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The Paris Climate Agreement’s Impact on Carbon Emission and Economic Growth on the

Five (5) ASEAN Countries

Madolid, Christian Rey P. Santos, Joshua Julian Q. Velasco, Christian Yob. C. Asst. Prof. Marie Antoinette L. Rosete, MDE

I. INTRODUCTION

Economic development and prosperity since the Industrial Revolution which began more
than 150 years ago have come about through technology driven by fuels such as coal, oil, and
gas. But these development and prosperity comes at a cost – not only we are fast depleting
these natural resources, but burning fossil fuels pollutes the atmosphere through the
“greenhouse effect” caused by these emissions from our consumption, the industries, and the
nature.

These technology driven by fuels causes one of the most complex problem in the world
with the potential to cause serious long-term damage to our economic life – the climate
change. It is the increase in the average world temperature induced by greenhouse gases that
is emitted from different sectors of an economy around the world. Global carbon emissions
from fossil fuels have significantly increased since 1990 (Boden, T.A., Marland, G., &
Andres, R.J.). At the global scale, the major greenhouse gas emitted by human activities that
contribute to the warming of the atmosphere is Carbon Dioxide which its primary source is
fossil fuel, then followed by industrial processes on forestry and land use. It accounts to 65%
of the greenhouse gas emissions in the world (IPCC 2014). The energy use driven by
economic growth is causing pollution, accelerating climate change. It is a global phenomenon
and no one will be exempted from its consequences. Pollution in one country affects other
countries as well. The problem is global and demands collective action on a global scale. For
it to be reduced effectively, measures to curb carbon emissions must be adopted worldwide,
even by those who do not want to adopt them. Certain features of the climate problem make it
unique in terms of finding economic solutions: the long time scale, the uncertainties involved,
the international scope of the problem, and the uneven distribution of benefits and costs
across the globe (Nordhaus, W.).

Environmental quality strongly affects economic development. Economic development


also strongly affects environmental quality. They are necessary conditions for each other. We
get most of our materials from the environment, from jobs, clothes, food, shelter and most of
the basic and luxurious goods and services that has ever existed. This goods and services in
turn promote economic growth for an economy. But as economic growth continues to
increase indefinitely, we are getting more from the environment faster than we are giving
back and letting them renew. This damages our environment, the quality and productivity of
resources and soon we will have fewer resources to be used for our production, giving less
output per capita and to sustain our living.

It is obvious now that environmental degradation can detract economic development.


Environmental pollution itself may cause slow economic growth. Environmental degradation
imposes high costs to its people and resources through health-related expenses and reduced
productivity of resources making it more costly for people to achieve what they desire.

This may also threaten a lot of livelihood of different people across the world especially
the ones who directly depends in whole or part on the environment through agriculture,
hunting, fishing, or forestry, this in turn may affect a country’s productivity and loss of output
to be shared in an economy.

These problems stress the importance of the environment as a source of income and
human development. It is obvious that environmental considerations should form an integral
part of policy initiatives. It is in fact one of the Millennium Development Goals (MDG)
adopted by the United Nations in September 2000 which is to “ensure environmental
sustainability” and it is said that this goal is essential for securing an escape from poverty so
people can get their basic needs and wants from the environment at a lower cost making it
affordable to the poor. The environment will also have a central place in the post-2015
Sustainable Development Goals (SDG) for its importance in the lives of every human and its
use for the economy.

Sustainability is the common word being used when talking about environment-economic
goals. It refers to the need to balance economic growth and environmental preservation.
Unsustainable methods of production sometimes in the short-run can have a positive impact
on current GNI figures from producing too much output given the resources from the
environment but in the long-run it will deplete these resources and decrease the national
productivity due to scarcer inputs. This method of production will not last indefinitely and it
implies that we should not only focus on one timeframe. As the meaning of sustainability
generally refers to “meeting the needs of the present generation without compromising the
needs of future generations.” They say that the natural resource base of a country and the
quality of its air, water, and land represent a common heritage for all generations, to destroy it
in the pursuit of short-term economic goals penalizes both the present and the future
generations.

The governments around the world want to combat climate change because of its impacts
in their state, but recent argument was brought by economists that made it harder to combat
climate change. The argument was used in an economic cost and benefit analysis. They argue
that the costs of combating climate change are more damaging to economic prosperity than
the potential benefits. Improvements in the environment require costly pollution abatement
technology and resource management and sometimes the benefit to the society at the margin
is small. This is one of the reasons why local and national government acts less on these
kinds of problem. But with environmental preservation it may be harmful for the economy in
the short run, but it would mitigate more damaging consequences in the long-run.

