1 23 Environment, Development and Sustainability A Multidisciplinary Approach to the Theory and Practice of Sustainable Development ISSN 1387-585X Environ Dev Sustain DOI 10.1007/s10668-013-9459-8 Energy, environment and growth nexus in South Asia Muhammad Zeshan & Vaqar Ahmed
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Environment, Development andSustainabilityA Multidisciplinary Approach to theTheory and Practice of SustainableDevelopment ISSN 1387-585X Environ Dev SustainDOI 10.1007/s10668-013-9459-8
Energy, environment and growth nexus inSouth Asia
Muhammad Zeshan & Vaqar Ahmed
1 23
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REVIEW
Energy, environment and growth nexus in South Asia
Muhammad Zeshan • Vaqar Ahmed
Received: 27 January 2013 / Accepted: 17 April 2013� Springer Science+Business Media Dordrecht 2013
Abstract The present study investigates the energy, environment and growth nexus for a
panel of South Asian countries including Bangladesh, India, Pakistan, Sri Lanka and
Nepal. The simultaneous analysis of real GDP, energy consumption and CO2 emissions is
conducted for the period 1980–2010. Levin panel unit root test and Im test panel unit root
both indicate that all the variables are I (1). In addition, Kao’s panel Cointegration test
specifies a stable long-term relationship between all these variables. Empirical findings
show that a 1 % increase in energy consumption increases output by 0.81 % in long run
whereas for the same increase in CO2 emission output falls by 0.17 % in long run. Panel
Granger causality tests report short-run causality running from energy consumption to CO2
emissions and from CO2 emissions to GDP.
Keywords Energy � Environment � Economic Growth � South Asia
1 Introduction
Rising economic growth in South Asia is escalating the energy demand, and more energy
inputs are required to cater this demand. This region witnesses a positive growth trend over
the last three decades, from 1981 to 2010. It is interesting to note that most of the countries
are following the same growth pattern indicating a strong impact of regional policies on
growth. During the period of analysis, the highest average growth rate was observed in
India that was 6.2 %, whereas Pakistan observed the second highest average growth rate
that was 5 %. On the other hand; Sri Lanka, Bangladesh and Nepal witnessed 4.9, 4.8 and
4.6 % growth rates, respectively (please see Fig. 1 for details).
There are serious concerns about rising demand for energy inputs and the volume of
greenhouse gas (GHG) emissions (Zeshan 2013, Shahbaz and Dube 2012; Shahbaz et al. 2012).
** and * indicate 5 and 10 % significance level, respectively
Energy, environment and growth
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Author's personal copy
Panel Granger causality tests report short-run causality running from energy con-
sumption to CO2 emissions which shows that higher energy consumption results in more
CO2 emissions in South Asia. Furthermore, it indicates that casualty is running from CO2
emissions to GDP indicating that CO2 emissions are detrimental to economic growth.
Moreover, the absence of any causal relationship between the energy consumption and
economic growth assures the evidence of neutrality hypothesis. Error correction coeffi-
cients portray that the system is convergent in long run and energy consumption and CO2
emissions would adjust them to rectify any short-run disturbance in the system.
6 Policy implications
• The CO2 emissions are adversely affecting the economic growth, and there is a need to
invest in environment friendly technologies.
• The South Asian countries should set regional environment protection targets to
overcome the increasing pollution in the region.
• The South Asian countries should meet at least once a year to discuss the devastating
impact of rising CO2 emissions in the region and also to devise strategies to cope with
these environmental challenges.
• The absence of any causal relationship between energy consumption and economic
growth assures the presence of neutrality hypothesis. The adoption of conservation
policies might reduce CO2 emission without impeding the economic growth.
• The South Asian countries use obsolete energy production technologies that are less
economic and are impeding the economic growth. It should gradually move to the
environment friendly technologies which are more efficient.
• The idea of regional energy market and open regional trade between the South Asian
countries would result in economies of scale and also more secure energy supplies.
• This regional interdependency will also reduce the hostile tendency of conflict which is
impeding the regional economic growth.
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