Key Drivers of Consumption Based Carbon Emissions: Empirical Evidence From SAARC Countries

Environmental Science and Pollution Research
https://doi.org/10.1007/s11356-021-17413-6
RESEARCH ARTICLE
Key drivers of consumption‑based carbon emissions: empirical

evidence from SAARC countries
Komal Kanwar Shekhawat1 · Arvind Kumar Yadav1 · Md Sahnewaz Sanu2 · Pushp Kumar3
Received: 12 July 2021 / Accepted: 3 November 2021

© The Author(s), under exclusive licence to Springer-Verlag GmbH Germany, part of Springer Nature 2021
Abstract
To devise an appropriate climate policy dealing with environmental degradation, reliable measurement of CO2 emissions is
essential. In the recent past, most researchers have utilized production-based emissions in their studies, ignoring the important
role of consumption-based emissions in environmental degradation. Therefore, the present research examines the drivers of
consumption-based CO2 emissions in SAARC nations over the period 1990 to 2018. By employing traditional and second-
generation panel cointegration methodologies, the study, more specifically, explores the link between consumption-based
CO2 emissions and its five macroeconomic determinants, namely, GDP growth, energy consumption, FDI, trade openness
(measured by composite trade share index), and urbanization. The study also applies the FMOLS and DOLS techniques for
calculating the long-run elasticities of regressors with respect to the explained variable. The results establish a cointegra-
tion relationship between the variables and validate an “N-shaped EKC” for the SAARC region. It is also found that in the
long run, energy consumption and urbanization amplify the consumption-based C O2 emissions while FDI and trade open-
ness improve the environmental quality by plummeting emissions. Most importantly, the study rejects the “pollution-haven
hypothesis” for the SAARC region based on the outcomes of FDI and trade openness. Lastly, based on the results, some
policies are recommended for the abatement of environmental degradation in SAARC countries. As the SAARC nations rely
heavily on fossil-based energy, it is suggestive for these economies to enhance the level of energy efficiency and augment
the share of renewable energy sources in the energy mix. Furthermore, the policy designers in this region should encourage
trade openness and liberalize inward FDI for containing consumption-based emissions.
Keywords Consumption-based CO2 emissions · Trade openness · FDI · Economic growth · SAARC countries · Composite
trade share index
Introduction
Responsible Editor: Ilhan Ozturk
Today, climate change is one of the critical issues facing
* Pushp Kumar
[email protected] humanity. Global warming caused by GHGs, particularly
CO2 emissions, which constitute around 60 percent of
Komal Kanwar Shekhawat
[email protected] the total greenhouse gases in the atmosphere (Khan and
Ozturk 2021), presents unappalled risks to human lives and
Arvind Kumar Yadav
[email protected] properties. Both anthropogenic (human) and natural eco-
nomic expansion practices triggered these environmental
Md Sahnewaz Sanu
[email protected] issues (Adebayo et al. 2021). With the growing impetus on
growth augmenting policy initiatives involving rapid indus-
1
Department of Economics, Akal University, Bathinda, trialization and urban infrastructure development, pollution
Punjab 151302, India as a negative externality continues to pose a threat to envi-
2
Department of Economics, PDU Govt. Model College, ronmental sustainability. This phenomenon is more pro-
Katlicherra, Assam 788162, India nounced, especially across the emerging market economies.
3
School of Humanities, Social Sciences, and Management, In developing countries, rising populations, income levels,
Indian Institute of Technology Bhubaneswar, Bhubaneswar, and energy use mainly based on fossil fuels are leading to
Odisha 752050, India
13
Vol.:(0123456789)
a rapid increase in GHGs emissions (Chandler et al. 2002; verified in a research conducted by Gökmenoğlu and Taspi-
Hanif et al. 2019). Presently, C
O2 emission from developing nar (2016), which examined the instance of Turkey. While
economies is growing at a faster rate than those of devel- trade openness is important in determining C O2 emissions,
oped economies. If this rate persists, they will surpass the the findings from the existing literature are contradictory
developed countries within a matter of decades (Ertugrul in nature (Dogan 2015; Nasir and Rehman 2011; Shahbaz
et al. 2016). Combating these environmental challenges et al. 2013). Especially for the SAARC region, it remains
is particularly difficult for least developed and develop- as a testable proposition. SAARC region holds a significant
ing economies as they set very ambitious growth targets position being the most populous region comprising more
to increase their masses’ living standards. Nevertheless, than one-fifth of the world population and the world’s fast-
along with developed nations, it is also the responsibility of est-growing region (WDI, 2020). Better prospects of growth
developing countries to prevent environmental degradation imply a surge in energy demand which primarily is fulfilled
by designing viable policies that leverage natural synergies via nonrenewable resources. Further, there has been a shift
between climate protection and development goals. This has in the biodiversity of the region due to frequent episodes
triggered our interest in investigating the determinants of of extreme weather events. Such events are projected to be
CO2 emissions in the SAARC region, one of the world’s more frequent and hence an issue of policy concern for the
developing regions, having contrasting economic profiles. region.
The SAARC member countries, including India, Bangla- To achieve sustainable development goals 2030, sustain-
desh, Pakistan, Sri Lanka, Nepal, Bhutan, and the Maldives able consumption with sustainable production cycles are the
have contrasting economic profiles, energy consumption key factors. Production-based carbon emissions have been
patterns, and energy portfolios. For emitting a high level the subject of extensive research, with a significant amount
of CO2, India and Pakistan are responsible for the high- of effort devoted to understanding their consequences.
est anthropogenic environmental degradation in the region Very few studies (Knight and Schor 2014; Adebayo and
(Latief et al. 2021). While South Asia has historically expe- Kirikkaleli 2021) have considered consumption-based car-
rienced low GHG emission, high population growth coupled bon emissions to assess environmental degradation. The
with rapid urbanization and industrialization is pushing the consumption-based approach towards carbon emissions
region toward a more carbon-intensive development path is distinctive because it considers the global supply chain
(Shrestha et al. 2012). Over the decade 2001–2011, the coun- that contributes to emission generation and distinguishes
tries in the region have experienced a population increase between emissions generated in one country from those used
of 130 million, which is more than Japan’s total population in another (Khan et al. 2020; Safi et al. 2021). Therefore, the
(Ellis and Roberts 2016). South Asian Economies rely heav- current study adds to the knowledge base through the proxy
ily on fossil fuels to meet their energy demand, resulting in to environmental degradation of consumption-based carbon
greenhouse emissions, and pollution, overall holding serious emissions (CCO2). In selected SAARC countries, trends of
implications for the environmental sustainability and health CCO2 are presented in Fig. 1. During the sample period, it
of the population (Wijayatunga and Fernando 2013). For displays an increasing trend. The validity of the environ-
instance, in Pakistan, 90 percent of C O2 is emitted from the mental Kuznets curve (EKC), N-shaped, and the PHH are
use of fossil fuels (Waqih et al. 2019). Therefore, the coun- investigated in this paper. In addition, the study also exam-
tries in the region need to examine their resource and energy ines the impact of FDI, trade openness, energy consumption,
options so as to adopt a low-carbon development path for urbanization, and economic growth on C CO2 emissions in
more inclusive and sustainable economic growth. SAARC countries during 1990–2018.
The evidence on the relationship between renewable The earlier studies in the literature have used tradi-
energy usage and economic growth variables with CO2 tional measures to estimate trade openness. Trade open-
emissions has been well documented across different geog- ness in the estimation model is considered as the proxy
raphies and time periods all over world (Mohsin et al. 2018; for technological progress. According to Gozgor (2017)
Sun et al. 2021). Among key macroeconomic variables, and Waugh and Ravikumar (2016), the trade potential
trade openness has been found to be significantly explaining index (TPI) can be used as a proxy for technological pro-
the cause of CO2 emissions in various studies (Adams and gress. On the other hand, an open economy is defined by
Klobodu 2017; Ertugrul et al. 2016). Ertugrul et al. (2016) Squalli and Wilson (2011) as one that has a relatively high
have argued in explaining the pollution haven hypothesis proportion of trade in total economic activity and signifi-
(PHH) that with rising incomes, the clean environment is cant engagement and interconnectivity with the rest of the
also demanding, which leads to the relocation in countries world. These two dimensions are significant because they
with less environmental concern for high C O2 emission are concerned with actual trade flows rather than antici-
industries (Kukla-Gryz 2009) and where income is selected pated trade flows. With this backdrop, the present paper
for the trade between income and pollution. This was also analyzes the determinants of CCO2 emissions in SAARC
13
Fig. 1 Consumption-based CO2

emissions in SAARC countries
during 1990–2018
countries during 1990–2018. In a number of ways, this Review of the literature