We can think of the atmosphere in economic terms as a public good, which tends to be
under-supplied if it is supplied by markets because of the lack of incentives and profit-motive
of the business firms. Pollution can be seen as an externality in which the social cost of a
production are not reflected in the produced product’s price therefore the producer does not
face the full cost of its supply. Pollution can also be viewed as a market failure because
normally there is no market for it. The argument for market failures can be a rationale for
strong government intervention. And according to Stern, climate change is the greatest
market failure ever experienced (Stern, N., 2007)

The problem of climate change is induced by the developed countries but its sweeping
consequences will be felt more by the developing countries, especially the ones located in the
top 4 highly vulnerable zones to climate change due to their environmental disaster proneness
to drought, flooding, and other multiple sensitivities, including the Philippines (Smith, S., &
Todaro, M., 2014). Because of the relatively low income of developing countries, it is more
difficult for them to finance adaptation to the global warming. This will cause social strains
due to increased resource scarcity that may lead to greater conflict. The worst impact will
likely be felt by the very poor who depend mostly on the environment and natural resources
through agriculture or living in environmentally stressed and risky areas.
Since greenhouse gases, especially carbon dioxide are emitted from different sources,
there are different laws or policies being implemented to their corresponding source. The
major sources of emissions are from the energy, forestry, transport, industry, waste, and
agricultural sectors.

Electricity and heat production are using mostly non-renewable energy such coal, natural
gas, and oil and it accounts to 25% of the 2010 global gas emissions (IPCC, 2014). Energy
use is at the heart of global warming and the core of solutions. One of the best policies under
the energy sector is the adaptation of the use of renewable energy as a substitute to non-
renewable energy that emits carbon dioxide at the same time unsustainable in the long-run
because of its relatively slow rate of replacement. Renewable energy is a kind of energy that
doesn’t cause too much degradation in the environment because of its abundance and
cleanliness in use that emit less or no carbon emission at all to the environment. Renewable
energy is considered to be in synergy with many aspects of sustainable development (Stiglitz,
2002) that is the reason that sustainable development through renewable energies is at the
center of policies all over the world. It is a way sustainable because it will be available at any
high level of production without losing too much of its productivity and quality, therefore it
can be used to sustain production at low costs even in the long-run.

Solid wastes come from human and animal activities that are discarded as useless or
unwanted. Treatment and disposal of these wastes produce emissions of greenhouse gases,
such as burning plastics that emits carbon dioxide and methane that is toxic to the human
health. It is important to dispose solid wastes properly to preserve the cleanliness of the
environment and reduce its potential harm to the nature and people’s health. And based on a
study, GHG emission from waste accounts for 3-4 percent of the total global GHG emission
(Metz, & Davidson, 2007)

Forests play a significant role in providing our environmental demands. It is the home to
many species in existence that help the nature to be in ecological balance. Trees and plants
absorb these carbon emissions at near areas around it. Degradation of forests such as
deforestation, illegal logging and burning of trees contribute to increased carbon emissions
and makes lesser absorption of carbon dioxide. Decrease in forest areas are still continuing
for the purpose of establishing commercial and residential buildings and economic interests
of the people. This will lead to greater environmental degradation because of the nature
cannot adapt faster relatively to the increase in emissions by the different sectors. It is
evidently important to preserve this for our environmental demands and further decrease the
carbon dioxide in the atmosphere to meet the goal of curbing emissions.

These policies overall lessen the inefficiencies of the different sectors of an economy.
These will improve the country’s way of living in many ways that can make it sustainable
even in the very long-run to use our environment at a low cost to the production and
consumption of goods and services. These policies are not always directed towards the
economic interests of the society, but to the preservation of the environment because of its
inherent importance in our daily lives including our social, physical, mental, as well as
emotional well-being and development for every individual to maximize their potential.

Economic growth is not always the primary goal of every economy. It does not take into
account development of a country which is more important to survive in the long-run.
Environmental and economic goals are rather complements for each other, but the
dependency of economic growth to the environment is greater than the environment
economic growth. It shows that economic growth is almost nothing without the environment,
but only few people recognize its importance over the short-run economic goals. Collective
action by the world is now being recognized because of the importance of the environment to
almost every goal in many fields. The impact of the climate change will challenge everyone
and will certainly change many goals. The researchers will investigate the actions of
international communities through their policies towards climate change and its degree of
impact to a country’s economic growth.

The need for collective action was first recognized at a UN “Earth Summit” in 1992
which called for all its members to curb their emissions of greenhouse gases. Since then
many governments have developed environmental policies and strategies for implementing
those policies.

