2070. India currently emits 1.9 tons of CO2 per capita, significantly 

under the global average of 4.69 metric tons, accounting for approximately 7.3%of global total CO2emissions (IEA, 

DOI: 10.1111/opec.12280

ORIGINAL ARTICLE

How economic growth, sustainable energy and carbon

emission impact each other? New insights from India using

ARDL approach

JasvinderKaur1

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KamaljitSingh2

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RashmiChaudhary1

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SimmiVashishtha3

© 2023 Organization of the Petroleum Exporting Countries.

1Department of Commerce, 

Kurukshetra University, Kurukshetra, 

Haryana, India

2University School of Business, 

Chandigarh University, Mohali, India

3Delhi Pharmaceutical Sciences and 

Research University, Delhi, India

Correspondence

Kamaljit Singh, University School 

of Business, Chandigarh University, 

Mohali, India.

Email: kamaljeetr.sehjan@gmail.com

Abstract

This study investigates the association among economic growth, sustainable 

energy consumption and carbon emission with additional variables including 

fossil fuel energy consumption, natural gas and trade openness. The annual time- 

series data from 1972 to 2019 is analysed using an auto- regressive distributive 

lag model. Moreover, the novelty and robustness of the model are verified using 

dynamic ordinary least squares, and fully modified ordinary least squares. The re-

sults specify that except carbon emission model equation, there is co- integration 

exists among variables. In terms of the outcomes in the long term, the consump-

tion of fossil fuels has a notable impact on economic growth and natural gas, 

whereas the consumption of sustainable energy has a detrimental effect on eco-

nomic growth. Interestingly, in the short run, sustainable energy consumption 

positively links with trade openness and economic growth. Furthermore, the 

VECM- based Granger Causality detects a one- way causal linkage of fossil fuel 

consumption, trade openness, carbon emissions and natural gas with economic 

growth. A bidirectional causality exists from carbon emission to fossil fuel con-

sumption, suggesting a feedback hypothesis. The study provides a comprehensive 

understanding of the underlying variables. The policymakers can make decisions 

for the efficient functioning of energy markets, enhanced production of energy- 

from- waste material and environmental enforcement in India related to air pol-

lution should be strengthened.

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SUSTAINABLE DEVELOPMENT GOALS

2021). India has formed significant paces in achieving the Sustainable Development Goals (SDGs), most prominently in 

achieving universal access to electricity.

The unexpected declaration of attaining net- zero emission by 2070 may have elegantly bounced the pressure on India 

to sign up for an ambitious target. However, to meet these objectives, international trade performs a vital function in the 

‘greening’ of the energy industry by allowing the shift of SE technology and reacting to the demand for energy sources 

sustainably. This trend has led to numerous trade possibilities, as well as importing of components and raw materials 

for SE and finished goods. To achieve the SE target, large Indian companies are investing billions of dollars in SE and 

gradually getting rid of their old fossil fuel- dependent industries. India needed an extra $500 billion in investments for 

modernisation, grid expansion and new wind and solar infrastructure (IEEFA,2021). Hence, India must work diligently 

to accomplish these targets on or before the deadline.

India is the sixth- most challenging market in the world for businesses to acquire sustainable resources. The significant 

barriers include each state's differential regulatory frameworks, fragmented policy and pending taxes and charges on ob-

taining sustainable power (Alam et al.,2016; Ahmad & Du, 2017). Interestingly, the variable cost of solar energy module 

production has very consistent. The primary difference is higher fixed expenses, particularly the interest rate on the loans 

needed to establish the manufacturing capacity. Consequently, the research results will help to frame comprehensive 

strategy decisions to solve barriers to achieving SDGs.

The study's other sections are categorised as follows: Section2 covers the Sustainability Outlook of India. In Section3, 

Literature Review is presented and Section4discusses the Data and Methodology employed in this study. Results and 

Discussion is exhibited in Section5. The Conclusion and Policy Recommendations are suggested in the final section.

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SUSTAINABILITYOUTLOOK OF INDIA

To achieve SDGs, the Indian Government has established enthusiastic short to medium- term sustainable electricity 

strategic goals. The country's target was to build 175 GW (Gigawatt) of sustainable power by 2022. In 2018, the Indian 

Government declared a new goal of 227 GW (earlier target was 175 GW) of SE potential by 2022 and 275 GW by 2027 

(IEA,2019). On 23 September 2019, at the United Nations Climate Summit in New York, India's Prime Minister declared 

a new goal of 450 GW of SE capability without indicating a deadline. At the end of November 2019, the grid- connected 

SE potential was 84 GW, with 32 GW from photovoltaic solar (PV), around 37 GW through wind generation, and the 

remainder from hydropower (Eren et al.,2019; Singh & Vashishtha, 2019).

India is an influential participant in global discussions on environmental issues. The nation's CO2 emissions have 

enhanced by two points since 2007, representing 4.4% of global emissions, while global energy use has risen by 70% in 

absolute terms. In line with the Paris Agreement, India submitted a nationally determined contribution, considering 

India's low per capita emanations and growth goals, with significant conservation initiatives. Even if India's GDP emis-

sion intensity has decreased according to targeted levels, moving towards a low- carbon electricity supply is a challenge.

In recent decades, India has become more open regarding trade compared to the preceding decades. Moreover, prior to 

1985, the contribution of trade to GDP had been on the decline. The contribution of trade to GDP showed a consistent in-

crease during the period of 1986– 2008. Although the imposition of tariffs and other measures aimed at promoting trade- 

led exports in India quickly had a detrimental effect on trade. From 2009 to 2019, trade openness has been seeing patterns 

of instability, expansion and contraction. The fivefold growth from 7.74% in 1972 to 39.55% in 2019 was recorded. The 

highest trade- to-GDP ratio was 55.79% in 2012. Figure1shows that natural gas has a stable trend in all years. However, 

by 2030, India intends to raise the proportion of natural gas to 15% of the energy assortment (PNGRB,2013). It proposes 

that existing demand and infrastructure requirements should be doubled as a vital component of the gas processing cen-

tre. In 2014– 2015, SE was only 17.28%, increasing by 3.97% in 2019– 2020. In August 2021, India had 100.68 GW of the SE 

capacity of the overall installed capacity, targeting 280 GW by 2030 (IBEF,2021).

The reason for choosing these variables to test their impact on each other is that sustainable development has gained 

considerable attention worldwide. Over 193 nations adopted the 2030 Agenda for Sustainable Development. The historic 

agenda outlines 17 SDGs and targets for achieving peace, dignity and prosperity for the planet and humanity by 2030. 

Indeed, India's rapid economic growth and growing environmental consciousness could force the government to reduce 

fossil fuel consumption, CO2 emissions and natural gas consumption. Recent efforts to develop renewable energy sec-

tors in India may also have implications for reducing carbon emissions, fossil fuel use and natural gas consumption. A 

total of $14.5 billion was invested in renewable energy, an increase of 125% compared to the fiscal year 2020– 2021. Also, 

in the latest report of IEA, The Indian government has set a renewable energy capacity target of 450 gigawatts by 2030.