Econometrics Regression Paper: Carbon Emission and Economic Development

Introduction

Energy is not just a keystone of economic growth, but it is also a critical strategic resource for every nation. Globally, in the mechanization stage, it is apparent that energy plays a huge role in the contemporary economy today. The last few decades have acquired high achievements in economic growth and rapid development of energy consumption globally. For instance, America, Europe, and China are categorized to be the utmost consumers which have attributed to an economic growth of about 3.5 up to 24 percent in the last 20 or so years (Hossain, 2012). However, the increased energy utilization has brought about the drastic increment in carbon emissions with further increases in the global warming rate thus creating a necessity to develop the economy while controlling carbon emissions. The higher the economic growth the higher the carbon emissions.

Literature Review

Carbon emissions have for the longest period been accounted as a critical force in polluting the environment. Pollution is among the most pressing economic as well as social issues today based on the level of its implications to productivity. However, despite the advancement of technology, carbon emissions remains very high annually which creates a rather disturbing impression. It is saddening, to note that there are no other energy alternatives that have the capability of replacing fossil fuel (Hossain, 2012). Most countries are currently engaged in the quest of reducing the emission rate by attempting to promote the use of energy efficient resources. In this context when the GDP of any state is high, this means that the carbon emission rate is low. The renewable, energy efficient and environmentally friendly options are currently available but they are characterized by high prices (Knight and Schor, 2014). It is, therefore, believed that such options are only adopted by wealthy individuals based on their understanding of the associated cost efficiency and environmental protection. The relationship amid carbon emissions and economic growth creates three major independent variables which are urban population, trade including both imports and exports and GDP per capita. Based on data acquired from a state level, it has been established by several studies that there is a strong and desirable relationship amid carbon emissions and economic growth. In that with an increase of economic growth by a single percent the rate of emissions rises by about 1.2 percent (Mercan and Karakaya, 2015).

Data

Dependent Variables

In assessing the effects of economic growth the dependent variables that were utilized in this study are energy consumption and carbon emission per capita. The measure is only effective when utilized on a national basis which created the necessity to incorporate exports and imports variables. From the findings, it is obvious that the higher the carbon energy utilization in a given country the higher the general rate of emissions and the higher the pollution while economic growth increases positively.

Independent Variables

The three identified independent variables are GDP, Urban population and Trade per capita which were measured in 2005 the United States dollars. The utilized data are acquired from the existing studies which align with the study’s findings. In addition, trade data both for the import and export as the GDP percentage were also incorporated along with the populace of the urban area.

Model

An empirical model was utilized in order to create a long term association amid carbon emissions, consumption of energy, economic development, and popularization in the urban sectors. The utilized linear logarithmic is as follows.

CO2= β0+β1 EC+ β2 GDP

In that Coz represent the carbon emissions per capita, while EC depicts Energy consumption in ever per capita and UP represent the urban population. The utilized parameters β0, β1, and β2 are a representation of the long term carbon emission elasticity respectively.

Conceptual Framework

The use of fossil fuel as the major energy generator is increasing globally especially in the recent years. While it remains absolute that fossil burning is associated with the highest carbon emissions that directly pollutes the surrounding it has been empirically and conceptually shown that the rise in the consumption of energy leads to increased economic operations and growth. It can thus be expected that increased economic growth levels and energy utilization hold a positive implication on the emission of carbon only in the short run.  Thus, this creates the equation b1 > 0 and b2 >0. Globalization results in increased goods movement with creative energy utilization which is a major pollution source.

Results

The research demonstrates the existence of s positive relation amid economic growth and all the emissions measures which include utilization and emission.  Both relationships are important statistically where b ≥ 0.001. In the utilized model economic growth coefficient is a positive one. This, therefore, shows that the acquired results are as per the expectations for the populace with a high income which seems to be utilizing the energy efficient resources, unlike the poor populace which cannot afford the options leading to increased energy emissions. In general, the findings created several conclusions. First, economic development holds a steady, positive and important association with carbon based consumption and emissions and second economic growth holds an authoritative impact of carbon emission.

Conclusion

The paper attempted to establish empirically and conceptually, the dynamic association and economic growth and carbon emissions in relation to energy consumption in the contemporary period. Based on the increasing carbon effects on the surrounding it is evident that the use of technological and intentional options might not be adequate. In this context, in order to acquire radical reductions, there is a necessity to address the growing carbon energy demand in avoiding negative climatic changes.

 

 

 

 

 

References

Hossain, S. (2012). An Econometric Analysis for CO2 Emissions, Energy Consumption, Economic Growth, Foreign Trade and Urbanization of Japan. DOI:10.4236/lce.2012.323013. Retrieved from https://file.scirp.org/Html/4-2900110_25022.htm

Kyle W. Knight and Juliet B. Schor. (2014). Economic Growth and Climate Change: A Cross-National Analysis of Territorial and Consumption-Based Carbon Emissions in High-Income Countries. 3722-3731; doi:10.3390/su6063722 Retrieved from http://www.mdpi.com/2071-1050/6/6/3722/htm

Mercan, M and Karakaya, E. (2015). Energy Consumption, Economic Growth and Carbon Emission: Dynamic Panel Cointegration Analysis for Selected OECD Countries. https://doi.org/10.1016/S2212-5671(15)00572-9. Retrieved from http://ac.els-cdn.com/S2212567115005729/1-s2.0-S2212567115005729-main.pdf?_tid=91a98076-76a0-11e7-82ac-00000aacb35e&acdnat=1501581951_5fb357cb5853851e1111845e5725e8f9