The Paris Agreement or Paris climate accord is an agreement by 180 countries negotiated
at the 21st Conference of the Parties (COP21) of the United Nations Framework Convention
on Climate Change (UNFCCC) in Paris and adopted by consensus on December 12 2015.
This became a landmark in global climate governance. This agreement was made whereby
different states across the world shall cooperate with the global community in the resolution
of climate change issues. This was made because its predecessor, the Kyoto Protocol have
failed to achieve universal ratification where in 1997, 141 countries joined the agreement, but
in 2012 only 37 countries had agreed to implement its targets for greenhouse gas emissions.
In this agreement, different countries submit their Intended Nationally Determined
Contributions (INDC) as a contribution to the international goal, to curb emission. Every
country’s INDC is premised on the philosophy of pursuing climate change mitigation as a
function of adaptation. In each INDC, policies and laws were made as a way to contribute to
the decrease in the carbon emission of its sectors. Mitigation measures in almost every INDC
will be pursued in line with sustainable development and a low-emission development that
promotes inclusive growth.

It is important to evaluate the effect of certain policies of the government and its actions
to make it economical as possible. Policies are made to benefit the majority through its
implementation, but adverse consequences are inevitable and bundled with most policies.
Policy-making should be grounded at economic analysis to assure its intention and meet a
target that is reasonable and feasible. Environmental policies are made to ensure and give an
optimal amount of environmental activity that will outweigh the benefit over cost at a
maximum amount to satisfy the wants and needs of the society given scarcity of resources.

It is significant to know the relationship between the carbon emissions of different


economic sectors and the economic growth of a country. Economic growth is one of the main
goal of every economy in the world, it gives the citizens of a country the fruits of their labor,
and it enhances their standard of living, and gives a wider access to wider variety of goods
and services produced given the scarce resources. It should not be forgotten that economics
is nothing if natural resources are not scarce, and the environment can be further improved
when there are economic incentives to do so. It implies that economics and environment are
complementary to each other. When the environment is in danger, so as the economic growth
of a country. When the environment is damaged, it becomes more vulnerable to further
degradation and makes pollution more widespread creating more problems in the society in
terms of individual and social well-being. Carbon emissions is one of the major contributor to
the one of the major environmental catastrophe that the world is experiencing and different
nations across the globe are taking actions on its reduction through costly adaptation and
mitigation technologies and techniques. These emissions are results of continuing increase in
unsustainable production methods that use a lot of fossil fuel. These actions on carbon
reduction to improve the environment comes at the expense of forgone output because
resources are directed towards making technologies that clean the environment rather than
used on production. Carbon emissions also affect the productivity of workers and other
resources through the warming of the atmosphere caused by increasing levels of carbon
dioxide. Reversing the effects of these emissions is almost impossible due to its very
dispersed around the world. It shows that carbon emissions affect the economy in many
degrading ways and the actions toward it have economic impacts as well. It is evident that the
two goals of carbon emission reduction and economic growth cannot be achieved easily
simultaneously and neglecting of one of it comes at the expense of the other goal. It is now
important to formulate a policy that will take into consideration the two goals and provide an
optimal level of carbon emission reduction to meet the desired goal of an economy.

The researchers will try to analyze the effect of certain policies of different countries
written in their INDC implemented related to greenhouse gas emissions of carbon emissions
of different sectors in an economy. These policies’ goals are all to reduce carbon emission
and the policies are differed according to their source of emissions. The policies are then
tested if it is effective and efficient for it to be economical to implement for the country. This
will show if the policies in the Paris agreement are indeed effective in their actions towards
their goal. After getting the results of the policies on the carbon emission, the researchers will
in turn investigate the effects of carbon emissions of different sectors to the economic growth
of a country. The researchers focused on three of the main sources of carbon dioxide, the
energy, waste, and forestry sector, due to its importance in the production in an economy and
their significant contribution to carbon emissions. It aims to know if carbon emissions have a
positive or negative, significant or insignificant relationship with economic growth based on
the data that were gathered. Basing on the empirical results, the researchers can formulate
possible environment and economic-friendly policies and solutions for the government to
implement to promote inclusive growth, environmental preservation and long-run
sustainability for an economy.

1.1 Scope and Limitation

This study will focus on investigating the effects of mitigation laws on carbon emissions
in the energy, waste, and forestry sector in the five (5) ASEAN countries namely, Cambodia,
Indonesia, Malaysia, the Philippines, and Sri Lanka. The researchers chose the 5 ASEAN
countries according to the availability of the three laws on the chosen carbon emission
sources. The researchers will only use the data available in the national level and by sector
of the different countries chosen. The researchers will use 44 annual data points in the period
covering from 1970 to 2014.

1.2 Null Hypothesis

These null hypothesis are applied to the five ASEAN countries chosen sample by the
researchers.

Ho1: Energy laws have no negative relationship with carbon emissions.


Ho2: Waste management laws have no negative relationship with carbon emission.
Ho3: Forestry laws have no negative relationship with carbon emissions.
Ho4: Carbon emissions have no negative relationship with economic growth.

