The Effects of Energy Consumption and National Output on CO2 Emissions: New Evidence from OIC Countries Using a Panel ARDL Analysis

Abstract

The issue of energy has been debated among policymakers and economists. Energy plays an important role in generating economic activities. On the other hand, it can have deleterious impacts on the environment as more carbon dioxide (CO2) emissions will be released. Most previous studies focused on total energy rather than types of energy such as oil and gas in investigating the effects of energy consumption on CO2 emissions. Therefore, this study investigates the effects of oil and gas consumption rather than total energy consumption on CO2 emissions in 20 Organization of Islamic Cooperation (OIC) countries. The dynamic heterogeneous panel (panel autoregressive distributed lag model – panel ARDL) approach namely pooled mean group (PMG), mean group (MG), and dynamic fixed effect (DFE) were employed. The main results reveal that in the long run, overall national output contributes to higher environmental degradation. However, in the short run, overall national output does not affect CO2 emissions. The results also suggest that the population can reduce CO2 emissions in the short run but leaves no effect in the long run. Besides, gas consumption and oil consumption can have deleterious effects on the environment. The effect of oil consumption is greater than the effect of gas consumption on the environment. Therefore, it is important to consume more renewable energy such as solar, biodiesel, and hydro to replace non-renewable energy, particularly oil, in a bid to conserve the environment.