Rapid Economic Growth at the Cost of Environment Degradation? - Panel Data Evidence from BRIC Economies

37 Pages Posted: 12 Jun 2008

See all articles by Juan Piñeiro Chousa

Juan Piñeiro Chousa

Universidade de Santiago de Compostela - Departmamento de Economía Financiera y Contabilidad

Artur Tamazian

Universidade de Santiago de Compostela; Universidade de Santiago de Compostela - Departmamento de Economía Financiera y Contabilidad

Krishna Chaitanya V.

The ICFAI Business School

Date Written: February 2008

Abstract

The paper investigates whether the decline in environmental quality in BRIC economies is due to high energy consumption level which is a resultant of rapid economic growth. We answer this using environmental, macroeconomic and financial variables along with Kyoto Protocol indicators based on panel data from 1992 to 2004. The long run equilibrium relationship between energy consumption and economic growth was examined. Through the panel data, feasible general least squares (FGLS) procedure was employed to estimate the environmental degradation caused by the increase in energy consumption. Pooled regression analysis is used to estimate the relationship between energy consumption and growth variables. We study the impact of excessive economic growth rates on energy consumption levels by means of threshold pooled ordinary least squares (POLS) method. Moreover, our analysis also attempts to fulfill the econometric criticism of the Environmental Kuznets Curve faced by Stern (2004). Our results reveal that higher energy consumption indeed leads to CO2 emission in the countries under consideration. We find that energy consumption is a resultant of rapid economic growth, creating scope for large demand which is caused by increase in investment levels, population, and trade in energy intensive products. We show that rapid economic growth rate further increases the energy consumption levels in BRIC economies. The results of cointegration analysis also confirm these findings. Finally, the inclusion of USA and Japan as a world's largest energy consumers into our analysis does not significantly change the results.

Keywords: CO2 Emissions, Energy Consumption, Economic Growth, BRIC economies

JEL Classification: Q40, Q41, Q43, O13, O14

Suggested Citation

Piñeiro Chousa, Juan and Tamazian, Artur and Chaitanya V., Krishna, Rapid Economic Growth at the Cost of Environment Degradation? - Panel Data Evidence from BRIC Economies (February 2008). William Davidson Institute Working Paper No. 908. Available at SSRN: https://ssrn.com/abstract=1143537 or http://dx.doi.org/10.2139/ssrn.1143537

Juan Piñeiro Chousa

Universidade de Santiago de Compostela - Departmamento de Economía Financiera y Contabilidad ( email )

Avda. Burgo das Nacions S/N
15782 Santiago de Compostela
Spain

Artur Tamazian

Universidade de Santiago de Compostela ( email )

Santiago de Compostela
United States

Universidade de Santiago de Compostela - Departmamento de Economía Financiera y Contabilidad ( email )

Avda. Burgo das Nacions S/N
Santiago de Compostela, 15782
Spain

Krishna Chaitanya V. (Contact Author)

The ICFAI Business School ( email )

Hyderabad
India

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