The impact of economic growth, trade openness and manufacturing on CO2 emissions in India: an autoregressive distributive lag (ARDL) bounds test approach
Keywords:ARDL, Trade openness, Carbon emissions, EKC hypothesis
Purpose. The purpose of this study is to examine the impact of economic growth, trade openness and manufacturing on CO2 emissions in India.
Design/methodology/approach. The study employed autoregressive distributive lag (ARDL) bounds test approach and uses CO2 emissions, trade, manufacturing and GDP per capita to examine the relationship using an annual time series data from World Development Indicators during 1971 to 2016.
Findings. Results depict that there exists a long-run relationship between CO2 emissions and other variables. Trade openness significantly reduces CO2 emissions, whereas manufacturing and GDP have a significant and positive impact on CO2 in the long run.
Research limitations/implications. The findings of the study contribute to the body of knowledge by providing new evidence on the relationship between developmental metrics and the environment. These findings are critical for policymakers and regulatory bodies to focus on economic development without jeopardizing environmental degradation.
Practical implications. In order to keep its commitment to sustainability, India needs to develop policies that encourage cleaner production methods and establishment of non-polluting industries. Simultaneously, it must disincentivize industries that emit CO2 by policy frameworks such as carbon taxes, pollution taxes or green taxes.
Originality/value. None of studies examine at how these environmental factors interact in India. Kilavuz and Dogan (2020) used the same variables, but their scope was limited to Turkey. As a result, the study is the first to examine this relationship for India, contributing to the body of knowledge on economic growth, manufacturing, trade openness and environmental concerns.
Abumunshar, M., Aga, M. and Samour, A. (2020), “Oil price, energy consumption, and CO2 emissions in Turkey. New evidence from a Bootstrap ARDL Test”, Energies, Vol. 13 No. 21, doi: 10.3390/en13215588.
Ali, M.U., Gong, Z., Ali, M.U., Wu, X. and Yao, C. (2020), “Fossil energy consumption, economic development, inward FDI impact on CO2 emissions in Pakistan: testing EKC hypothesis through ARDL model”, International Journal of Finance and Economics, Vol. 26 No. 3, pp. 1-12.
Al-Mulali, U., Solarin, S.A. and Ozturk, I. (2016), “Investigating the presence of the environmental Kuznets curve (EKC) hypothesis in Kenya: an autoregressive distributed lag (ARDL) approach”, Natural Hazards, Springer, Vol. 80 No. 3, pp. 1729-1747.
Alshehry, A.S. and Belloumi, M. (2015), “Energy consumption, carbon dioxide emissions and economic growth: the case of Saudi Arabia”, Renewable and Sustainable Energy Reviews, Vol. 41, pp. 237-247.
Antweiler, W., Copeland, B.R. and Taylor, M.S. (2001), “Is free trade good for the environment?”, American Economic Review, Vol. 91 No. 4, pp. 877-908.
Banerjee, P.K. and Rahman, M. (2012), “Some determinants of carbon dioxide emissions in Bangladesh”, International Journal of Green Economics, Vol. 6 No. 2, pp. 205-215.
Bekun, F.V., Emir, F. and Sarkodie, S.A. (2019), “Another look at the relationship between energy consumption, carbon dioxide emissions, and economic growth in South Africa”, Science of The Total Environment, Vol. 655, pp. 759-765.
Canh, N.P., Thanh, S.D., Schinckus, C., Bensemann, J. and Thanh, L.T. (2019), “Global emissions: a new contribution from the shadow economy”, International Journal of Energy Economics and Policy, Vol. 9 No. 3, pp. 320-337.
Chowdhury, M.M.I., Rahman, S.M., Abubakar, I.R., Aina, Y.A., Hasan, M.A. and Khondaker, A.N. (2021), “A review of policies and initiatives for climate change mitigation and environmental sustainability in Bangladesh”, Environment, Development and Sustainability, Vol. 23 No. 2, pp. 1133-1161.
