Examining the Linkages among Carbon Dioxide Emissions, Electricity Production and Economic Growth in Different Income Levels

Abstract

Our industrialized world highly depends on fossil fuels to cover its energy needs. Although fossil fuels have been linked with economic growth, their use has also been found to have severe impacts on the environment. The linkages among carbon dioxide emissions, energy consumption and economic growth have been extensively examined in the current literature. The present study focuses on electricity production from fossil fuels, as well as from renewable sources and examines their linkages with CO2 emissions and economic growth in 119 world countries of different income levels, by assessing Granger causality. In addition, the Environmental Kuznets Curve (EKC) hypothesis is tested, in order to evaluate whether economic growth and carbon dioxide emissions are linked with an inverse U-shaped relationship and with an N-shape relationship in higher income levels. The EKC hypothesis is confirmed for high income and upper-middle income countries, but not for lower-middle and low income levels and a bidirectional Granger causality is found between GDP per capita and CO2 per capita in all income levels.