1
.
3

S
i
mulacrum

II. REVIEW OF RELATED LITERATURE

There are only relatively few studies conducted about the Paris Climate Agreement
because it’s a recent agreement between more than 180 countries around the world and its full
operation has not yet started. The researchers focused on the past environmental laws that are
also included in the present INDC of the chosen countries and see if they have a significant
effect on carbon emission reduction.
Despite there are only few studies related to the Paris climate agreement, there are many
studies that have been done by numerous people relating to the effect of certain carbon
emission source laws to carbon emissions of many countries.

Energy Laws to Carbon Emission

There are many laws under the energy sector with different goals such as energy
efficiency, energy consumption, use of clean energy, and especially renewable energy. The
researchers focused on all kinds of laws relating to the energy sector with different rules and
techniques.

Most of the studies that were done by different researchers showed that renewable energy
has a significant and negative relationship with carbon emissions. This means that adaptation
of renewable energy contributes to carbon emission reduction in an area.

In the study made by York and McGee, it shows that nations with more electricity from
renewable sources typically have lower carbon emissions per capita than countries with less
renewable energy. (York, R., & McGee, J. A., 2017). According to the study of Dogan and
Seker, renewable energy has a significant and negative impact on carbon emissions which
means that that increases in renewable energy consumption decrease carbon emissions.
(Dogan, E., & Seker, F., 2016) (Sinha, A., & Shahbaz, M., 2017). Renewable energy
consumption have a negative and significant effects on carbon emissions in both the short-run
and long-run (Waheed, R., Chang, D., Sarwar, S., et. al., 2017), while according to Shafei and
Salim this relationship exists only in the long-run (Shafei, S., & Salim, R. A., 2013). In the
study of Liu, Zhang, and Bae, increasing renewable energy is negatively related to carbon
emissions, while non-renewable energy is positively correlated to emissions. There also an
existence of feedback causalities between emissions, renewable energy, and non-renewable
energy (Liu, X., Zhang, S., & Bae, J., 2017). According to Khan, Ali, and Ashfaq, there is a
unidirectional causality running from renewable energy to greenhouse gas emission and there
is an estimated 1.08% reduction in greenhouse gas emission due to 1% increase in renewable
energy (Khan, M. T. I., Ali, Q., & Ashfaq, M., 2017). For all the countries in the sample
except for U.S.A., the increasing renewable energy sources on electricity share has economic
costs in terms of GDP per capita and a decrease of carbon emissions per capita. (Silva, S.,
Soares, I., & Pinho, C. 2012). In the study of Silva shows that total renewable energy sources
and hydroelectricity only affect negatively carbon emissions during the first year. (Silva, F. I.
G., 2012). In the study of Perry and Klemes shows that energy efficiency can be successfully
applied to integrate renewables into the energy source mix and consequently reduce the
carbon footprint of these locally integrated energy sectors. (Perry, S. & Klemes, K., 2008)

There were also studies that focused on certain policies like in the study of Qi, Zhang,
and Karplus where it shows that current renewable electricity targets result in significant
additional renewable energy installation and a reduction in cumulative carbon emissions of
1.8% relative to a No Policy Baseline. The forecasts show that carbon emissions due to
increased renewables are offset in each year by emissions increases in non-covered sectors
through 2050. Projected carbon emissions reductions are very modest under a policy that only
targets the supply side in the electricity sector. (Qi, T., Zhang, X., & Karplus, V., 2013).
Renewable portfolio standards have already had a negative and significant impact on carbon
intensities through their influence on state electricity prices. It also shows that adoption of
renewable portfolio standards reduced overall U.S. carbon emissions by 4% by 2010. (Sekar,
S., & Sohngen, B., 2014).

Some studies show bi-directional relationship between renewable energy and carbon
emissions such as in the study of Hu, Xie, Fang, et. al. shows that there is a long-run bi-
directional Granger causalities exist between economic growth, renewable energy
consumption, international commercial services trade, and carbon emissions. Long-run
equilibrium also exists between the analysis variables. Increasing only the share of renewable
energy consumption on the total energy consumption contributes to carbon emissions
reduction (Hu, H., Xie, N., Fang, D., et. al. 2018). There was a bi-directional causal
relationship found between carbon emissions and renewable energy consumption and a long
run equilibrium existing among renewable energy consumption, carbon emission, and GDP
(Lu, W., 2017). Using the Dumitrescu-Hurlin non-Causality approach it shows that there is a
bi-directional causality between renewable energy and carbon emissions. The researchers also
found that renewable energy mitigate carbon emissions while non-renewable energy
increases carbon emissions. They are all integrated, thus the variables studied have a long-run
relationships. Using the DOLS Estimator, it shows that a 1% increase in renewable energy
mitigates carbon emission by.03%. (Dogan, E., & Seker, F., 2016).
There were also studies that show a positive impact of renewable energy on carbon
emissions that contradicts most of the studies’ claim. Such as from Lorente, Shahbaz,
Roubaud, et. al. stating that interaction between economic growth and renewable energy
consumption exert a positive impact on carbon emissions. (Lorente, D., Shahbaz, M.,
Roubaud, D., et. al., 2018)

