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Determinants of CO2 emissions in upper middle-income group countries: an

empirical investigation

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DOI: 10.1007/s11356-020-09803-z

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Environmental Science and Pollution Research
https://doi.org/10.1007/s11356-020-09803-z

RESEARCH ARTICLE

Determinants of CO2 emissions in upper middle-income group

countries: an empirical investigation
Aqib Mujtaba 1 & Pabitra Kumar Jena 1 & D. Mukhopadhyay 2

Received: 6 April 2020 / Accepted: 18 June 2020

# Springer-Verlag GmbH Germany, part of Springer Nature 2020

Abstract
This study investigates the kinked exponential growth, degree of association, and causation between economic growth, energy
consumption, population, trade openness, and carbon dioxide (CO2) emissions in 25 upper middle-income group countries
spanning data from 1985 to 2014. The study employed first-generation and second-generation unit root tests; prior to that, the
cross-sectional dependence test is also applied and panel cointegration techniques, panel FMOLS and DOLS, and panel causality
techniques are employed to test the degree of association and causation among the variables. The study reveals a long-run
cointegration among the variables. Results of FMOLS declare that there are negative associations between economic growth and
CO2 emissions, trade openness, and carbon dioxide emissions respectively, whereas it was found that there are positive relations
between energy consumption and CO2 emissions, population, and CO2 emissions. While analyzing the association through
DOLS, we find that all the selected determinants of carbon dioxide emissions are directly proportional to CO2 emissions in these
countries. The panel Granger causality test indicates that there is bi-directional causality between population and economic
growth and between trade openness and economic growth. Finally, the study ends with some policy suggestions and new avenues
for future research.

Keywords Carbon dioxide emissions . Economic growth . Energy consumption . Population . Trade openness . FMOLS and
DOLS

JEL classification C50 . O13 . Q56

Introduction economies based on human capital and animal power to non-

living economies based on energy-consuming machinery.
Global warming is fetched out as a result of the industrial This change has turned out to be one of the most challenging
revolution which renovated the global economy from living environmental problems in recent years captivating great at-
tention to the world’s researchers and policymakers. Global
warming is the main reason behind climate change, and this is
Responsible editor: Nicholas Apergis
mainly attributed to greenhouse gas emissions (Gozgor 2017).
* Pabitra Kumar Jena
Carbon dioxide (CO2) emissions is considered as the major
pabitrakumarjena@gmail.com source of global warming, having the highest heat-trapping
ability among other greenhouse gases in the atmosphere,
Aqib Mujtaba (Sarker et al. 2016). Energy consumption (EC) and economic
aqibmazad@gmail.com growth (EG) rise CO2 emissions (Shahbaz et al. 2013; Jamel
D. Mukhopadhyay and Derbali 2016). The growth rate of world GDP is an es-
mukhopadhyay.dinabandhu@gmail.com sential driver of energy demand and it is projected to rise 3.6%
per year over the period 2009 to 2035 in all scenarios (IEA
1
School of Economics, Shri Mata Vaishno Devi University, 2011).1 The rise in the prices of energy will affect majorly to
Katra-182320, Union Territory of Jammu & Kashmir, India
2
School of Business, Faculty of Management, Shri Mata Vaishno
1
Devi University, Katra-182320, Union Territory of Jammu & International Energy Agency report 2011, entitled, “Deploying Renewables
Kashmir 182320, India 2011: Best and Future Policy Practice.”