work contributes to the literature. First, C
CO2 emissions
are employed as a proxy for environmental deterioration Linkage between economic growth and CO2 emissions
rather than ecological and production-based C O 2 emis-
sions. Second, the trade openness approach of Squalli The EKC theory asserts that environmental degrada-
and Wilson (2011) is used instead of the traditional trade tion grows with output in the early phases of economic
to GDP ratio. Third, to the authors’ knowledge, no previ- growth but afterward diminishes. The EKC hypothesis is
ous study linking economic growth to consumption-based explained by three distinct mediums: scale, composition,
CO2 emissions has been carried out in the SAARC region. and method influences (Grossman and Krueger 1995; Ant-
Therefore, this research adds to the existing knowledge weiler et al. 2001). According to the scale effect, emis-
for examining the impact of economic growth, energy sions tend to rise due to greater economic activities that
consumption, FDI, trade openness, and urbanization on are harmful to the environment. As industrial technology
C CO 2 emission in the context of this under-researched gets more environmentally friendly and efficient, the tech-
economic bloc. Lastly, this study explores the possible nique effect tends to reduce emissions. The composition
N-shaped association between economic growth and envi- effect states that as an economy’s industries get cleaner,
ronmental degradation while using C CO2 emissions as a emissions decrease. The EKC hypothesis’s importance and
proxy for ecological degradation. The existing literature stability in explaining the relationship between produc-
on the N-shaped relationship between economic growth tion and pollution motivated a quest for both empirical
and environmental degradation has mainly considered the and theoretical explanations. Apergis (2016) analyzed
production-based CO2 emissions. The remainder of the data from fifteen countries from 1960 to 2013 to assess
paper is organized as follows: Sect. 2 presents the litera- the validity of the EKC hypothesis using both panel
ture review. The theoretical framework for the investiga- and time series cointegration methods. They identified
tion is included in Sect. 3. Section 4 contains information an inverse U-shape connection between CO 2 emissions
on the data and techniques used in this research. Section 5 and economic growth in twelve of the fifteen countries
contains the findings and conclusions. Section 6 gives a investigated. The remaining three countries appeared to
conclusion as well as some policy recommendations. support the EKC theory but only in particular quantiles.
13
Similarly, studies by Ang (2007), Halicioglu (2009), Nasir (2011), Ocal and Aslan (2013), Magazzino et al. (2021),
and Rehman (2011), Shahbaz et al. (2015), Tutulmaz Banday and Aneja (2019), and Ocal and Aslan (2013), inves-
(2015), Ahmad et al. (2016), Alam et al. (2016), Dong tigated the causal relationship between EC and C
O2 emis-
et al. (2016), Chakravarty and Mandal (2016), Sapkota sions and came up with mixed results. Table 2 explains the
and Bastola (2017), Rehman and Rashid (2017), Gill et al. summary of these investigations.
(2018), Bekun et al. (2019), Sharif et al. (2019), Pan et al.
(2019), and Ahmed and Le (2021) confirmed the validity
of EKC hypothesis. Whereas studies by Zoundi (2017), Linkage between FDI and CO2 emissions
Aye and Edoja (2017), Neve and Hamaide (2017), and
Lotz and Dogan (2018) concluded that there is no associa- The third focuses on the relationships between FDI and
tion between output and pollutants. A summary of these CO2. The pollution haven hypothesis (PHH) was explored
studies is explained in Table 1. for panel data of 28 Chinese provinces by Ahmad et al.
(2021), who discovered the existence of PHH in seven
Linkage between energy consumption and CO2 provinces with varying levels of development. Le
emissions et al. (2020) used three composite financial inclusion
measures to examine the relationship between FDI and
The second strand investigates the link between energy CO2 emissions for a sample of 21 Asian countries from
consumption (EC) and carbon dioxide emissions (CO2). 2004 to 2014. The study demonstrates PHH’s validity
Ito (2017), for example, obtained data for 42 industrialized and revealed that greater financial inclusion contributed
countries from 2002 to 2011, using the GMM and PMG to greater C O 2 emissions. PHH is also supported by
models, and discovered an inverse link between EC and car- research (Nguyen et al. 2020; Muhammad et al. 2021).
bon emissions. Cai et al. (2018) examined the link between Mujtaba and Jena (2021) analyze the asymmetric effects
EC and CO2 emissions for G7 countries from 1965 to 2015 of FDI on C
O2 emissions in India. Their study supports the
using the bootstrap ARDL bound test, finding unidirectional PHH hypothesis. Kim (2019) employed the VECM model
causality from clean EC to C O2 emissions. Chen et al. (2021) to assess the causative link for 57 developing countries
observed a statistically insignificant influence of EC on C O2 from 1980 to 2013, finding no direct short-run causality
emissions for 36 OECD nations between 1970 and 2016. between FDI and CO2 emissions, rejecting the prevalence
They employed the random effects model (REM) and panel of PHH in these countries. He et al. (2020) adopted the
quantile regression using the fixed-effects (FE) methods of bootstrap autoregressive distributed lagged model (ARDL)
moments. Other studies, such as Zhang (2011), Alam et al. approach on a panel of BRICS countries. They observed a
Table 1 An overview of the literature on environmental degradation and economic growth
S. No Authors Methodology Country Time period Key findings
1 Apergis (2016) Panel ARDL 15 countries 1960–2013 EKC holds in 12 out of the 15
countries based on the quan-
tile cointegration approach
2 Chakravarty and Mandal Fixed effects and GMM BRICS countries 1997–2011 EKC holds
(2016)
3 Alam et al. (2016) ARDL model Brazil, China, Indonesia, 1970–2012 EKC holds in all four coun-
and India tries
4 Zoundi (2017) Panel cointegration 25 African countries 1980–2012 EKC does not hold
approach, DOLS, GMM,
pooled mean group
5 Aye and Edoja (2017) Dynamic panel threshold 31 developing countries 1971–2013 EKC doesn’t hold
model
6 Rehman and Rashid (2017) FMOLS and DOLS and Emerging and frontier Asian 1960–2015 EKC holds, bidirectional cau-
panel cointegration (EFA) markets sality between CO2 and EG
7 Lotz and Dogan (2018) Panel DOLS model 10 Sub- Saharan African 1980–2011 EKC doesn’t hold
countries
8 Bekun et al. (2019) PMG-ARDL 16 EU countries 1996–2014 EKC holds
9 Sharif et al. (2019) FMOLS 74 countries 1990–2015 EKC holds
10 Pan et al. (2019) Symbolic regression method 34 OECD countries 1995–2014 EKC holds in 17 countries
11 Ahmed and Le (2021) CUP-FM panel model ASEAN countries 1996–2017 EKC holds
13
Table 2 An overview of the literature on environmental degradation and energy consumption
1 Ito (2017) GMM and PMG model 42 developed countries 2002–2011 Inverse relationship between
EC and C O2
2 Cai et al. (2018) Bootstrap ARDL G7 countries 1965–2015 Unidirectional causality from
EC to CO2 for US
3 Banday and Aneja (2019) Pooled mean group ARDL G7 countries 1971–2014 LR relationship between EC
and CO2
4 Wang and Dong (2019) Augmented mean group 14 Sub- Saharan African 1990–2014 Bidirectional LR causality
countries between EC and CO2
5 Chen et al. (2020) Panel quantile regression 36 OECD countries 1970–2016 EC found statistically insig-
approach nificant
6 Magazzino et al. (2021) Wavelet approach Italy Several time scales Bidirectional causality at
lower scales
Table 3 An overview of the literature on environmental degradation and foreign direct investment
1 Kim (2019) VECM 57 developing countries 1980–2013 PHH does not hold in short run
2 He et al. (2020) Bootstrap ARDL BRICS 1970–2018 PHH does not hold
3 Le et al. (2020) Pooled OLS, Fixed effects and GLS 21 Asian countries 2004–2014 PHH holds
4 Phuc Nguyen et al. (2020) STIRPAT model, Pooled OLS and 33 emerging economies 1996–2014 PHH holds
FGLS
5 Muhammad et al. (2021) STIRPAT model, DOLS 13 Muslim countries 2002–2014 PHH holds
6 Mujtaba and Jena (2021) NARDL India 1986–2014 PHH holds
7 Ahmad et al. (2021) DCCEMG method 28 Chinese provinces 1998–2016 PHH holds
poor association between FDI and carbon emissions. Table 3 short-run link between TO and CO2 emissions in their
provides a summary of these studies. study. In contrast, Jamel and Maktouf (2017) and Rahman
et al. (2020) discovered a bidirectional causal relationship
Linkage between trade openness and CO2 emissions between TO and CO2 emissions. Saidi and Mbarek (2017)
used time series data from 1990 to 2013 to examine the
The final section is concerned with the relationship between relationship for emerging economies and found that TO was
trade openness (TO) and CO2 emissions. Zhang et al. (2017) an insignificant determinant of CO2 emissions. Table 4 sum-
studied a panel of recently industrialized nations (NICs- marizes the findings of these studies.
10) from 1971 to 2013 and observed a robust and nega-
tive association with TO and C O2 emissions. Some studies Studies on consumption‑based carbon emissions
(such as Sharma 2011; Sarkodie et al. 2019; Ragoubi and
Mighri 2020) studied the relationship and noticed that TO As mentioned in the introduction, a couple of studies
seems to have a detrimental impact on CO2 emissions. In (Knight and Schor 2014; Baloch et al. 2021; Adebayo et al.
contrast, Bhat and Mishra (2018) examined the long- and 2021; He et al. 2021; Kirikkaleli and Adebayo 2021) have
short-term relationships between C O2 emissions and their considered consumption-based carbon emissions to assess
primary determinants in India from 1971 to 2013. They environmental degradation. He et al. (2021) investigated the
came to the conclusion that TO tends to enhance C O2 emis- effect of globalization and financial development on con-
sions. Trade openness appeared to have a considerable sumption-based carbon emissions for Mexico using a dual
impact on C O2 emissions, according to Phuc Nguyen et al. adjustment approach. The findings revealed that economic
(2020) and Chen et al. (2021). Rasoulinezhad and Saboori growth and energy consumption worsen environmental qual-
(2018) used composite trade index (CTI) to measure trade ity whereas globalization and financial development improve
openness (TO) as a proxy and found unidirectional short-run it. Kirikkaleli and Adebayo (2021) investigated the impact of
panel causality effect of trade openness on C O2 emissions. public–private partnership and renewable energy consump-
Kasman and Duman (2015) discovered a unidirectional tion on CCO2 emissions, finding an inverse relationship
13
Table 4 An overview of the literature on environmental degradation and trade openness
1 Saidi and Mbarek (2017) GMM 19 emerging economies 1990–2013 TO is insignificant

