Relationships among environmental pollution, energy use and economic growth: a global perspective

• Published date: 01 December 2020
• Author: T Raja Sekar,Sania Ashraf,Jaya Abraham
• Date: 01 December 2020
• DOI: http://doi.org/10.1111/opec.12192

Relationships among environmental

pollution, energy use and economic growth:

a global perspective

Dr. Sania Ashraf*, Dr. T Raja Sekar** and Dr. Jaya Abraham***

Assistant Professor*, College of Business, Abu Dhabi University, Abudhabi, United Arab Emirates. Email:

sania.ashraf@adu.ac.ae

Assistant Professor**, Department of Commerce, St. Claret College, Bengaluru, Karnataka, India.

Assistant Professor***, College of Business, Abu Dhabi University, Abudhabi, United Arab Emirates.

Abstract

This study examines the relationships between the environmental pollution, energy use and

economic growth of countries around the world using secondary sources of 44 countries collected

from the World Energy Outlook 2019. Cointegration tests with sophisticated econometric panel

models and autoregressive distributed lag models were used to measure the relationship between

the above variables ranging from 1990 to 2018. Our study’s empirical model f‌inds that high energy

usage improves a country’s economic position but at the cost of environmental pollution (carbon

dioxide emissions). It also observes that countries in the European Union, the Commonwealth of

Independent States, and North and Latin American across the Pacif‌ic region support the hypothesis

of an inverted N-shaped environmental Kuznets curve. However, the situation in Asia and Africa

suggests the N-shaped environmental Kuznets curve hypothesis, which indicates that these

countries experience ups and downs in their environmental quality all the time and their

environmental quality is substandard at any point in time. Those countries that show both long-

term and short-term relationships among these three factors must adopt environmental safety

measures such as renewable energy sources and green concepts to reduce their levels of carbon

dioxide emissions and increase their environmental quality.

1. Introduction

Energy consumption is closely related to social, economic and technological growth.

Across the globe, countries that experience high economic growth use energy at higher

rates than slow-growth countries. More than 80% of energy sources are derived from

fossil fuels: 28% from coal, 21.4% from natural gas and nearly 31.1% from oil (Sun

et al. 2019). However, higher energy use also means negative implications for the

economy through environmental pollution (carbon dioxide emissions and greenhouse

gases, hereafter environmental pollution) as this inf‌luences human well-being and

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wealth. The indiscriminate use of energy sources, especially non-renewable ones such as

the fossil fuels, across different economic sectors contributes to global warming and

climate change, which affect human lives worldwide.

Measuring and mitigating the negative consequences of environmental pollution has

become a global concern. The Kyoto Protocol, an international agreement that was

adopted in 1997 and became an international law in 2005, governs global activities to

reduce and manage environmental pollution. It sets emissions reduction standards for all

industrially advanced economies and economies in transition. As a continuation of the

Kyoto Protocol, in 2015, countries that are parties to United Nations Framework

Convention on Climate Change (UNFCCC) adopted the Paris Climate Accord to

accelerate activities to combat climate change and provide increased support to

developing countries pursuing similar efforts. This agreement, the Paris Climate Accord

aims to keep global temperature increases to below 2 degrees Celsius above pre-

industrial levels with an aim to limit this increase to 1.5 degrees Celsius. The Paris

Climate Accord has strengthened global efforts to control the threat of climate change

and charted a new course in climate change control (UNFCCC, 2019). Its recommen-

dations are to be implemented by every country around the world. However, apart from

the two major meetings in Kyoto and Paris, few meetings have been held with the aim of

reducing environmental pollution caused by carbon dioxide emissions.

The global decline in environmental quality due to high greenhouse gas emissions,

especially carbon dioxide emissions from industrial activity, is detrimental to human

health and environmental welfare. Particularly serious is the fact that a forecast

temperature increase in 3–degrees Celsius could mean a sea level rise of 20 feet (over

6 m) in the near future. This will lead to unseasonal f‌loods, droughts and other severe

weather events that could affect more than 350 million people worldwide. Increasing

emissions threaten to exacerbate global warming. Developed countries, in particular,

appear to be increasing their economic prosperity at a cost to the entire world, especially

developing and underdeveloped countries (Borhan et al., 2012).

The research on the link between economic development and environmental

pollution has mixed results. Most empirical studies in this area stem from the

environmental Kuznets curve (EKC) hypothesis. According to this theory, as national

income increases, emissions will also increase until income reaches a threshold; beyond

this threshold, emissions will decrease. The early literature based on the EKC mostly

focusses on sulphur and carbon dioxide emissions in industrialised countries or major

emerging economies. Criticisms point to less attention being paid to smaller emerging

countries especially those in the Middle East and North Africa, otherwise referred to as

the MENA region (Soytas and Sari, 2009).

In the light of the EKC hypothesis, the inf‌luence of industrial development on

economic growth requires closer examination. Industrial production not only contributes

OPEC Energy Review December 2020 ©2020 Organization of the Petroleum Exporting Countries

512 Sania Ashraf, T Rajasekar and Jaya Abraham