There were also studies that show no relationship at all such as in the study of Twumasi
that there’s no specific pattern between renewable energy and carbon emissions. It means that
producing more renewable energy does not necessarily lead to less carbon emission
(Twumasi, Y., 2017). No relationship has been found between carbon emissions and
renewable energy but they are stable in the long-term (Cherni, A., & Jouini, S. E., 2017)

Waste Management Laws to Carbon Emission

Climate Change has become one of the most important concerns that humanity is
currently facing. The Intergovernmental Panel on Climate Change (IPCC) third assessment
report said that carbon dioxide (CO2), methane (CH4), nitrous oxide (N20) and other
greenhouse gases are the main culprit of global warming as a result of human activities.

For the past few years, governments and scholars alike have drawn attention to the
increase of solid wastes that became as one of the sources of GHG’s. In 2007, the IPCC
released the Climate Change 2007 comprehensive report wherein municipal solid wastes
(MSW) were classified as a separate category for which GHG’s emissions are to be
quantified.

According to Wang and Jeng (2015), there are four treatments for solid waste namely,
sanitary landfill, simple landfill, composting and burning. Composting has the lowest carbon
emissions, followed by burning and sanitary landfill has the most carbon emissions. Sanitary
landfill is also the most common way of managing wastes, especially in developing countries
but is the least desirable option for the disposal of waste (Foolmaun et al., 2011) (Smith et al.,
2001) (Tchobanoglous, Нeisen & Vigil, 1993). Anaerobic decomposition of these disposable
wastes will produce Landfill gas (LFG) emissions which are readily considered an air
pollutant (Rezaee et al., 2013). Chiemchaisri and Visvanathan (2008) pointed out that this is
cause by the biological degradation of organic matter present in solid wastes. They also said
that there are several methods of estimating landfill emissions such as field testing, site
evaluation, and mathematical modeling. Moreover, they also indicated that municipal solid
wastes could be divided into two aspects: components and production and disposal and
utilization. Another study suggests that emissions can also be classified on how the waste is
processed: waste emissions from landfilled and waste emissions when recycled (Kilaru,
2010).

Furthermore, factors like quantity of MSW and its handling can affect MSW carbon
emissions. The researchers also argue that MSW is mainly composed of personal
consumptions like food, clothing, bedding and other commodities related to it. Ramachandra
and Shwetmala (2012) mentioned that improper management of these cause potent GHG
emissions and plays an important role in carbon footprint in the urban society. Factors like
age, quantity and moisture content of wastes contribute to the variation of percentage of
carbon dioxide produce by MWS (Arvind et al., 2008).

There are many accounting methods when calculating GHG’s emissions but the most
widely used are the IPCC methods. Other methods like Landfill Gas Emission model
(LandGem), Atmospheric Brown Clouds and Emission Inventory Manual (ABC EIM) are
also used and somewhat give similar results (Mohareb, et al., 2010). Similarly, there is no
commonly accepted methodology for quantifying GHG impacts (Lakhan, 2016).But the
development of these GHG inventories is a helpful tool to point out that people should be
responsible at aiming to reduce impacts of wastes in the environment (Marchi, et al., 2014).
Many studies were conducted and confirmed that massive urbanization, industrialization,
rapid economic and population growth are correlated to the generation of MSW (Duet et al.,
2006; Godínez et al., 2015; Seo et al., 2004; Issam, 2010). With the increase in solid waste
production, disposals have rapidly consumed landfill capacity. These problems are mainly
caused by institutional, economic, financial, technical factors that limit the improvement of
an effective MWS management. Likewise, the consumption of goods and services has a
direct effect on MSW generation. An increase in consumer spending, MWS also increases
(Wang & Jeng, 2015). In addition, the result of the sensitivity analysis of the study of Ying-
Chu Chen (2016) indicates that incineration and transportation of wastes directly affects the
environment (Chen & Lo, 2016; Rajcoomar & Ramheawon, 2017). Moreover, it also
confirmed that there is direct relationship between total waste generation and carbon dioxide
emission from waste sector (Lee, Kim & Chong, 2016; Chalvatzaki & Lazaridis, 2010)
(Shekdar, 2009) in her study revealed that there is a strong relationship between the
economic status of the society and solid wastes generation that equates to a country’s GDP.
On the other hand, results from other study also suggests that tertiary industry in overall
Gross Domestic Product and the urban per capital have an indirect but positive effect on solid
waste carbon emissions (Wang & Jeng, 2015). Conversely, the study of (Lee, Kim & Chong,
2016) contends that there is no causality between GDP and waste generation, but total waste
and recycling produce large amount of increasing and decreasing GHG emissions from the
waste sector, respectively.