2 Zhang et al. (2017) Panel OLS, FMOLS, DOLS Newly industrialized coun- 1971–2013 TO found significant and
tries (NICs-10) negative
3 Jamel and Maktouf (2017) Cobb–Douglas production 40 European countries 1985–2014 Significant and Bidirectional
function causal linkage
4 Bhat and Mishra (2018) ARDL bound test India 1971–2013 TO is positively significant
5 Rasoulinezhad and Saboori DOLS and FMOLS Commonwealth of Inde- 1992–2015 Unidirectional SR causality
(2018) pendent States (CIS) from TO to C O2 emissions
region
6 Sarkodie et al. (2019) ARDL, FMOLS 14 African countries 1990–2013 TO found significant and
negative
7 Ragoubi and Mighri (2020) QML, GMM, and MCMC 54 Middle-income countries 1996–2013 TO found significant and
negative
8 Rahman et al. (2020) FMOLS, DOLS, and GMM Five South Asian countries 1990–2017 Significant and Bidirectional
causal linkage
9 Phuc Nguyen et al. (2020) STIPPAT model, Pooled 33 Emerging economies 1996–2014 TO is positively significant
OLS, FGLS
10 Chen et al. (2021) Panel quantile regression 64 Countries along the Belt 2001–2019 TO is positively significant
approach and Road
11 Khalid et al. (2021) AMC, ECM, and DH panel SAARC countries 1990–2017 TO is positively significant
non-causality tests in Nepal
between public–private partnership investment and carbon relationship between foreign direct investment and carbon
emissions whereas renewable energy lowers carbon emis- dioxide for SAARC countries. The study implemented
sions. Adebayo and Kirikkaleli (2021) used wavelet tools panel ARDL and FMOLS and validated the PHH and EKC
to investigate the impact of globalization, technical innova- hypotheses in the short run and the absence of PHH in the
tion, and renewable energy consumption on environmen- long run. Dar and Asif (2019) investigated the impact of
tal degradation for Japan for the time period 1990Q1 to renewable energy consumption, trade liberalization, real
2015Q4. The results reported a negative relationship with income, agricultural contribution, and urbanization on car-
economic growth, technological innovation, and globaliza- bon emissions in five SAARC countries from 1990 to 2013.
tion and a positive relationship with the usage of renew- The study used Pedroni and Kao cointegration techniques
able energy. Adebayo et al. (2021) used nonlinear ARDL as well as Granger causality tests and found no evidence of
for the time period 1990–2018 to explore the main drivers PHH. Khalid et al. (2021) investigated the impact of trade
of CCO2 for Chile. The empirical estimation indicates that openness, financial development, economic growth, and
usage of renewable energy improves environmental quality primary and renewable energy utilization on environmental
whereas reduction in economic growth leads to environmen- quality in SAARC countries using panel data from 1990 to
tal degradation. 2017. In the case of SAARC countries, the authors predicted
However, only a few studies have been conducted for that financial development would be fragile.
the SAARC region. Rehman and Rashid (2017) have used
FMOLS and DOLS approaches to detect the presence of
EKC and PHH hypotheses in SAARC countries. The authors Theoretical Framework
examined the impact of energy consumption, GDP, and
population growth, as well as CO2 emissions, on environ- This study looks at economic growth, energy consumption,
mental degradation, and predicted bidirectional causality foreign direct investment (FDI), trade openness, and urbani-
between CO2 emissions and EG. Afridi et al. (2019) ana- zation as key factors of consumption-based CO2 emission in
lyzed SAARC countries for panel data from 1980 to 2016. the SAARC region. The study documented that economic
The authors advocated the EKC hypothesis and obtained growth and environmental quality are frequently emphasized
N-shaped EKC by incorporating a cubic function. The to be interconnected (Iheonu et al. 2021). Moreover, sus-
results reported a negative relationship between CO2 and taining economic growth is in doubt unless environmental
TO and a positive with the rest of the variables. Using panel sustainability is ensured as well. Grossman and Krueger
data from 1986 to 2014, Waqih et al. (2019) examined the (1995) noticed a nonlinear association between a country’s
13
economic growth and its environmental quality. They innovation to generate economically efficient goods that
hypothesized that as an underdeveloped economy begins support the mitigation of environmental emissions (Sinha
to rise, the increase in national income initially causes the and Shahbaz 2018).
deterioration of environmental qualities. Demand for energy Urbanization is frequently considered in terms of eco-
within the economy is predicted to rise, most of it met by nomic modernization; it is a demographic factor that affects
fossil fuels. Thus, the exploitation and consumption of non- household energy use patterns by increasing urban density
renewable energy sources damage the ecosystem. Moreo- and changing the structure of human behavior (Barnes
ver, the EKC hypothesis states that once national income et al. 2010). The existing literature highlighted three impor-
reaches a certain threshold level, additional economic tant theories, i.e., ecological modernization, urban environ-
growth improves environmental quality. Numerous studies mental transmission, and compact city theories, explaining
link economic growth and environmental quality (Iheonu how urbanization affects the natural environment. Eco-
et al. 2021). As a result, the ability to sustain economic logical, environmental theory can be seen as an important
growth is in doubt unless environmental sustainability is indicator of societal transformation, a significant indication
ensured. Hence, the relationship between economic growth of progress (Poumanyvong and Kaneko 2010). As societal
and environmental quality has become a prominent research transformation takes place in the society from the low to the
area recently. EKC hypothesis shows a nonlinear relation- middle phase of development, the environment may dete-
ship between economic growth and environmental quality. riorate because in the development process, growth in the
According to this theory, when an underdeveloped econ- economy takes priority over environmental sustainability.
omy starts to expand, an increase in national income causes In the higher stage of development, environmental deterio-
environmental quality deterioration. This can be termed as ration became more critical; governments sought to make
scale effect, which emphasizes economic well-being over their nations more environmentally friendly. Technological
environmental quality, thus resulting in a trade-off between innovation, urbanization, and change from a manufactur-
these two variables. Furthermore, economic growth leads ing-based economy to a service-based economy all have the
to continued increases in national income, resulting from potential to mitigate the negative environmental impact of
a composition effect, further deteriorating environmental economic growth. The urban environmental transmission
quality. The decomposition effect occurs when input criteria theory is linked with environmental problems with urbaniza-
change, especially during modernization (Zhang et al. 2020). tion at the city level (Jacobi et al. 2010). In the modern era,
Energy demand is predicted to rise throughout industrializa- cities have frequently become more prosperous as a result
tion, which is often supplied by fossil fuels. Thus, extract- of expanding their manufacturing base, which results in
ing and burning nonrenewable energy sources damage the industrial pollution issues, which affect land, air, and water
ecosystem. The EKC hypothesis states that as the national resources. The compact city theory is primarily concerned
income increases to a threshold level, further increase in with the advantages of rapid urbanization. Rising urban
national income leads to environmental improvement. It is density helps to achieve economies of scale in developing
termed as technique effect (Muhammad and Long 2021), public infrastructure like schools, hospitals, electricity, water
which highlights the importance of technical innovation supply, etc. As a result, these economies of scale improve
in eliminating the trade-off between economic growth and environmental quality (Capello and Camagni 2000).
environmental quality (Sarkodie 2018). The EKC hypothesis is also affected by energy consump-
Some studies have found an N-shaped association tion. The energy push emission hypothesis asserts that when
between environmental deterioration and economic growth an economy’s aggregate energy consumption increases, it
instead of an inverted U-shaped relationship. It implies that is more likely to boost greenhouse gas emissions (Khan
throughout the initial phase of economic development, eco- et al. 2019). Furthermore, it is well accepted that envi-
nomic expansion raises the amount of environmental pollu- ronmental consequences of energy use rely on the types
tion until the first critical juncture is reached and then dimin- of energy resources used (Ito 2017). It is widely accepted
ishes till the second crucial juncture. But, once the second that burning fossil fuels accelerates environmental damage
critical juncture is reached, the environmental deterioration (Pata 2018). The combustion of fossil fuels boosts green-
resumes its upward shift. Because an increase in the level house gas emissions into the atmosphere, resulting in con-
of income has a significant impact on environmental emis- siderable environmental degradation. The pollution haven
sions, environmental changes occur in specific economic set- hypothesis and the pollution halo hypothesis are two theo-
tings. This also suggests that environmental emissions will ries that explain how foreign direct investment (FDI) influ-
restore their upward trajectory if the government’s renewal ences environmental performance. According to population
energy sources initiatives are not implemented and enforced haven hypothesis, FDI brings polluting industries to poor
over the second juncture for the implementation of energy countries because of low environmental restrictions, which
legislation. The final stage demonstrates technological degrades the quality of the environment. Consequently,
13
poor countries become pollution haven by bringing effi- urbanization as the explanatory variables. These variables
cient technical industries to underdeveloped countries; FDI are selected on the basis of the review of literature and
benefits the environment. Trade openness has three envi- their significance with respect to environmental degrada-
ronmental effects: scale, technique, and composition (Ant- tion in SAARC countries. The study utilized (see Squalli
weiler et al. 2001). The scale effect assumes that more trade and Wilson 2011) composite trade share (CTS) approach
openness leads to increased exports, contributing to greater rather than trade percent GDP to estimate trade openness
economic activity. As a result, hazardous emissions further in the presence of technological progress. The definition of
damage the ecosystem. Moreover, the technique effect effec- trade openness and how it is measured have been ambigu-
tively reduces emissions since trade openness allows for the ous (Ngouhouo et al. 2021; Udeagha and Ngepah 2021).
importation of advanced technology, positively affecting the Trade openness is traditionally assessed by using the trade
environment. According to the composition effect, increased to GDP ratio (Kumar et al. 2021). Traditional approaches
trade openness will enhance the environment if the country to trade openness fail to fully influence economic growth
has a comparative advantage in environmentally friendly as they ignore the country’s openness to world trade
industries. Thus, the environmental impact of trade open- because it incentivizes larger economies by labeling and
ness is uncertain because it depends on other factors. portraying them as closed economies as a consequence of
their higher GDP (Squalli and Wilson 2011). It is calcu-
lated using the formula below.
Data and methodology
(X + M)i (X + M)i
CTSi = ∑n .
1∕n j=1 (X + M)j GDPi (1)
Data and model specification
This study analyses annual data from 1990 to 2018 to esti- where X is the export, M is the import, and GDP is the
mate the major determinants of C CO 2 emissions in the country’s gross domestic product. Detailed explanations
SAARC countries. Bangladesh, Nepal, India, Pakistan, and of the variables and data sources are provided in Table 5.
Sri Lanka are sample SAARC countries. These countries Following a review of the literature, we hypothesized
have been chosen solely on the basis of the availability that GDP, EC, FDI, TO, and URB all had an impact on
of data in each of them. C CO 2 emissions are employed CCO2 emissions and developed the following empirical
as a proxy for environmental degradation in this study as model:
the dependent variable. C
CO2 emissions have a significant CCO2it = f (Y, EC, FDI, TO, URB) (2)
advantage over production-based CO2 emissions. In recent
years, many emerging economies have seen a substantial where i and t denote the country and year, respectively.
reduction in production-based CO2 emissions due to sus- The model also adds the square and cube of per capita
tained economic growth (Iqbal et al. 2021). According to GDP to assess the validity of “EKC hypothesis” and
Davis and Caldeira (2010), rather than actual reductions in “N-shaped” for sample SAARC countries. The model is
carbon emissions, reported reductions in production-based redefined by taking natural logarithms of all these vari-
CO2 emissions are mainly the result of PHH. Therefore, ables to deal with heteroskedasticity as follows in Eq. (3):
consumption-based CO 2 emissions play a critical role
lnCCO2it = 𝛽0 + 𝛽1 lnY it + 𝛽2 lnY 2it + 𝛽3 lnY 3it + 𝛽4 lnECit
in ensuring a fair distribution of responsibility among
nations. Moreover, this study used economic growth, +𝛽5 lnFDI it + 𝛽6 lnTOit + 𝛽7 lnURBit + 𝜀it (3)
energy consumption, FDI inflows, trade openness, and
Table 5 Data source and description of the variables