Dale, A., Robinson, J., King, L., Burch, S., Newell, R., Shaw, A. and Jost, F. (2020), “Meeting the climate change challenge: local government climate action in British Columbia, Canada”, Climate Policy, Vol. 20 No. 7, pp. 866-880.
Dey, S.R. and Tareque, M. (2020), “External debt and growth: role of stable macroeconomic policies”, Journal of Economics, Finance and Administrative Science, Vol. 25 No. 50, pp. 185-204.
Esen, Ö. and Bayrak, M. (2017), “Does more energy consumption support economic growth in net energy-importing countries?”, Journal of Economics, Finance and Administrative Science, Vol. 22 No. 42, pp. 75-98.
Ghazouani, T., Boukhatem, J. and Yan Sam, C. (2020), “Causal interactions between trade openness, renewable electricity consumption, and economic growth in Asia-Pacific countries: fresh evidence from a bootstrap ARDL approach”, Renewable and Sustainable Energy Reviews, Vol. 133, July, p. 110094.
Grossman, G.M. and Krueger, A.B. (1995), “Economic growth and the environment”, The Quarterly Journal of Economics, Vol. 110 No. 2, pp. 353-377.
Hocaoglu, F.O. and Karanfil, F. (2011), “Examining the link between carbon dioxide emissions and the share of industry in GDP: modeling and testing for the G-7 countries”, Energy Policy, Vol. 39 No. 6, pp. 3612-3620.
Jacquet, J. and Jamieson, D. (2016), “Soft but significant power in the Paris agreement”, Nature Climate Change, Vol. 6 No. 7, pp. 643-646.
Jayanthakumaran, K., Verma, R. and Liu, Y. (2012), “CO 2 emissions, energy consumption, trade and income: a comparative analysis of China and India”, Energy Policy, Vol. 42, June 2011, pp. 450-460.
Jun, W., Mahmood, H. and Zakaria, M. (2020), “Impact of trade openness on environment in China”, Journal of Business Economics and Management, Vol. 21 No. 4, pp. 1185-1202.
Khan, M.K., Teng, J.Z. and Khan, M.I. (2019), “Effect of energy consumption and economic growth on carbon dioxide emissions in Pakistan with dynamic ARDL simulations approach”, Environmental Science and Pollution Research, Vol. 26 No. 23, pp. 23480-23490.
Kılavuz, E. and Doğan, İ. (2020), “Economic growth, openness, industry and CO2 modelling: are regulatory policies important in Turkish economies?”, International Journal of Low-Carbon Technologies, Vol. 16 No. 2, pp. 476-487.
Kohler, M. (2013), “CO2 emissions, energy consumption, income and foreign trade: a South African perspective”, Energy Policy, Vol. 63, pp. 1042-1050.
Lin, B., Moubarak, M. and Ouyang, X. (2014), “Carbon dioxide emissions and growth of the manufacturing sector: evidence for China”, Vol. 76, 2014, pp. 830-837.
Lin, F. (2017), “Trade openness and air pollution: city-level empirical evidence from China”, China Economic Review, Vol. 45, pp. 78-88.
Menyah, K. and Wolde-Rufael, Y. (2010), “Energy consumption, pollutant emissions and economic growth in South Africa”, Energy Economics, Vol. 32 No. 6, pp. 1374-1382.
Munir, K. and Riaz, N. (2019), “Energy consumption and environmental quality in South Asia: evidence from panel non-linear ARDL”, Environmental Science and Pollution Research, Vol. 26 No. 28, pp. 29307-29315.
Pao, H.T. and Tsai, C.M. (2011), “Multivariate Granger causality between CO2 emissions, energy consumption, FDI (foreign direct investment) and GDP (gross domestic product): evidence from a panel of BRIC (Brazil, Russian Federation, India, and China) countries”, Energy, Vol. 36 No. 1, pp. 685-693.
Park, J. and Hong, T. (2013), “Analysis of South Korea's economic growth, carbon dioxide emission, and energy consumption using the Markov switching model”, Renewable and Sustainable Energy Reviews, Vol. 18, pp. 543-551.