Major components of household wastes are composed of about 82 percent of organic


fraction. This requires appropriate treatment to be able to decrease GHG emissions of these
household wastes. Decentralize treatment options like converting wastes to biogas or manure
would help in making money in waste (Kulkarni et al., 2012).

Hoklis and Sharp (2014) proposed two scenarios in managing waste. First, the separating
of wastes in the landfill and second is the composting of wastes in the landfill as well. GHG
emissions can be reduced by 5.95 percent and 27.98 percent for both scenarios respectively. It
is revealed that implementation of this has tremendous benefit to the environment. The
government should effectively initiate more 3R programs in solid waste management not
only to protect the environment, but also get a lot of benefits. For example, recycling can
decrease the dependence on costly landfills and will generate revenue in the future (Kilaru,
2010).

(Lakhan, 2016) contends that recycling may not be the most efficient and effective option
for GHG reduction because it is possible to decouple the interrelationship between recycling
and carbon emissions. In the same way, the study of (Ying-Chu Chen, 2016) states that
energy recovery can offset GHG emissions and this provides a valuable insights for a
greenhouse gas mitigation policy. In addition, (Lakhan, 2016) points out that it is good to
promote the sustainable waste management, but it should also be considered that the most
sustainable system is not always the one who recycles the most material.

According to (Ngwabiea, et. al., 2018), spreading and compressing wastes potentially
increase gas emissions, but covering it with a layer of soil can help reduce the emissions. It is
therefore recommended that dumpsites should be upgraded and biogas should be exploited. In
addition, Advancements in technology, effective environmental regulations and proper
resource conservation have greatly contributed in reducing impacts on MWS and GHGs in
the environment (Weitz, et. al., 2011). Likewise, a low technology combined with poverty in
developing countries causes improper wastes disposal. (Forbid, et. al., 2011).
Forestry and Land Use Laws to Carbon Emission

Many countries especially developing countries experienced economic growth and


agriculture and land use played a pivotal role in ejecting many out of poverty and
redistributing the fruits of natural resources. However, the increase in dependence in
agriculture leads to increase in deforestation and decrease in forest area. The increase in
dependence in agriculture and decrease of forest area leads to an increase in carbon
emissions. Which a leading cause of on-going climate change. There are many laws in the
forestry sector that have different goals like preserving and increasing the total forest area and
decreasing emissions in land use by converting into a more sustainable agriculture. As
mentioned by Stern in his study, he finds out that curbing deforestation and forest degradation
is cost-effective in reducing carbon emissions (Stern, 2007). The researchers focused on the
laws on preservation of forest area and land use.

Many studies show that forest area has a negative effect on carbon emissions. Land use or
agriculture has a positive effect on carbon emissions. Suggesting that increase in forest area
and adaptation on a more sustainable land use or agriculture help on reducing carbon
emissions.

According to the study of Chang, Chen, and Waheed on the effects of agriculture and
forest on carbon emissions, using Autoregressive Distributed lag model, the researchers
found that forest area has a negative effect on carbon emissions while agriculture has a
positive effect on carbon emissions. (Chang, D., Chen, W., & Waheed, R., 2016)

As stated by Jebli and Youssef in their study about the investigation of causality between
agricultural value added, carbon emission, and gross domestic product in the case of Brazil,
using Autoregressive distributed lag approach and Granger causality tests, there is a
unidirectional causality exists between agriculture and carbon emissions. (Jebli, M.B, &
Youssef, S.B., 2016).
As indicated by Kander in his study about the factors in generating carbon emissions in
Sweden. Agriculture and land use played a vital role in the increase of carbon emission
throughout the years. Increase in forest area leads to a decrease in carbon emissions because
forests absorb carbon gases and the increase in forest area leads to the increase in the
absorption of carbon gases. His study also finds that draining of wetlands for agriculture has a
substantial contribution in generating carbon emissions in Sweden. (Kander, 2008).
As eloquently stated by Jebli and Youssef in their study about the investigation of
causality between agriculture value added, arable land use, and carbon emissions in Morocco,
using Autoregressive distributed lag (ARDL) model and Granger causality tests, there is a
dynamic causality, both short-run and long-run, on agriculture value added and arable land
use on carbon emissions. This implies that the increase in agriculture value added and arable
land use leads to an increase in carbon emissions. (Jebli, M.B., & Youssef, S.B., 2017).