Variable Description Unit Data source
lnCCO2 Consumption-based CO2 emissions per person in natural logarithm Metric ton World Development Indicators
lnY Gross domestic product (GDP) per capita in natural logarithm Constant 2010 prices World Development Indicators
lnY2 Square of GDP in natural logarithm Constant 2010 prices World Development Indicators
lnY3 Cube of GDP in natural logarithm Constant 2010 prices World Development Indicators
lnEC Energy consumption per capita in natural logarithm kg of oil equivalent World Development Indicators
lnFDI Foreign Direct Investment net inflows in natural logarithm % of GDP World Development Indicators
lnTO Trade openness in natural logarithm current US $ Calculated using composite trade share
lnURB Urban population (% of total population) % of total population World Development Indicators
13
where βs denotes the elasticities to be evaluated and 𝜀 ADF-cross section (CADF) and IPS-cross-sectional incre-
denotes the error term that accounts for random effects. ment (CIPS).
After validating that all of the variables in this study are
Cross‑sectional dependence, panel unit root tests, I(0) and I(1), the study applies four types of panel cointegra-
and panel cointegration tests tion tests to determine the existence of a long-run linkage
between the variables: Pedroni (1999, 2000), Kao (1999),
We begin by employing cross-sectional dependence (CSD) and Johansen Fisher panel cointegration). Finally, the study
tests. In addition to socioeconomic and cultural similarities, use the Westerlund (2007) cointegration test to resolve
the selected SAARC nations have various bilateral and mul- cross-sectional dependence among selected nations. This
tilateral ties in commercial and scientific fields. Moreover, is an error correction-based test that is resilient to cross-
some of the SAARC countries share a common border and sectional dependence.
may affect the transborder pollution effect. As a result, the
interdependence among them is high. We check the cross- FMOLS, DOLS, and DH panel model
sectional dependence among sample countries by employing
CD and scaled LM tests proposed by Pesaran et al. (2004) After determining the long-run relationship, we intend to
as well as the Breusch-Pagan LM test. The equation for the compute the long-run elasticities of all explanatory variables
CD test is presented in Eq. (4). included in our model with respect to the explained variable.
√ For this, we have employed panel FMOLS and DOLS meth-
2T
(∑N−1 ∑N )
ods suggested by Pedroni (2001, 2004). These methods can
�
CSD = Pij ⇒ N(0, 1)
N(N − 1) i=1 j=i+1
be expressed as presented in Eq. (9) and Eq. (10):
(4)
∑N
where T denotes the time period, N is the sample size ∗
𝛽̂FMOLS = N −1 𝛽̂∗ FMOLS .n (9)
n=1
and Pij is the sample estimate of correlation errors for
each cross section of country i and j defined as follows in ∑N
Eq. (5). ∗
𝛽̂DOLS = N −1
n=1
∗
𝛽̂DOLS .n (10)
T signifies the time, N denotes the sample size, and Pij
denotes the correlation error sample estimate for each cross The heterogeneous panel causality test of Dumitrescu and
section of the country i and j as specified in Eq. (5). Hurlin (DH) (2012) is utilized for determining the causal
∑T link of the panel variables with reference to C
CO2 emissions
� uit ujt
i=1 after measuring the elastics of Y, squared Y, C, FDI, and TO.
Pij backprime = �
∑T
1
� �∑ �1 (5) A causal relationship between the variables is asserted by the
2 T 2
t=1
u2it t=1
u2jt null hypothesis versus the alternative hypothesis, which says
that there is a causal linkage among the variables, in DH test.
The stationarity of target variables is checked prior to
the empirical estimation of the panel model because all
of the panel cointegration tests are based on a presupposi- Empirical Results and Discussions
tion that the variables of order I(0), I(1), or a mix of both
are integrated and no variables of order I(2) or beyond are Table 6 summarizes descriptive statistics for the variables
integrated. To begin, the study uses four well-known first- under discussion. The lower part of Table 6 shows the corre-
generation panel unit root tests: Fisher ADF, Fisher PP, Im, lation matrices among the variables. The correlation analysis
Pesaran, and Shin (IPS) and Levin, Lin, and Chu (LLC). manifests that Y, EC, FDI, TO, and URB are significantly
The stationarity properties have been investigated separately and positively correlated with CCO2 emissions. Similarly,
with the only intercept and with both trend and intercept. In EC, FDI, and TO have a significant and positive correlation
contrast to the alternative hypothesis of no unit root, the null with Y. TO is also positively correlated with FDI. Table 6
hypothesis of the unit root test confirms the presence of a also indicates a strong correlation between the explanatory
unit root in the series. variables, which implies the likelihood of multicollinear-
The first-generation unit root tests may give biased results ity. The observed high collinearity is probably due to the
when there is heterogeneity and cross-sectional depend- inclusion of the square term of Y so as to validate the “EKC
ence. As a result, two second-generation panel unit root hypothesis.” Allison (2012) and Waqih et al. (2019) argued
tests: cross section ADF (CADF) and cross-sectionally that this term neither affects standard error nor probability of
augmented IPS (CIPS) are used. Both tests were developed the model; thus, it has no effects on results. Nevertheless, to
by Pesaran (2007). As a consequence, two root unit tests of safeguard our panel model from the potential multicollinear-
Pesaran (2007) of second generation are being performed: ity, we apply a VIF test for explanatory variables. The results
13
Table 6 Descriptive statistics lnCCO2 lnY lnY2 lnY3 lnEC lnFDI lnTO lnURB
and correlation matrix
Mean − 0.586 6.821 46.868 326.974 5.874 − 0.586 14.125 3.158
Median − 0.337 6.717 45.122 303.450 6.004 − 0.217 14.232 3.257
Maximum 0.554 8.281 68.567 567.768 6.633 1.300 22.275 3.602
Minimum − 2.746 5.870 34.457 202.265 4.778 − 5.406 7.810 2.181
Std. Dev 0.749 0.584 8.191 86.697 0.427 1.312 3.424 0.346
Skewness − 0.760 0.613 0.790 0.945 − 1.045 − 1.647 0.280 − 0.716
Kurtosis 2.760 2.791 3.082 3.410 3.374 5.828 2.537 2.868
Jarque–Bera 14.315 9.342 15.140 21.980 27.235 110.741 3.191 12.149
Probability 0.001 0.009 0.001 0.000 0.000 0.000 0.203 0.002
Observations 145 145 145 145 145 145 145 145
Correlation matrix
lnCCO2 1.000
lnY 0.789*** 1.000
lnY2 0.769*** 0.999*** 1.000
lnY3 0.747*** 0.995*** 0.999*** 1.000
lnEC 0.694*** 0.610*** 0.600*** 0.589*** 1.000
lnFDI 0.656*** 0.636*** 0.616*** 0.595*** 0.550*** 1.000
lnTO 0.505** 0.195** 0.174** 0.153* 0.236** 0.273*** 1.000
lnURB 0.636*** 0.179** 0.144* 0.109 0.136*** 0.374*** 0.626 1.000
“***,” “**,” and “*” indicate the level of significance at 1%, 5%, and 10%, respectively
Table 7 Cross-sectional dependence test show that the mean VIF value is 1.67 and the individual VIF
values for lnY, lnEC, lnFDI, and lnTO are 2.01, 1.75, 1.84,
Test Statistic Prob
and 1.09, respectively, are well below the critical value. The
Breusch-Pagan LM 53.524*** 0.000 results for the CSD test are presented in Table 7. Following
Pesaran scaled LM 8.421*** 0.000 our findings, we conclude that cross-sectional dependency
Pesaran CD 6.438*** 0.000 exists in our sample of five SAARC nations, rejecting the
null hypothesis of “no cross-sectional dependence.”
“***” indicates the level of significance at 1%
Table 8 First-generation panel Variable Fisher-ADF Fisher-PP IPS LLC

unit root tests (with intercept)
I(0) I(1) I(0) I(1) I(0) I(1) I(0) I(1)
lnCCO2 2.488 91.587 2.190 110.290 2.769 − 10.011 0.487 − 10.774

(0.991) (0.000) (0.995) (0.000) (0.997) (0.000) (0.687) (0.000)
lnY 0.092 48.628 0.115 49.118 7.937 − 5.367 5.768 − 5.288
(1.000) (0.000) (1.000) (0.000) (1.000) (0.000) (1.000) (0.000)
lnY2 0.037 43.107 0.056 42.927 8.748 − 4.654 6.771 − 4.325
(1.000) (0.000) (1.000) (0.000) (1.000) (0.000) (1.000) (0.000)
lnY3 0.067 21.598 0.029 37.565 8.385 − 1.702 6.147 − 3.454
(1.000) (0.017) (1.000) (0.000) (1.000) (0.044) (1.000) (0.000)
lnEC 4.022 73.008 3.620 84.192 5.948 − 7.972 4.425 − 9.252
(0.946) (0.000) (0.963) (0.000) (1.000) (0.000) (1.000) (0.000)
lnFDI 73.185 87.417 32.001 95.145 − 8.015 − 9.501 − 6.379 − 7.621
(0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000)
lnTO 14.701 134.87 14.733 134.80 − 1.497 − 14.678 − 1.186 − 17.015
(0.143) (0.000) (0.142) (0.000) (0.067) (0.000) (0.118) (0.000)
lnURB 7.050 28.416 3.863 45.106 0.698 − 2.651 0.503 − 3.180
(0.721) (0.002) (0.953) (0.000) (0.758) (0.004) (0.693) (0.004)
P values are in the parenthesis
13
Table 9 First-generation panel Variable Fisher-ADF Fisher-PP IPS LLC

unit root tests (with intercept
and trend) I(0) I(1) I(0) I(1) I(0) I(1) I(0) I(1)
lnCO2 17.952 88.509 14.084 134.574 − 1.622 − 10.337 − 1.061 − 9.967

(0.056) (0.000) (0.169) (0.000) (0.052) (0.000) (0.145) (0.000)
lnY 8.092 39.055 3.771 88.262 0.905 − 4.669 − 0.091 − 4.816
(0.620) (0.000) (0.957) (0.000) (0.817) (0.000) (0.464) (0.000)
lnY2 5.716 38.458 2.107 63.649 1.748 − 4.596 0.474 − 4.424
(0.839) (0.000) (0.996) (0.000) (0.960) (0.000) (0.682) (0.000)
lnY3 1.721 33.359 1.282 57.050 3.990 − 3.910 1.968 − 3.827
(0.998) (0.000) (1.000) (0.000) (1.000) (0.000) (0.976) (0.000)
lnEC 5.916 80.689 6.170 84.595 1.920 − 9.711 0.470 − 10.718
(0.822) (0.000) (0.801) (0.000) (0.973) (0.000) (0.681) (0.000)
lnFDI 53.785 67.182 22.909 174.244 − 6.260 − 7.820 − 5.740 − 4.384
(0.000) (0.000) (0.011) (0.000) (0.000) (0.000) (0.000) (0.000)
lnTO 11.891 118.262 11.526 118.521 − 0.997 − 13.722 − 0.902 − 15.425
(0.292) (0.000) (0.318) (0.000) (0.159) (0.000) (0.184) (0.000)
lnURB 3.188 20.469 4.206 33.750 2.255 − 2.017 2.914 − 2.051
(0.977) (0.025) (0.938) (0.000 (0.988) (0.022) (0.998) (0.020)
P values are in the parenthesis
Table 10 Second-generation unit root tests with trend and intercept Table 11 Pedroni cointegration test
Variable CADF CIPS Statistic Prob
I(0) I(1) I(0) I(1) Within-dimension (homogenous)

lnCCO2 − 1.843 − 3.484*** − 2.197 − 5.185*** Panel v-statistic 1.548 0.119
lnY − 2.082 − 3.664*** − 2.629 − 4.534*** Panel rho-statistic 0.822 0.924
lnY2 − 1.929 − 3.547*** − 2.409 − 4.405*** Panel PP-statistic − 4.345*** 0.000
lnY3 − 1.739 − 3.383*** − 2.138 − 4.234*** Panel ADF-statistic − 3.751*** 0.000
lnEC − 0.94 − 3.155** − 1.193 − 5.537*** Between-dimension (heterogeneous)
lnFDI − 4.607*** − 5.14*** − 2.948 − 5.562*** Group rho-statistic 1.652 0.950
lnTO − 2.848 − 3.922*** − 2.973 − 5.355*** Group PP-statistic − 3.258*** 0.001
lnURB − 2.062 − 4.579*** − 1.501 − 4.863*** Group ADF-statistic − 2.344*** 0.006
“***” and “**” indicate the level of significance at 1% and 5%, “***” indicates the level of significance at 1%
respectively
Table 12 Kao (1999) cointegration test

Table 8 and Table 9 show the unit root tests of first gen- t-statistic Prob
eration. All variables, with the exception of lnFDI, have a
unit root at a level, and there is no unit root at the first differ- ADF − 3.081** 0.007
ence, according to the findings of these tests. Only lnFDI is Residual variance 0.005
found stationary at both level and first difference. HAC variance 0.004
The results for CADF and CIPS are presented in Table 10. “**” indicates the level of significance at 5%
The results of CADF show that lnCCO2, lnY, lnY2, lnY3,
lnTO, and lnURB are stationary at first difference, while
lnFDI is stationary at both level and first difference. CIPS hypothesis of no cointegration” indicating that Y, square
results indicate that all panel variables have a unit root at the of Y, cube of Y, EC, FDI, TO, and URB have a long-run
level, but they become stationary when the first difference is association with CCO2 emissions in our sample of five
taken. In conclusion, all of the variables are I(0) and I(1) in SAARC countries. The Kao cointegration test is tabulated
both unit root tests of first and second generation. in Table 12. The results of this test corroborate Pedroni
The results of the Pedroni cointegration tests are dis- cointegration’s conclusions by implying that the variables
played in Table 11. Four out of seven statistics (two within are in long-run equilibrium. Table 13 shows the results of
dimension and two between dimensions) reject the “null Johansen Fisher’s cointegration test. The reported trace and
13
Table 13 Johansen Fisher panel cointegration test Table 15 FMOLS and DOLS model results
Tests Fisher statistics Prob Fisher statistics Prob Variables FMOLS DOLS
(from trace test) (from max Eigen)
Coefficient Prob Coefficient Prob
None 485.300*** 0.000 165.300*** 0.000
lnY 33.883*** 0.000 46.054** 0.034
At most 1 209.700*** 0.000 149.900*** 0.000
(7.420) (21.491)
At most 2 141.500*** 0.000 70.530*** 0.000
lnY2 − 4.891*** 0.000 − 6.467** 0.026
At most 3 81.900*** 0.000 45.520*** 0.000
(0.987) (2.868)
At most 4 43.150*** 0.000 22.750*** 0.004
lnY3 0.237*** 0.000 0.305** 0.018
At most 5 26.030*** 0.001 16.300** 0.038
(0.044) (0.128)
At most 6 16.850** 0.032 14.840* 0.062
lnEC 0.378*** 0.002 0.317 0.379
At most 7 12.940 0.114 12.940 0.114
(0.119) (0.360)
“***,” “**,” and “*” indicate the level of significance at 1%, 5%, and lnFDI − 0.010*** 0.233 − 0.015 0.546
10%, respectively (0.008) (0.025)
lnTO − 0.013*** 0.000 − 0.014* 0.088
(0.003) (0.008)
Table 14 Westerlund (2007) cointegration test lnURB 1.495*** 0.000 1.050 0.118
Statistic Value Z value P value (0.241) (0.667)
R-squared 0.975 0.971
Gt − 4.123** 2.124 0.02 Adjusted R-squared 0.973 0.969
Ga − 14.124 0.25 0.654
Pt − 7.254*** 2.456 0.004 “***,” “**,” and “*” indicate the level of significance at 1%, 5%, and
10%, respectively. Standard error (SE) values are in the parenthesis
Pa − 15.121** 1.89 0.034
“***” and “**” indicate the level of significance at 1% and 5%,

