An econometric study of energy consumption, carbon emissions and economic growth in South Asia: 1972-2009

The purpose of this paper is to empirically examine the relationship between energy consumption, carbon emissions and economic growth for a panel of five South Asian economies namely India, Pakistan, Bangladesh, Sri Lanka and Nepal over the period 1972-2009 within multivariate framework.

The study uses Pedroni cointegration and Granger causality test based on panel vector error correction model to examine long-run equilibrium relationship and direction of causation in short run and long run between energy consumption, carbon emissions and economic growth in South Asia.

Cointegration result indicates the long-run equilibrium relationship between economic growth, energy consumption and carbon emissions for panel. Causality results suggest that bidirectional causality exist between energy consumption-GDP, and unidirectional causality from carbon emissions to GDP and energy consumption in long run. However, energy consumption causes carbon emissions in short run.

Implementing energy efficiency measures and reducing dependence on fossils fuels by scaling up carbon free energy resources like nuclear, renewables including hydropower in energy mix is necessary for sustainable and inclusive growth in the region.

South Asia economies need to sacrifice economic growth for reducing the carbon emissions in long run if the region dependence on fossils fuels including coal, oil and natural gas in energy mix continues at same pace.