Does Energy Consumption, Economic Growth, and Foreign Direct Investment Contribute to CO2 Emission? Evidence from Bangladesh

Abstract

This work used the Johansen Cointegration Test and the Vector Error Correction Model (VECM) cointegration methodology to assess the long-run cointegrating relationship and short-run dynamics in Bangladesh between energy consumption economic growth, foreign direct investment, urbanization, population growth, and carbon emissions. To assess the long-term association between these variables, we examined data from 1972 to 2014, and empirical estimation revealed that all factors are significant at the 1% level of significance in the case of Bangladesh. Thus, energy consumption, economic growth, foreign direct investment, urbanization, population growth, and carbon emissions  all have shown the predicted sign and are statistically significant, indicating that increased energy consumption, gross domestic product, and population increase all are responsible for increased carbon emissions in Bangladesh. Higher FDI inflows, on the other hand, cut per capita carbon emissions in Bangladesh. On the other hand, the empirical outcome has revealed that there is no substantial causal association between carbon emissions and urbanization.

Keywords: CO₂; FDI; GDP; population growth; energy consumption; VECM

DOI: 10.7176/JESD/12-12-05

Publication date:June 30^th 2021