respectively emissions will fall by 0.334%. The positive and negative
effects of GDP and its square term, respectively, on C CO2
emissions confirm the presence of an EKC in the region
maximum-eigenvalue statistics show the presence of a maxi- under study. This evidence corroborates the findings of
mum of six cointegration equations. This further strengthens Saboori and Sulaiman (2013), Farhani and Shahbaz (2014),
the case for the long-run cointegration of our chosen panel Kasman and Duman (2015), Shahbaz et al. (2016a, 2016b),
variables. Table 14 displays the results of the Westerlund Dogan and Seker (2016), Le and Ozturk (2020) and Pablo-
cointegration test. According to the results shown in Table 8, Romero et al. (2017) in regard to the ASEAN countries,
3 out of 4 statistics refute the null hypothesis of no cointe- MENA region, African countries, new EU members, EU
gration, which has been accepted as true, at a level of sig- 27 countries, 47 EMDEs countries, and OECD countries.
nificance of less than 5%. In summary, we conclude from all Studies by Knight and Schor (2014), Baloch et al. (2021),
four tests of co-integration test that there is strong empirical Adebayo et al. (2021), He et al. (2021), and Kirikkaleli and
evidence that the target variables have a long-running asso- Adebayo (2021) have considered consumption-based carbon
ciation in the countries of SAARC throughout the period emissions to assess environmental degradation. Our results
1990 to 2018. regarding the positive and negative impact of GDP and its
Finally, the long-run elasticities of all explanatory vari- square term, respectively, on C CO2 emissions endorse the
ables using FMOLS and DOLS methods are summarized in findings of Knight and Schor (2014), Baloch et al. (2021),
Table 15. The results of FMOLS and DOLS expose that per and Adebayo et al. (2021) with respect to high-income coun-
capita GDP growth has a significant and positive effect on tries, OECD countries, and Chile, respectively. However, the
consumption-based CO2 emissions (CCO2) in the SAARC results contradict the conclusion of Kirikkaleli and Adebayo
region. These outcomes imply that economic growth in (2021), who found an insignificant connection between eco-
South Asian countries comes at the cost of environmental nomic growth and consumption-based CO2 in the case of
degradation, including air pollution and carbon emissions. India. This is because India has achieved a certain degree
The results further indicate that the squared-GDP (GDP2) is of energy efficiency gains and is thus in a position to pursue
negatively associated with CO2 emissions. More precisely, economic expansion strategies without being overly worried
FMOLS estimation shows that a 1% increase in squared about emissions. We also investigate whether an N-shaped
GDP minimizes CCO2 emission by 4.89% if all other fac- EKC exists in SAARC nations by including the cubic term of
tors are considered constant. Similarly, according to the per capita GDP in our empirical model. The results highlight
DOLS approach, when squared-GDP grows by 1%, C CO2 that the cubic term of GDP ( GDP3) is positively linked with
13
CO2 emissions, thereby confirming an N-shaped relation-

C Table 16 Variance inflation Variable VIF 1/VIF
ship between economic growth and C CO2 emissions. This factor of explanatory variables
relationship pattern implies that at the initial phase of eco- lnY 2.01 0.497
nomic growth, an increase in income entails a higher level lnEC 1.77 0.564
of CO2 emission. Further increase in income level leads to lnFDI 2.06 0.485
an improvement in environmental quality by reducing C O2 lnTO 1.72 0.582
emission. Lastly, in the third stage, the environment again lnURB 1.85 0.541
deteriorates after a certain income level is achieved. One Mean VIF 1.72 0.582
possible explanation for this behavior of EKC in SAARC
nations is that the economy of the region is mainly driven
by India, where technological obsolesce effect may be in The coefficients of trade openness obtained from FMOLS
operation as the country is still heavily dependent on fossil and DOLS are − 0.013 and − 0.014, respectively, indicating
fuels to fulfill its ambitious development projects. Therefore, that increased trade openness leads to a decline in CCO2
the technical effect is being outweighed by the scale effect in emissions. These findings are the same as Dogan and Seker
SAARC countries. These findings regarding the existence of (2016) for 23 top renewable energy-using nations, Shahbaz
N-shaped EKC corroborate the studies of Alvarez-Herranz et al. (2013) for Indonesia, and Zhang et al. (2017) for 10
et al. (2017), Bekun et al. (2019), and Zhang et al. (2020). newly industrialized countries but differ from Shahbaz et al.
However, these outcomes contradict Gyamfi et al. (2021). (2016a, 2016b) for BRICS countries. This is an interesting
The findings uncover a positive and highly significant finding as the conventional wisdom supports the view that
link between energy usage and CCO2 emissions in SAARC trade openness would degrade the environment in devel-
countries. The results of the FMOLS method reveal that oping countries. Nevertheless, there are some plausible
when energy consumption rises by 1%, CCO2 emissions explanations for a negative association between trade open-
increase by 0.378%, all other factors remaining the same. ness and CCO2 emissions in the SAARC region. First, the
These results endorse the previous findings of Arouri et al. extent of trade openness in SAARC nations is still meager
(2012) for MENA countries; Ozturk and Acaravci (2013) for to affect CO2 emissions positively. Second, trade openness
Turkey; Shahbaz et al. (2018) for a sample of high, middle, can encourage the transfer of innovative technologies from
and low-income countries; Tang and Tan (2015) for Vietnam industrialized to developing economies, reducing CO2 emis-
and Baek (2015) for Arctic countries; and Hanif et al. (2019) sions (Zhang et al. 2017; Dauda et al. 2021). In other words,
for emerging Asian economies. Like other developing coun- in line with the “pollution halo effect,” knowledge spillover
tries, SAARC nations are confronting multiple economic from engaging with industrialized nations promotes green
challenges and are struggling to improve the living standards growth in host countries by diminishing emissions. Third,
of their populations. To achieve their ambitious growth tar- India, which is the dominant economy in the SAARC region,
gets and produce more goods, they are using more energy, is paying more attention to the environmental impact of a
which mainly originates from fossil fuels in SAARC coun- trade by drawing lessons from industrialized nations. Inter-
tries. This, in turn, generates CO2 emissions and other toxic estingly, the evidence we have drawn from FDI and trade
gases. Additionally, as Hanif et al. (2019) pointed out, the openness rejects the “pollution haven hypothesis” in SAARC
combustion of fossil fuels discharges more CO2 emissions countries favoring the “pollution halo hypothesis” from 1990
in Asian developing countries as they use less efficient and to 2018.
oil-based technologies (Table 16). The results also demonstrate that urbanization in SAARC
Contrary to the “pollution haven hypothesis,” our results member countries significantly contributes to C CO2 emis-
indicate that inward FDI diminishes C CO2 emissions in sions. More precisely, the results obtained from FMOLS
SAARC countries. However, this relationship is statistically show that a 1% rise in urbanization increases C CO2 emis-
insignificant. A positive relationship between FDI and CO2 sions by 1.495% at less than 1% level of significance. This
emissions is also reported by Zhu et al. (2016) for ASEAN-5 outcome endorses the findings of Kasman and Duman
countries and Waqih et al. (2019) for SAARC countries. (2015), Dogan and Turkekul (2016), and Hanif (2018).
However, this outcome is contrary to those reported by Baek Despite offering various economic and social benefits to
and Koo (2008), Chandran and Tang (2013), Shahbaz et al. the lives of the people, rapid urbanization creates greater
(2018), and Khan and Ozturk (2019). This positive effect of demand for transportation, public utilities, and other ser-
FDI experienced by SAARC countries may be attributed to vices. The higher demands for these services put increasing
adopting modern technology and approaches designed for pressure on natural resources, thereby generating negative
improving environmental quality. externalities, including GHGs emissions, health issues, and
Trade openness is found to boost the environmental qual- water contamination (Hanif et al. 2019). South Asia is expe-
ity in SAARC countries by plummeting CCO2 emissions. riencing rapid growth of urban population; according to an
13
Table 17 D-H causality tests Null hypothesis W-Stat Zbar-Stat Prob
lnY does not homogeneously cause lnCCO2 5.120*** 2.685 0.007