Pesaran, M.H., Shin, Y. and Smith, R.J. (2001), “Bounds testing approaches to the analysis of level relationships”, Journal of Applied Econometrics, Vol. 16 No. 3, pp. 289-326.
Purcel, A.A. (2020), “New insights into the environmental Kuznets Curve Hypothesis in developing and transition economies: a literature survey”, Environmental Economics and Policy Studies, Vol. 22, doi: 10.1007/s10018-020-00272-9.
Rahman, M.M. and Kashem, M.A. (2017), “Carbon emissions, energy consumption and industrial growth in Bangladesh: empirical evidence from ARDL cointegration and Granger causality analysis”, Energy Policy, Vol. 110, March, pp. 600-608.
Rajpurohit, S.S. and Sharma, R. (2021), “Impact of economic and financial development on carbon emissions: evidence from emerging Asian economies”, Management of Environmental Quality: An International Journal, Vol. 32 No. 2, pp. 145-159.
Rasool, H., Malik, M.A. and Tarique, M. (2020), “The curvilinear relationship between environmental pollution and economic growth”, International Journal of Energy Sector Management, Vol. 14 No. 5, pp. 891-910.
Rauf, A., Zhang, J., Li, J. and Amin, W. (2018), “Structural changes, energy consumption and carbon emissions in China: empirical evidence from ARDL bound testing model”, Structural Change and Economic Dynamics, Vol. 47, pp. 194-206.
Sajeev, A. and Kaur, S. (2020), “Environmental sustainability, trade and economic growth in India: implications for public policy”, International Trade, Politics and Development, Vol. 4 No. 2, pp. 141-160.
Shabbir, A., Kousar, S. and Kousar, F. (2020), “The role of natural resources in economic growth: new evidence from Pakistan”, Journal of Economics, Finance and Administrative Science, Vol. 25 No. 50, pp. 221-238.
Shahbaz, M. and Sinha, A. (2019), “Environmental Kuznets curve for CO2 emissions: a literature survey”, Journal of Economic Studies, Vol. 46 No. 1, pp. 106-168.
Shahbaz, M., Nasreen, S., Ahmed, K. and Hammoudeh, S. (2017), “Trade openness-carbon emissions nexus: the importance of turning points of trade openness for country panels”, Energy Economics, Vol. 61, pp. 221-232.
Sharma, R. and Kautish, P. (2020), “Examining the nonlinear impact of coal and oil-based electricity production on CO2 emissions in India”, Electricity Journal, Vol. 33 No. 6, p. 106775.
Sharma, R., Sinha, A. and Kautish, P. (2021), “Does renewable energy consumption reduce ecological footprint? Evidence from eight developing countries of Asia”, Journal of Cleaner Production, Vol. 285, p. 124867.
Song, Z. (2021), “Economic growth and carbon emissions: estimation of a panel threshold model for the transition process in China”, Journal of Cleaner Production, Vol. 278, p. 123773.
Wang, X. and Wiser, G. (2002), “The implementation and compliance regimes under the climate change convention and its Kyoto Protocol”, Review of European Community and International Environmental Law, Vol. 11 No. 2, pp. 181-198.
Wang, Q. and Zhang, F. (2021), “The effects of trade openness on decoupling carbon emissions from economic growth – evidence from 182 countries”, Journal of Cleaner Production, Elsevier, Vol. 279, p. 123838.
Wen, H. and Dai, J. (2020), “Trade openness, environmental regulation, and human capital in China: based on ARDL cointegration and Granger causality analysis”, Environmental Science and Pollution Research, Vol. 27 No. 2, pp. 1789-1799.
Xu, X., Zhang, W., Wang, T., Xu, Y. and Du, H. (2021), “Impact of subsidies on innovations of environmental protection and circular economy in China”, Journal of Environmental Management, Vol. 289, p. 112385.
Zafar, A., Ullah, S., Majeed, M.T. and Yasmeen, R. (2020), “Environmental pollution in Asian economies: does the industrialisation matter?”, OPEC Energy Review, Vol. 44 No. 3, pp. 227-248.
How to Cite
Copyright (c) 2021 Journal of Economics, Finance and Administrative Science
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.