As studied by Asamadu-Sarkodie and Owusu about the impact of agriculture and land
use on environmental pollution from 1971-2011, the researchers found evidence that there is
a linear relationship between agriculture and land use on carbon emissions. Using statistically
inspired modification of partial least squares (SIMPLS) regression model, Asamadu-Sarkodie
and Owusu found out that an increase of 1% in crop production index will reduce carbon
emissions by 0.71% thus implying that using a more sustainable method of land use help
reduce carbon emissions. (Asamadu-Sarkodie, S., & Owusu, P.A., 2016)

According to the study of Bae, Lui and Zhang on the impact of agriculture value added
and renewable energy consumption on carbon emission in 4 selected countries of the
Association of South East Asian Nations, it shows that increase in agriculture value added
and renewable energy consumption decreases carbon emissions. (Bae, J., Lui, X., & Zhang,
S., 2016)

As stated by Ali, Ashfaq, and Khan in their study about investigating the connection
between agriculture value added, forest area, and greenhouse gas emissions in Pakistan, using
Vector Error Correction model (VECM), Fully Modified Ordinary Least Square (FMOLS),
and Canonical Cointegration Regression (CCR), there is a unidirectional causality existing
between forest area and GHG emissions. Also stated in the study is the long run causality
existing between GHG emission, agriculture value added and forest area. The researchers
found that there will be a 0.124% decrease in greenhouse gas emission in every increase in
agriculture value added and 0.240% in every increase in forest area. (Ali, Q., Ashfaq, M., &
Khan, M.T.I., 2010)

As indicated by Asamadu-Sarkodie and Owusu in their study about the investigation of


the relationship between carbon dioxide emissions and land use in Ghana. The researchers
used Vector Error Correction Model (VECM) and Autoregressive Distributed Lag (ARDL)
model and found evidence of a causal relationship between agriculture and carbon emissions.
However, the relationship is slowly decreasing over time which may die over time.
(Asamadu-Sarkodie, S., & Owusu, P.A., 2015)

As eloquently stated by Jebli and Youssef about the investigation of causal links between
agriculture value added, carbon emissions and gross domestic product in North Africa
countries spanning the period 1980-2011, there is short-run and long-run relationship
between carbon emissions and agriculture. (Jebli, M.B., & Youssef, S.B., 2016)
There are studies that suggests that forest has a positive effect in carbon emissions. Which
implies that forest also contributes to the increase in carbon emissions.

As argued by Ahillen, it is the common belief that forest is a carbon sink that absorbs
carbon gases, he argued that forest also contribute to carbon emission one reason is because
of forest fires. In 2016, 119,000 acres of forest was burnt because of forest fires. Another
reason is because plants also emits carbon back to the atmosphere. Ahillen studies indicate
that when plants absorb carbon dioxide it turns it into an organic compound. Because of
respiration the carbon gas is emitted back in the environment. (Ahillen, 2016)

In a study by Baccini et al, forests do also contribute to carbon emissions. When a plant
die, the microbes releases the carbon compounds present in the plant. Thus, contradicting
other studies that plants absorbs carbon gasses. (Baccini et al, 2016).

Carbon Emission to Economic Growth

One of the objectives of this study is to know the effect of carbon emissions of different
economic sectors to the economic growth of a country. There are many ways that carbon
emission can affect economic growth and the researchers aim to know to what degree they
affect it.
According to Leitao, carbon emissions and renewable energy are positively correlated
with economic growth and there is a uni-directional causality between renewable energy and
economic growth. (Leitao, N. C., 2014). According to Fankhauser and Jotzo, a clean energy
transition will bring a range of additional benefits for growth and development via
innovation, removal of market failures, and other benefits. (Fankhauser, S., & Jotzo, F.,
2017). In the study of Choi, Heshmati, and Cho, it shows that there is a statistically
significant relationship between GDP and carbon emissions. There is a positive long-run
relationship between carbon emissions and GDP and none in the short-run in China and
Korea. (Choi, E., Heshmati, A., & Cho, Y., 2010). There is a long-run cointegration
relationship between the variables and a feedback effect exists between economic growth and
carbon emissions. (Ahmad, A., Zhao, Y., Shahbaz, M., et. al., 2015)

There are studies that has many results throughout the sample chosen such as in the study
of Esso and Keho where in the long-run, energy consumption and economic growth are
associated with increase in atmospheric pollution in most countries. Economic growth causes
carbon emissions in the short-run for some countries, and reverse causality was found
running from carbon emissions to economic growth for some. There’s a bi-directional
causality between economic growth and carbon emissions found in the short-run for one
country, and two country in the long-run. (Esso, L. J., Keho, Y., 2016). Two-way causality
was found between carbon emissions and economic growth using non-linear Granger
causality tests. The growth rate of both carbon emissions and industrial production exhibit a
significant non-linear asymmetric dynamics (Kim, S., Lee, K., Nam, K., 2010).