lnCCO2 does not homogeneously cause lnY 1.205 − 0.914 0.361
lnY2 does not homogeneously cause lnCCO2 5.216*** 2.773 0.006
lnCCO2 does not homogeneously cause lnY2 1.141 − 0.973 0.330
lnY3 does not homogeneously cause lnCCO2 5.191*** 2.750 0.006
lnCCO2 does not homogeneously cause lnY3 1.093 − 1.018 0.309
lnEC does not homogeneously cause lnCCO2 1.330 − 0.800 0.424
lnCCO2 does not homogeneously cause lnEC 3.956 1.615 0.106
lnFDI does not homogeneously cause lnCCO2 2.022 − 0.171 0.864
lnCCO2 does not homogeneously cause nidi 2.419 0.190 0.849
lnTO does not homogeneously cause lnCCO2 2.381 0.167 0.868
lnCCO2 does not homogeneously cause lnTO 2.985 0.721 0.471
lnURB does not homogeneously cause lnCCO2 4.601** 2.208 0.027
lnCCO2 does not homogeneously cause lnURB 6.864*** 4.288 0.000
lnY2 does not homogeneously cause lnY 1.554 − 0.594 0.553
lnY does not homogeneously cause lnY2 1.537 − 0.609 0.542
lnY3 does not homogeneously cause lnY 1.526 − 0.619 0.536
lnY does not homogeneously cause lnY3 1.509 − 0.636 0.525
lnEC does not homogeneously cause lnY 2.015 − 0.170 0.865
lnY does not homogeneously cause lnEC 5.636*** 3.159 0.002
lnFDI does not homogeneously cause lnY 1.145 − 0.970 0.332
lnY does not homogeneously cause lnFDI 3.125 0.833 0.405
lnTO does not homogeneously cause lnY 1.448 − 0.691 0.490
lnY does not homogeneously cause lnTO 2.541 0.313 0.754
lnURB does not homogeneously cause lnY 5.180*** 2.740 0.006
lnY does not homogeneously cause lnURB 4.328* 1.957 0.050
lnY3 does not homogeneously cause lnY2 1.490 − 0.653 0.514
lnY2 does not homogeneously cause lnY3 1.489 − 0.653 0.514
lnEC does not homogeneously cause lnY2 2.020 − 0.165 0.869
lnY2 does not homogeneously cause lnEC 5.469*** 3.006 0.003
lnFDI does not homogeneously cause lnY2 1.126 − 0.986 0.324
lnY2 does not homogeneously cause lnFDI 3.074 0.787 0.432
lnTO does not homogeneously cause lnY2 1.388 − 0.746 0.455
lnY2 does not homogeneously cause lnTO 2.495 0.271 0.786
lnURB does not homogeneously cause lnY2 4.739** 2.335 0.020
lnY2 does not homogeneously cause lnURB 4.463** 2.081 0.037
lnEC does not homogeneously cause lnY3 2.029 − 0.157 0.875
lnY3 does not homogeneously cause lnEC 5.496*** 3.030 0.002
lnFDI does not homogeneously cause lnY3 1.118 − 0.994 0.320
lnY3 does not homogeneously cause lnFDI 3.026 0.743 0.458
lnTO does not homogeneously cause lnY3 1.327 − 0.803 0.422
lnY3 does not homogeneously cause lnTO 2.442 0.222 0.824
lnURB does not homogeneously cause lnY3 3.359 1.065 0.287
lnY3 does not homogeneously cause lnURB 4.988** 2.563 0.010
lnFDI does not homogeneously cause lnEC 1.727 − 0.440 0.660
lnEC does not homogeneously cause lnFDI 2.344 0.122 0.903
lnTO does not homogeneously cause lnEC 4.214 1.851 0.064
lnEC does not homogeneously cause lnTO 3.901 1.564 0.118
lnURB does not homogeneously cause lnEC 5.301*** 2.851 0.004
lnEC does not homogeneously cause lnURB 5.561*** 3.090 0.002
lnTO does not homogeneously cause lnFDI 2.870 0.601 0.548
13
Table 17 (continued) Null hypothesis W-Stat Zbar-Stat Prob
lnFDI does not homogeneously cause lnTO 1.740 − 0.428 0.669

