Can Co2 Emissions and Energy Consumption Determine the Economic Performance of South Korea? A Time-Series Analysis

Abstract

Abstract Following the United Nations Sustainable Development Goals (UN-SDGs) which emphases on relevant concerns that encompass access to energy (SDG-7) and sustainable development (SDG-8). This research tends to re-examine the interaction between urbanization, CO2, capital formation, energy use, and economic growth in South Korea, which has not yet been assessed using the recent econometric techniques and data stretching between 1965 and 2019. The present study utilized the Autoregressive distributed lag (ARDL), Dynamic Ordinary Least Square (DOLS), and Fully Modified Ordinary Least Squares (FMOLS) methods while for the causality direction the Gradual shift and Wavelet coherence method are utilized. The ARDL bounds test uncovers a long-run linkage between the variables of interest. Empirical evidence shows that emissions spur economic growth. Thus, there is also a necessity to change the energy mix in South Korea to renewables, based on increasing environmental awareness across the globe, to enable the use of sustainable energy sources and establish an environmentally sustainable ecosystem. Moreover, the energy-induced growth hypothesis is validated. This result is resonated by the causality analysis where energy consumption drives GDP one-way in South Korea. This suggests that South Korea cannot embark on energy conservative policies, as such actions will hurt economic progress. Additionally, unidirectional causality is seen between urbanization, trade opens, and economic growth. These findings have far-reaching consequences for GDP growth and macroeconomic indicators in South Korea.