The impact of energy consumption and merchandise exports on CO2 emission in the United Nations geoscheme regions

Abstract

Purpose While sustainable development policies are mostly set based on United Nations (UN) geoscheme classification, no study attempts to examine the impact of influential economic variables such as energy consumption (EC) and merchandise exports (ME) on carbon dioxide (CO2) emission in the UN geoscheme regions. The purpose of this paper is to examine the possible impact of EC and ME on CO2 emission in UN geoscheme classification regions such as Africa, America, Arab, Asia and Europe. Design/methodology/approach This paper uses autoregressive distributed lag (ARDL), Pedroni panel cointegration and panel Granger causality methodologies covering an annual panel data sampling period from 1971 to 2014. Findings The results show that there is bidirectional causality between all three variables in the European and American panel except for the non-causality from CO2 to EC in the American panel. These findings suggest possible consequences of weaker energy efficiency (even under environmental policy tightening) and strong demand for energy-intensive economic activities in those regions. Developed countries with higher environmental policy tightening (America and Europe) show significant estimates from the chosen tests supporting the Porter hypothesis. EC and ME have a long-run impact on CO2 emission in American and European panels. The African region has the least environmental impact of pollution from ME. Practical implications The ME and EC have a direct significant impact on CO2 emission in America and Europe. As these causalities, co-integrations and their impacts share a long-run equilibrium relationship, policymakers must design long-term industry policies such as cleaner production techniques focusing on environmentally sustainable practices. Also, it is suggested that the policymakers must ensure that they implement more robust policies and standards for environmental-friendly export production. Originality/value This is the first paper that examines the impact of EC and ME on CO2 emission in UN geoscheme regions. The findings of this paper provide theoretical implications supporting Porter hypothesis and practical implications for policymaking.