lnURB does not homogeneously cause lnFDI 2.484 0.250 0.803
lnFDI does not homogeneously cause lnURB 3.279 0.973 0.330
lnURB does not homogeneously cause lnTO 5.678*** 3.198 0.001
lnTO does not homogeneously cause lnURB 2.248 0.044 0.965
“***,” “**,” and “*” indicate the level of significance at 1%, 5%, and 10%, respectively
estimate, the region’s urban population expanded by 130 have strong empirical evidence of a long-run equilibrium
million between 2000 and 2011, and it is forecast to grow relationship. Apart from establishing a traditional inverted
by 250 million by 2030 (Ellis and Roberts 2016). This rapid U-shaped association between income and CCO2 emis-
and unmanaged urbanization is exacerbating environmental sions as evidenced by the negative and positive coefficients
quality in the region. of GDP and squared-GDP, our findings reveal the presence
The findings of the DH causality test are presented in of an N-shaped EKC in the SAARC region. Besides, we
Table 17. The findings support the unidirectional causality find that energy consumption and urbanization are rap-
that runs from economic growth to CCO2 emissions and idly degrading the environment in the region by emitting
the unidirectional causality that runs from squared eco- CCO2, while FDI and trade openness are found to improve
nomic growth to CCO2 emissions. These outcomes align the environmental quality in SAARC countries by reducing
with (Dogan and Seker 2016). The findings also support the CO2 emissions. Although the impact of FDI on CCO2 emis-
unidirectional causality that runs from cube of economic sion is proved positive, the relationship is not significant.
growth to CCO2 emissions. The results also reveal the evi- The negative elasticities of FDI and trade openness found in
dence of unidirectional causality from economic growth to the study reject the “pollution haven hypothesis” in SAARC
energy consumption, squared economic growth to energy countries favoring the “pollution halo hypothesis” over the
consumption, trade openness to energy consumption, cube period 1990 to 2018. DH causality test results support the
of economic growth to energy consumption, cube of eco- unidirectional causality running from economic growth to
nomic growth to urbanization, and urbanization to trade CCO2 emissions and from squared economic growth to
openness. Interestingly, the findings show bidirectional cau- CCO2 emissions. The results also reveal the evidence of
sality between urbanization and CCO2 emissions, urbaniza- unidirectional causality from economic growth to energy
tion and economic growth, urbanization and squared GDP, consumption, squared economic growth to energy consump-
and urbanization and energy consumption. tion, and trade openness to energy consumption. Due to the
unavailability of data for Bhutan and Maldives, only Bang-
ladesh, Nepal, India, Pakistan, and Sri Lanka are considered
Conclusion and Policy Recommendations for this study. Population and usage of renewable resources
are other significant determinants of consumption-based car-
This research is an empirical attempt to determine the key bon emissions that are not considered in this study due to
drivers of consumption-based carbon dioxide emissions the unavailability of data for some SAARC countries. The
in SAARC nations for a time span of 1990 to 2018. We N-shaped hypothesis can be explored for other economic
investigate the effects of economic growth, energy consump- regions by employing FMOLS and DOLS methods.
tion, trade openness, and FDI on consumption-based CO2
emissions within the EKC framework. Unlike most previ-
ous researches, our study utilizes consumption-based CO2 Policy Implications
emissions as a proxy for environmental deterioration. Fur-
ther, instead of considering nominal trade openness or trade Some of the policy recommendations emanating from this
potential index as a proxy of trade openness, this paper study are:
considers composite trade share for the same. The study The findings show that in the SAARC area, trade open-
employs both the first and second-generation unit root tests, ness, and FDI have a negative impact on carbon dioxide
revealing all the variables are stationary either at level or emissions. At the same time, GDP and energy consumption
at first difference. After confirming all the variables under are the primary drivers of environmental degradation:
the present research are I(0) and I(1), we performed first-
and second-generation cointegration tests. The findings 1. As the findings highlight an N-shaped association
of these cointegration tests show that the target variables between economic growth and CCO2 emissions, the
13
SAARC countries, especially India, which is the domi- Author contribution Komal Kanwar Shekhawat and Arvind Kumar
nant economy in the region, should revise their current Yadav have done the introduction, literature, review, and method sec-
tion. Pushp Kumar has made the analysis. Md Sahnewaz Sanu has
policies by considering the technological obsolesce written the result and discussion section. Pushp Kumar has done the
effect to avoid further environmental degradation in the overall formatting of the paper. All authors have read and approved
future. The authorities in the region need to continually the manuscript.
encourage the creation/upgradation of new technologies
so as to boost environmental quality. Data Availability Data will be made available upon request.
2. The result manifests that SAARC nations are now using
a high level of energy, which is causing environmen- Declarations
tal degradation. Therefore, it is suggestive for these
Ethics approval and consent to participate Not applicable.
economies to enhance the level of energy efficiency and
augment the share of renewable energy sources in the Consent for publication Not applicable.
energy mix. Additionally, they should pay more atten-
tion to environmental protection by implementing poli- Competing interests The authors declare no competing interests.
cies and designing action agendas.
3. The importance of the scale effect in economic activ-
ity must be addressed, and SAARC countries should
invest in new technologies that are both environmentally References
benign and efficient.
4. As urbanization is found detrimental for environmen- Adams S, Klobodu EKM (2017) Urbanization, democracy, bureau-
tal quality in the SAARC region, the member countries cratic quality, and environmental degradation. J Policy Model
39(6):1035–1051
should slow down the pace of urbanization by creat- Adebayo TS, Kirikkaleli D (2021) Impact of renewable energy con-
ing income-generating avenues in rural areas. Although sumption, globalization, and technological innovation on envi-
urbanization enhances the wellbeing and living stand- ronmental degradation in Japan: application of wavelet tools.
ards of people, its pace should be monitored in such a Environ Dev Sustain 1–26
Adebayo TS, Udemba EN, Ahmed Z, Kirikkaleli D (2021) Determi-
way that it does not worsen the environmental quality. nants of consumption-based carbon emissions in Chile: an appli-
Additionally, the authorities can raise the awareness of cation of non-linear ARDL. Environ Sci Pollut Res 1–15
the urban population about the necessity of green energy Afridi MA, Kehelwalatenna S, Naseem I, Tahir M (2019) Per capita
through awareness programs and open dialogues with income, trade openness, urbanization, energy consumption, and
CO 2 emissions: an empirical study on the SAARC Region. Envi-
civil society at both the micro and macro levels. ron Sci Pollut Res 26(29):29978–29990
5. The region must also concentrate on strategies to Ahmad A, Zhao Y, Shahbaz M, Bano S, Zhang Z, Wang S, Liu Y
reduce emissions by fostering industries that use green (2016) Carbon emissions, energy consumption and economic
and cleaner energy sources. Aside from that, the area growth: An aggregate and disaggregate analysis of the Indian
economy. Energy Policy 96:131–143
should focus on green projects in a shared forum and use Ahmad M, Jabeen G, Wu Y (2021) Heterogeneity of pollution haven/
advanced carbon-reduction mechanisms (cap and trade, halo hypothesis and environmental Kuznets curve hypothesis across
carbon permits) to reduce emissions. development levels of Chinese provinces. J Clean Prod 285:124898
6. SAARC countries’ energy usage is heavily reliant on Ahmed Z, Le HP (2021) Linking information communication tech-
nology, trade globalization index, and CO 2 emissions: evi-
nonrenewable sources. Therefore, alternative energy dence from advanced panel techniques. Environ Sci Pollut Res
resources should be discovered for both economic 28(7):8770–8781
growth and environmental protection. Furthermore, Alam MJ, Begum IA, Buysse J, Rahman S, Van Huylenbroeck G
nonrenewable resources must be used wisely and effec- (2011) Dynamic modeling of causal relationship between energy
consumption, CO2 emissions and economic growth in India.
tively. To reproduce the intended results, policies must Renew Sustain Energy Rev 15(6):3243–3251
be developed in a shared forum. Alam MM, Murad MW, Noman AHM, Ozturk I (2016) Relationships
7. On the government’s front, national policies targeting among carbon emissions, economic growth, energy consump-
consumption-based carbon emissions should also be tion and population growth: testing environmental Kuznets
curve hypothesis for Brazil, China, India and Indonesia. Ecol
designed to combat environmental degradation in order Ind 70:466–479
to ensure harmony between energy consumption, for- Allison P (2012) When can you safely ignore multicollinearity? Sta-
eign direct investment, trade openness, and environment. tistical Horizons 5(1):1–2
Creating awareness and disseminating information at a Alvarez-Herranz A, Balsalobre-Lorente D, Shahbaz M, Cantos JM
(2017) Energy innovation and renewable energy consumption in
mass level regarding the harmful effects of rising carbon the correction of air pollution levels. Energy Policy 105:386–397
emissions and resulting environmental unsustainability Ang JB (2007) CO2 emissions, energy consumption, and output in
is one of the mediums. France. Energy Policy 35(10):4772–4778
13
Antweiler W, Copeland BR, Taylor MS (2001) Is free trade good for Davis SJ, Caldeira K (2010) Consumption-based accounting of CO2
the environment? Am Econ Rev 91(4):877–908 emissions. Proc Natl Acad Sci 107(12):5687–5692. https://doi.
Apergis N (2016) Environmental Kuznets curves: New evidence on org/10.1073/pnas.0906974107
both panel and country-level CO2 emissions. Energy Econ Dogan E (2015) The relationship between economic growth and elec-
54:263–271 tricity consumption from renewable and non-renewable sources:
Arouri MEH, Youssef AB, M’henni H, Rault C (2012) Energy con- a study of Turkey. Renew Sustain Energy Rev 52:534–546
sumption, economic growth and CO2 emissions in Middle East Dogan E, Seker F (2016) An investigation on the determinants of car-
and North African countries. Energy Policy 45:342–349 bon emissions for OECD countries: empirical evidence from
Aye GC, Edoja PE (2017) Effect of economic growth on CO2 emis- panel models robust to heterogeneity and cross-sectional depend-
sion in developing countries: evidence from a dynamic panel ence. Environ Sci Pollut Res 23(14):14646–14655
threshold model. Cogent Econ Finance 5(1):1379239 Dogan E, Turkekul B (2016) CO 2 emissions, real output, energy con-
Baek J (2015) A new look at the FDI–income–energy–environment sumption, trade, urbanization and financial development: test-
nexus: dynamic panel data analysis of ASEAN. Energy Policy ing the EKC hypothesis for the USA. Environ Sci Pollut Res
91:22–27 23(2):1203–1213
Baek J, Koo WW (2008) A dynamic approach to the FDI-environ- Dong B, Wang F, Guo Y (2016) The global EKCs. Int Rev Econ Financ
ment nexus: the case of China and India. East Asian Econ Rev 43:210–221
13(2):87–106 Dumitrescu EI, Hurlin C (2012) Testing for Granger non-causality in
Baloch MA, Ozturk I, Bekun FV, Khan D (2021) Modeling the heterogeneous panels. Econ Model 29(4):1450–1460
dynamic linkage between financial development, energy inno- Ellis P, Roberts M (2016) Leveraging urbanization in south Asia. The
vation, and environmental quality: does globalization matter? World Bank
Bus Strateg Environ 30(1):176–184 Ertugrul HM, Cetin M, Seker F, Dogan E (2016) The impact of trade
Banday UJ, Aneja R (2019) Energy consumption, economic growth openness on global carbon dioxide emissions: Evidence from
and CO2 emissions: evidence from G7 countries. World J Sci the top ten emitters among developing countries. Ecol Ind
Technol Sustain Dev 16(1):22–39 67:543–555
Barnes DF, Krutilla K, Hyde WF (2010) The urban household energy Farhani S, Shahbaz M (2014) What role of renewable and non-renewa-
transition: social and environmental impacts in the developing ble electricity consumption and output is needed to initially miti-
world. Routledge, New York gate CO2 emissions in MENA region? Renew Sustain Energy
Bekun FV, Alola AA, Sarkodie SA (2019) Toward a sustainable Rev 40:80–90
environment: Nexus between CO2 emissions, resource rent, Gill AR, Viswanathan KK, Hassan S (2018) A test of environmen-
renewable and nonrenewable energy in 16-EU countries. Sci tal Kuznets curve (EKC) for carbon emission and potential of
Total Environ 657:1023–1029 renewable energy to reduce greenhouse gases (GHG) in Malay-
Bhat AA, Mishra PP (2018) The Kyoto Protocol and CO2 emis- sia. Environ Dev Sustain 20(3):1103–1114
sion: is India still hibernating? Indian Growth Dev Rev Gökmenoğlu K, Taspinar N (2016) The relationship between CO2
11(2):152–168 emissions, energy consumption, economic growth and FDI: the
Cai Y, Sam CY, Chang T (2018) Nexus between clean energy con- case of Turkey. J Int Trade Econ Dev 25(5):706–723
sumption, economic growth and CO2 emissions. J Clean Prod Gozgor G (2017) Does trade matter for carbon emissions in OECD
182:1001–1011 countries? Evidence from a new trade openness measure. Envi-
Capello R, Camagni R (2000) Beyond optimal city size: an evalu- ron Sci Pollut Res 24(36):27813–27821
ation of alternative urban growth patterns. Urban Studies Grossman GM, Krueger AB (1995) Economic growth and the environ-
37(9):1479–1496 ment. Q J Econ 110(2):353–377
Chakravarty D, Mandal SK (2016) Estimating the relationship Gyamfi BA, Adedoyin FF, Bein MA, Bekun FV (2021) Environmental
between economic growth and environmental quality for the implications of N-shaped environmental Kuznets curve for E7
BRICS economies-a dynamic panel data approach. J Dev Areas countries. Environ Sci Pollut Res 28:33072–33082
50(5):119–130 Halicioglu F (2009) An econometric study of CO2 emissions, energy
Chandler W, Secrest TJ, Logan J, Schaeffer R, Szklo AS, Schuler consumption, income and foreign trade in Turkey. Energy Policy
ME, Alpan-Atamer S (2002) Climate change mitigation in 37(3):1156–1164
developing countries. Brazil, China, India, Mexico, South Hanif I (2018) Impact of fossil fuels energy consumption, energy poli-
Africa, and Turkey. Pew Center on Global Climate Change, cies, and urban sprawl on carbon emissions in East Asia and the
Arlington, VA (United States) pacific: a panel investigation. Energ Strat Rev 21:16–24
Chandran VGR, Tang CF (2013) The impacts of transport energy Hanif I, Raza SMF, Gago-de-Santos P, Abbas Q (2019) Fossil fuels,
consumption, foreign direct investment and income on CO2 foreign direct investment, and economic growth have triggered
emissions in ASEAN-5 economies. Renew Sustain Energy Rev CO2 emissions in emerging Asian economies: some empirical
24:445–453 evidence. Energy 171:493–501
Chen F, Jiang G, Kitila GM (2021) Trade openness and CO2 emis- He F, Chang KC, Li M, Li X, Li F (2020) Bootstrap ARDL test on the
sions: the heterogeneous and mediating effects for the belt and relationship among trade, FDI, and CO2 emissions: based on
road countries. Sustainability 13(4):1958 the experience of BRICS countries. Sustainability 12(3):1060
Chen T, Gozgor G, Koo CK, Lau CKM (2020) Does international He X, Adebayo TS, Kirikkaleli D, Umar M (2021) Consumption-based
cooperation affect CO 2 emissions? Evidence from OECD carbon emissions in Mexico: an analysis using the dual adjust-
countries. Environ Sci Pollut Res 27(8):8548–8556 ment approach. Sustain Prod Consum 27:947–957
Dar JA, Asif M (2019) Do agriculture-based economies mitigate Iheonu CO, Anyanwu OC, Odo OK, Nathaniel SP (2021) Does eco-
CO2 emissions? Int J Energy Sect Manage 14(3):638–652 nomic growth, international trade, and urbanization uphold
Dauda L, Long X, Mensah CN, Salman M, Boamah KB, Ampon- environmental sustainability in sub-Saharan Africa? Insights
Wireko S, Dogbe CSK (2021) Innovation, trade openness and from quantile and causality procedures. Environ Sci Pollut Res
CO2 emissions in selected countries in Africa. J Clean Prod 28(22):28222–28233
281:125143
13
Iqbal J, Nosheen M, Khan MW, Raja EUH, Jasim M (2021) An sub-Saharan Africa’s Βig 10 electricity generators. Renew
asymmetric analysis of the role of exports and imports in Energy 123:36–43
consumption-based carbon emissions in the G7 economies: Magazzino C, Mutascu M, Mele M, Sarkodie SA (2021) Energy con-
evidence from nonlinear panel autoregressive distributed lag sumption and economic growth in Italy: A wavelet analysis.
model. Environ Sci Pollut Res 28:53804–53818. https://doi. Energy Rep 7:1520–1528
org/10.1007/s11356-021-14465-6 Mohsin M, Rasheed AK, Saidur R (2018) Economic viability and pro-
Ito K (2017) CO2 emissions, renewable and non-renewable energy duction capacity of wind generated renewable hydrogen. Int J
consumption, and economic growth: Evidence from panel data Hydrogen Energy 43(5):2621–2630
for developing countries. Int Econ 151:1–6 Muhammad F, Khan A, Razzaq N, Karim R (2021) Influence of tour-
Jacobi P, Kjellen M, McGranahan G, Songsore J, Surjadi C (2010) The ism, governance, and foreign direct investment on energy con-
citizens at risk: from urban sanitation to sustainable cities. Routledge sumption and CO 2 emissions: a panel analysis of Muslim coun-
Jamel L, Maktouf S (2017) The nexus between economic growth, tries. Environ Sci Pollut Res 28(1):416–431
financial development, trade openness, and CO2 emissions in Muhammad S, Long X (2021) Rule of law and CO2 emissions: a com-
European countries. Cogent Econ Finance 5(1):1341456 parative analysis across 65 belt and road initiative (BRI) coun-
Kao C (1999) Spurious regression and residual-based tests for coin- tries. J Clean Prod 279:123539
tegration in panel data. J Econom 90(1):1–44 Mujtaba A, Jena PK (2021) Analyzing asymmetric impact of eco-
Kasman A, Duman YS (2015) CO2 emissions, economic growth, energy nomic growth, energy use, FDI inflows, and oil prices on CO
consumption, trade and urbanization in new EU member and can- 2 emissions through NARDL approach. Environ Sci Pollut Res
didate countries: a panel data analysis. Econ Model 44:97–103 28:30873–30886
Khalid K, Usman M, Mehdi MA (2021) The determinants of environ- Nasir M, Rehman FU (2011) Environmental Kuznets curve for carbon
mental quality in the SAARC region: a spatial heterogeneous emissions in Pakistan: an empirical investigation. Energy Policy
panel data approach. Environ Sci Pollut Res 28(6):6422–6436 39(3):1857–1864
Khan MA, Ozturk I (2019) Examining foreign direct investment and Neve M, Hamaide B (2017) Environmental Kuznets curve with
environmental pollution linkage in Asia. Environ Sci Pollut adjusted net savings as a trade-off between environment and
Res 27(7):7244–7255 development. Aust Econ Pap 56(1):39–58
Khan MTI, Yaseen MR, Ali Q (2019) Nexus between financial Ngouhouo I, Nchofoung T, Njamen Kengdo AA (2021) Determinants
development, tourism, renewable energy, and greenhouse gas of Trade Openness in Sub-Saharan Africa: Do Institutions Mat-
emission in high-income countries: a continent-wise analysis. ter? Int Econ J 35(1):96–119
Energy Econ 83:293–310 Nguyen TT, Pham TAT, Tram HTX (2020) Role of information and
Khan M, Ozturk I (2021) Examining the direct and indirect effects communication technologies and innovation in driving carbon
of financial development on CO2 emissions for 88 developing emissions and economic growth in selected G-20 countries. J
countries. J Environ Manag 293:112812 Environ Manage 261, 110162
Khan Z, Ali M, Jinyu L, Shahbaz M, Siqun Y (2020) Consumption- Ocal O, Aslan A (2013) Renewable energy consumption–economic
based carbon emissions and trade nexus: Evidence from nine growth nexus in Turkey. Renew Sustain Energy Rev 28:494–499
oil exporting countries. Energy Econ 89:104806 Ozturk I, Acaravci A (2013) The long-run and causal analysis of
Kim S (2019) CO2 emissions, foreign direct investments, energy energy, growth, openness and financial development on carbon
consumption, and GDP in developing countries: a more com- emissions in Turkey. Energy Econ 36:262–267
prehensive study using panel vector error correction model. Pablo-Romero MP, Cruz L, Barata E (2017) Testing the transport
Korean Econ Rev 35(1):5–24 energy-environmental Kuznets curve hypothesis in the EU27
Kirikkaleli D, Adebayo TS (2021) Do public-private partnerships countries. Energy Econ 62:257–269
in energy and renewable energy consumption matter for con- Pan X, Uddin MK, Ai B, Pan X, Saima U (2019) Influential factors of
sumption-based carbon dioxide emissions in India? Environ carbon emissions intensity in OECD countries: evidence from
Sci Pollut Res 1–14 symbolic regression. J Clean Prod 220:1194–1201
Knight KW, Schor JB (2014) Economic growth and climate change: Pata UK (2018) Renewable energy consumption, urbanization, financial
a cross-national analysis of territorial and consumption-based development, income and CO2 emissions in Turkey: testing EKC
carbon emissions in high-income countries. Sustainability hypothesis with structural breaks. J Clean Prod 187:770–779
6(6):3722–3731 Pedroni P (1999) Critical values for cointegration tests in heteroge-
Kukla-Gryz A (2009) Economic growth, international trade and air neous panels with multiple regressors. Oxford Bull Econ Stat
pollution: a decomposition analysis. Ecol Econ 68(5):1329–1339 61(S1):653–670
Kumar P, Sahu NC, Ansari MA (2021) Export potential of climate Pedroni P (2001) Fully modified OLS for heterogeneous cointegrated
smart goods in India: evidence from the Poisson pseudo maxi- panels. In Nonstationary Panels, Panel Cointegration, and
mum likelihood estimator. Int Trade J 35(3):288–308 Dynamic Panels. Emerald Group Publishing Limited
Latief R, Kong Y, Javeed SA, Sattar U (2021) Carbon emissions in Pedroni P (2004) Panel cointegration: asymptotic and finite sample
the SAARC countries with causal effects of FDI, economic properties of pooled time series tests with an application to the
growth and other economic factors: evidence from dynamic PPP hypothesis. Economet Theor 20(3):597–625
simultaneous equation models. Int J Environ Res Public Health Pesaran MH (2007) A simple panel unit root test in the presence of
18(9):4605 cross-section dependence. J Appl Economet 22(2):265–312
Le TH, Le HC, Taghizadeh-Hesary F (2020) Does financial inclusion Pesaran MH, Schuermann T, Weiner SM (2004) Modeling regional
impact CO2 emissions? Evidence from Asia. Finance Res Lett interdependencies using a global error-correcting macroecono-
34:101451 metric model. J Bus Econ Stat 22(2):129–162
Le HP, Ozturk I (2020) The impacts of globalization, financial develop- Phuc Nguyen C, Schinckus C, Su Dinh T (2020) Economic integration
ment, government expenditures, and institutional quality on CO and CO2 emissions: evidence from emerging economies. Climate
2 emissions in the presence of environmental Kuznets curve. Dev 12(4):369–384
Environ Sci Pollut Res 27(18):22680–22697 Poumanyvong P, Kaneko S (2010) Does urbanization lead to less
Lotz and Dogan (2018) The role of renewable versus non-renewa- energy use and lower CO2 emissions? A Cross-Country Analy-
ble energy to the level of CO2 emissions a panel analysis of sis. Ecol Econ 70(2):434–444
13
Ragoubi H, Mighri Z (2020) Spillover effects of trade openness on Sharma SS (2011) Determinants of carbon dioxide emissions: empiri-
CO2 emissions in middle-income countries: a spatial panel data cal evidence from 69 countries. Appl Energy 88(1):376–382
approach. Reg Sci Policy Pract 13(3):835–877 Shrestha RM, Ahmed M, Suphachalasai S, Lasco R (2012) Economics
Rahman MM, Saidi K, Mbarek MB (2020) Economic growth in South of reducing greenhouse gas emissions in South Asia: Options and
Asia: the role of CO2 emissions, population density and trade costs. Asian Development Bank
openness. Heliyon 6(5):e03903 Sinha A, Shahbaz M (2018) Estimation of environmental Kuznets
Rasoulinezhad E, Saboori B (2018) Panel estimation for renewable curve for CO2 emission: role of renewable energy generation in
and non-renewable energy consumption, economic growth, CO India. Renew Energy 119:703–711
2 emissions, the composite trade intensity, and financial openness Squalli J, Wilson K (2011) A new measure of trade openness. World
of the commonwealth of independent states. Environ Sci Pollut Econ 34(10):1745–1770
Res 25(18):17354–17370 Sun H, Ikram M, Mohsin M, Abbas Q (2021) Energy security and envi-
Rehman MU, Rashid M (2017) Energy consumption to environmen- ronmental efficiency: evidence from OECD countries. Singap
tal degradation, the growth appetite in SAARC nations. Renew Econ Rev 66(02):489–506
Energy 111:284–294 Tang CF, Tan BW (2015) The impact of energy consumption, income
Saboori B, Sulaiman J (2013) Environmental degradation, economic and foreign direct investment on carbon dioxide emissions in
growth and energy consumption: Evidence of the environmental Vietnam. Energy 79:447–454
Kuznets curve in Malaysia. Energy Policy 60:892–905 Tutulmaz O (2015) Environmental Kuznets curve time series applica-
Safi A, Chen Y, Wahab S, Ali S, Yi X, Imran M (2021) Financial insta- tion for Turkey: why controversial results exist for similar mod-
bility and consumption-based carbon emission in E-7 countries: els? Renew Sustain Energy Rev 50:73–81
The role of trade and economic growth. Sustain Prod Consum Udeagha MC, Ngepah N (2021) The asymmetric effect of trade open-
27:383–391 ness on economic growth in South Africa: a nonlinear ARDL
Saidi K, Mbarek MB (2017) The impact of income, trade, urbanization, approach. Econ Chang Restruct 54(2):491–540
and financial development on CO 2 emissions in 19 emerging Wang J, Dong K (2019) What drives environmental degradation?
economies. Environ Sci Pollut Res 24(14):12748–12757 Evidence from 14 Sub-Saharan African countries. Sci Total
Sapkota P, Bastola U (2017) Foreign direct investment, income, and Environ 656:165–173
environmental pollution in developing countries: Panel data Waqih MAU, Bhutto NA, Ghumro NH, Kumar S, Salam MA (2019)
analysis of Latin America. Energy Econ 64:206–212 Rising environmental degradation and impact of foreign direct
Sarkodie SA (2018) The invisible hand and EKC hypothesis: what are investment: an empirical evidence from SAARC region. J Envi-
the drivers of environmental degradation and pollution in Africa? ron Manage 243:472–480
Environ Sci Pollut Res 25(22):21993–22022 Waugh ME, Ravikumar B (2016) Measuring openness to trade. J Econ
Sarkodie SA, Ntiamoah EB, Li D (2019) Panel heterogeneous dis- Dyn Control 72:29–41
tribution analysis of trade and modernized agriculture on CO2 Westerlund J (2007) Testing for error correction in panel data. Oxford
emissions: the role of renewable and fossil fuel energy consump- Bull Econ Stat 69(6):709–748
tion. In Natural Resources Forum 43 (3), 135–153. Oxford, UK: Wijayatunga P, Fernando P (2013) An overview of energy cooperation
Blackwell Publishing Ltd in South Asia. ADB South Asia Working Paper Series (19)
Shahbaz M, Hye QMA, Tiwari AK, Leitão NC (2013) Economic Zhang J, Fan Z, Chen Y, Gao J, Liu W (2020) Decomposition and
growth, energy consumption, financial development, interna- decoupling analysis of carbon dioxide emissions from economic
tional trade and CO2 emissions in Indonesia. Renew Sustain growth in the context of China and the ASEAN countries. Sci
Energy Rev 25:109–121 Total Environ 714:136649
Shahbaz M, Mahalik MK, Shah SH, Sato JR (2016a) Time-varying Zhang S, Liu X, Bae J (2017) Does trade openness affect CO 2 emis-
analysis of CO2 emissions, energy consumption, and economic sions: evidence from ten newly industrialized countries? Environ
growth nexus: statistical experience in next 11 countries. Energy Sci Pollut Res 24(21):17616–17625
Policy 98:33–48 Zhang YJ (2011) Interpreting the dynamic nexus between energy con-
Shahbaz M, Nasir MA, Roubaud D (2018) Environmental degradation sumption and economic growth: Empirical evidence from Russia.
in France: the effects of FDI, financial development, and energy Energy Policy 39(5):2265–2272
innovations. Energy Econ 74:843–857 Zhu H, Duan L, Guo Y, Yu K (2016) The effects of FDI, economic
Shahbaz M, Nasreen S, Abbas F, Anis O (2015) Does foreign direct growth and energy consumption on carbon emissions in
investment impede environmental quality in high-, middle-, and ASEAN-5: evidence from panel quantile regression. Econ Model
low-income countries? Energy Econ 51:275–287 58:237–248
Shahbaz M, Rasool G, Ahmed K, Mahalik MK (2016b) Considering Zoundi Z (2017) CO2 emissions, renewable energy and the Environ-
the effect of biomass energy consumption on economic growth: mental Kuznets Curve, a panel cointegration approach. Renew
fresh evidence from BRICS region. Renew Sustain Energy Rev Sustain Energy Rev 72:1067–1075
60:1442–1450
Sharif A, Raza SA, Ozturk I, Afshan S (2019) The dynamic relation- Publisher's note Springer Nature remains neutral with regard to
ship of renewable and nonrenewable energy consumption with jurisdictional claims in published maps and institutional affiliations.
carbon emission: a global study with the application of heteroge-
neous panel estimations. Renew Energy 133:685–691
13