There were also studies that show no impact of carbon emissions on economic growth
such as in the study of Ozturk and Acaravci where they found that neither carbon emissions
per capita nor energy per capita cause real GDP per capita but there is a long-run relationship
between the variables at 5% significance level (Ozturk, I., Acaravci, A., 2010).Neither carbon
emissions nor energy consumption leads to economic growth (Zhang, X. P., Cheng, X. M.,
2009).

There were many studies that show reverse causality from economic growth to carbon
emissions such as in the study Narayan, Saboori, and Soleymani where it showed that income
growth will reduce emissions in the future. (Narayan, P. K., Saboori, B., Soleymani, A.,
2015). According to Saboori, Sulaiman and Mohd, there’s a uni-directional causality from
economic growth to carbon emissions in the long-run and there is an absence of causality
between carbon emissions and economic growth in the short-run. There exists a long-run
relationship between per capita carbon emissions and real per capita GDP when the carbon
emissions level is the dependent variable. There’s an inverted-U relationship between carbon
emissions and GDP in both the short- and long-run (Saboori, B., Sulaiman, J., Mohd, S.,
2012). There is a uni-directional causality running from real per capita GDP to per capita
carbon emissions in both the short- and long-run. (Jaunky, V. C., 2010). Li, Dong, Li, et. al.
estimated that in the long-term, a 1% increase in real GDP per capita increases consumption
of energy by approximately .48% - .50% and increases the carbon emissions by about .41% -
.43% (Li, F., Dong, S., Li, X., et. al., 2010). In the study of Chang shows that there’s a bi-
directional causality running from GDP and carbon emissions and the consumption of crude
oil and coal. Economic growth induces a higher level of energy consumption and carbon
emissions. (Chang, C. 2012). In the study of Acaravci and Ozturk found that there’s a long-
run relationship between carbon emissions per capita, energy consumption per capita, real
GDP per capita and the square of per capita real GDP only for seven countries. There’s a
positive long-run elasticity estimate of carbon emissions with respect to real GDP and the
negative long-run elasticity estimate of carbon emission with respect to the square of per
capita real GDP at 1% alpha. (Acaravci, A., Ozturk, I., 2010)

The different studies produced different results due to differences in sampling techniques
and tests that were used in conducting the study. These show that results may vary no matter
from one place to another and we cannot get a concrete answer. With strong empirical testing
and accuracy of methods used can be used to provide solutions and answers to different
problems.

III. Methodology

3.1 Research Design


The researchers will use the Dynamic Ordinary Least Squares to determine the
estimated parameters of the renewable energy, waste, and forestry to the Gross Domestic
Product of the five (5) ASEAN countries. The researchers will then use Granger causality
tests to determine the direction of the causality between carbon emission and economic
growth.

3.2 Data and Sources

The researchers will be collecting data on secondary sources. These sources will
mainly cover government sites, annual reports, and online data sites. Also, they will be
using national annual data for the five ASEAN countries namely, the Philippines,
Indonesia, Malaysia, Cambodia and Sri Lanka.

This study will be using annual data from the period 1970-2014. The variables
that will be used are carbon dioxide (CO2) emissions measured in metric tons and GDP
growth rate (%) measured at market prices based on constant local currency. Panel data
will be collected for both variables. To measure the impact of forest on carbon emissions,
area of forest cover in sq. km. will be used.

GDP will be taken from World Development Indicators (WDI) which is


published by World Bank database, and is available online (http://data.worldbank.org/).
The data will be employed to investigate the economic growth on the five ASEAN
countries for the period stated. CO2 emissions will be obtained from CAIT Climate Data
Explore available online (http://cait.wri.org).

Forest cover area from the Philippines will be taken from the Forest Management
Bureau in the Department of Environment and Natural Resources. Data in Indonesia,
Cambodia, and Sri Lanka will be collected from the World Bank. And forest cover from
Malaysia will be taken from Forestry Department Peninsular Malaysia. Data from wastes
will also be gathered from the database of World Bank.

3.3 Research Method

The functional form of regression model that will be used is a linear model
because the measurements that will be used are in absolute value. Renewable energy will
be measured in KiloWatt per hour, wastes are measured in metric tons, and forestry will
be measured in hectares. Carbon emission will be measured in metric tons.
Gross Domestic Product will be measured at 2000 constant prices to get the real value of
the output adjusted for inflation.

Carbon emission = β0 - β1Energy - β2Waste - β3Forestry + ê


GDP = β0 - β1CarbonEmission

3.4 Statistical Treatment of the Data

The researchers will use a multiple regression model to determine the impact and to what
degree the energy, waste management, and forestry laws have on economic growth.

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