Key Drivers of Consumption Based Carbon Emissions: Empirical Evidence From SAARC Countries

Uploaded by

Copyright:

Available Formats

Key Drivers of Consumption Based Carbon Emissions: Empirical Evidence From SAARC Countries

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Key Drivers of Consumption Based Carbon Emissions: Empirical Evidence From SAARC Countries

Uploaded by

Copyright:

Available Formats

Environmental Science and Pollution Research

Key drivers of consumption‑based carbon emissions: empirical

Received: 12 July 2021 / Accepted: 3 November 2021

Fig. 1 Consumption-based ­CO2

countries during 1990–2018. In a number of ways, this Review of the literature

1 Saidi and Mbarek (2017) GMM 19 emerging economies 1990–2013 TO is insignificant

Table 5 Data source and description of the variables

Table 8 First-generation panel Variable Fisher-ADF Fisher-PP IPS LLC

lnCCO2 2.488 91.587 2.190 110.290 2.769 − 10.011 0.487 − 10.774

P values are in the parenthesis

Table 9 First-generation panel Variable Fisher-ADF Fisher-PP IPS LLC

lnCO2 17.952 88.509 14.084 134.574 − 1.622 − 10.337 − 1.061 − 9.967

P values are in the parenthesis

I(0) I(1) I(0) I(1) Within-dimension (homogenous)

Table 12 Kao (1999) cointegration test

“***” and “**” indicate the level of significance at 1% and 5%,

­ CO2 emissions, thereby confirming an N-shaped relation-

Table 17 D-H causality tests Null hypothesis W-Stat Zbar-Stat Prob

lnY does not homogeneously cause lnCCO2 5.120*** 2.685 0.007

Table 17 (continued) Null hypothesis W-Stat Zbar-Stat Prob

lnFDI does not homogeneously cause lnTO 1.740 − 0.428 0.669

You might also like

Fig. 1 Consumption-based CO2

“*” and “” indicate the level of significance at 1% and 5%,

CO2 emissions, thereby confirming an N-shaped relation-