the future demand for energy and supply of energy plans (IEA
2011).
The global population scenario is rising continuously
which may cause a major impact on future demand for energy.
According to the International Energy Agency (2011) report,
the world’s population is expected to rise by 26%, from 6.8
billion in 2009 to 8.6 billion in 2035. The rising population is
a significant driver of upcoming energy movements and the
level of the population has a direct influence on the magnitude
and arrangement of energy demand and an indirect influence
by persuading economic growth and development. Population
growth is the foremost driving force behind the fast-rising of
global carbon dioxide emissions (Shi 2003). “A doubling in
population results in a doubling in emissions” (Dietz and Rosa
1997). Ceteris paribus, the larger the population growth, the
greater will be the energy demand, and this will lead to more
emissions.
The empirical models of this study include EG, EC, popu-
lation (POP), and trade openness to examine their impact on
CO2 emissions for 25 upper middle-income group countries.
There is a need for empirical work that looks into the short-
and long-run association and causation among these variables
in the upper middle-income countries. Moreover, these upper
middle-income countries are fast-growing economies, which
are using a large amount of energy in the form of fossil fuels
which emits a huge amount of carbon, causing environmental
degradation.
The present study aims at examining the degree of associ-
ation between CO2 emissions, energy consumption, economic
growth, trade openness, and population. It is pertinent to assert
that economic growth is the resultant outcome out of com-
bined and integrated influence of CO2 emissions, energy con-
sumption, trade openness, and population. The greatest threat
of the twenty-first century is the degradation of the environ-
ment in terms of sustainability which is of high relevance for
the existence of mankind. There are few studies that aimed to
address the issues relating to CO2 emissions, energy consump-
tion, economic growth, trade openness, and population but
they are found to be inadequate for finding out economic
cointegration in terms of environmentally sustainable and eco-
nomic development. Keeping this in view, the research prob-
lem identified as a factor enabling CO2 emissions which in
terms of evidencing economic growth has been adopted. To
establish validity and reliability of the study, 25 countries
across the globe were selected at random in a league of upper
and middle-income group. Quantum of CO2 emission is relat-
ed to the volume of income leading to energy consumption. In
general economic growth and CO2 emission are highly corre-
lated but in order to ensure environmental sustainability de-
sired economic growth with the aid of sustainable CO2 that is
the resultant outcome of energy consumption needs to be
traded-off as achieving desired economic growth is the ulti-
mate objective of any country.
Environ Sci Pollut Res
The fast-growing GDP of these countries increases the de-
mand for energy, which necessitates the burning of coal, thus
leading to the emissions of that CO2; carbon emissions wors-
ening the greenhouse effect that causes global warming. In
turn, global warming leads to a greater need for air condition-
ing and again the need for air conditioning increases the de-
mand for energy. So, it may be asserted that there is a cyclical
linkage between economic growth (EG) and CO2 emission.
Therefore, the fast-growing GDP and energy use in these
countries are also a big challenge for a sustainable environ-
ment. Now, the question is how to address these issues? To
answer this question, this study attempts to examine the expo-
nential growth of each variable for the individual dataset of 25
countries. To our knowledge, this is the first study which
investigates the kinked exponential growth of these variables.
The results acquired from the current study are reliant on the
sample period, the variables compilation, and the procedure
exercised.
Given the above motivations, the proposal of the current
study is to inspect the kinked exponential growth, degree of
association, and causation between carbon dioxide emission
and its determinants such as economic growth, energy con-
sumption, population, and trade openness in 25 upper middle-
income group countries for the 1985 to 2014 period by using
the Pedroni (1999) panel cointegration, panel causality meth-
od, and panel fully modified ordinary least square (FMOLS)
and dynamic ordinary least square (DOLS) methods.
This study contributes to the literature, by investigating the
nexus of these mentioned variables for selected upper middle-
income countries which are classified by the World Bank
recently. The present study goes beyond the available litera-
ture in many ways: (i) There is no well-known literature that
investigates the kinked exponential growth of these vari-
ables—EG, EC, POP, and TO. (ii) There are only a few
well-known studies that inspect the impact of these variables
on carbon in the upper middle-income group countries which
are classified by the World Bank (2019). (iii) This study uses
the FMOLS and DOLS methods to examine nexus between
the variables. FMOLS is the most appropriate technique for
the panel, which contains heterogeneous cointegration
(Hamit-Haggar 2012). The DOLS estimator required a similar
asymptotic distribution as that of the panel FMOLS estimation
derivative by Pedroni (2000). This procedure of estimation
has chosen based on its advantages. (i) It removes the problem
of endogeneity from the explanatory variables. (ii) This tech-
nique also eradicates the difficulties which is triggered by the
long-run correlation between the cointegrating equation and
stochastic explanatory variables changes. (iii) This method is
asymptotically unbiased with a fully efficient mixture of nor-
mal asymptotic.
The remained study is designed as follows.
Section “Review of the Literature” critically reviews an over-
view of the brief empirical literature. Section “Data and
Environ Sci Pollut Res

methodology” explains data sources, theoretical framework Smyth (2010) observed a positive and uni-directional link from
and empirical strategies employed in this study. EC to carbon dioxide emissions. Can and Gozgor (2017) obtain-
Section “Findings and discussion” comprises the empirical ed the data for France over the period 1964–2014 and applied the
results and discussion. Finally section “Conclusion and policy DOLS technique and found a positive relation of EC with CO2
implications” ends with concluding remarks, policy implica- emission. However, Chen et al. (2020) obtained the data for 36
tions and avenues for future research. OECD countries over the period 1970–2016 and applied random
effects (RE) method and panel quantile regression with the fixed
effects method of moments (PQR-FEMM) estimation s and
found an adverse but statistically insignificant impact of EC on
Review of the literature
CO2 emission. The third part focuses on the nexus of POP and
carbon dioxide emissions which we have already discussed in the
The earlier studies in the context of economic growth-energy
second paragraph of the “Introduction” section.
consumption-population-trade openness-carbon dioxide emis-
The fourth part is connected with the association between
sions are divided into four parts: the first one makes an effort to
trade openness (TO) and carbon emissions. Antweiler et al.
describe the association between EG and CO2 emissions which
(2001) classified three channels: scale effect, technique effect,
is closely connected to inspecting the reversed U-shaped link
and composition effect through which trade liberalization be
between environmental degradation and EG, i.e., testing the
able to result in environmental degradation or improvement.
validity of environmental Kuznets curve (EKC) hypothesis.2
Scale effect indicates that TO rise the emissions with rising
Scholars have carried out enormous empirical studies that end
EG which is injurious for the environment. The technique effect
with a different conclusion. For example, the studies by Ang
diminishes the emissions because it is believed that the impor-
(2007), obtained the data for France from 1960 to 2000,
tation of efficient and environment-friendly technology may
employed an autoregressive distributed lag (ARDL) model
reduce emissions. The composition effect implies that TO
and they observed a reversed U-shaped link between CO2
may decrease or rise emissions depending upon whether the
emissions and EG in France. Gozgor (2017) collected the data
economy has relatively led in dirty industries or cleaner.
for 35 OECD countries over the period 1960–2013, applied
Hence, the composition effect may have positive or negative
PMG estimation technique, and found a reversed U-shaped
effects. There are conflicting results recognized in the practical
connection between CO2 emissions and EG. Similarly,
works on the role of TO. Some studies like of Shafik and
Halicioglu (2009), Jalil and Mahmud (2009), Nasir and
Bandyopadhyay (1992), Grether et al. (2007), Shahbaz et al.
Rehman (2011), Shahbaz et al. (2012), Baek and Kim
(2012), and Shahbaz et al. (2013) determined that trade open-
(2013), Apergis and Ozturk (2015), Shahbaz et al. (2015),
ness is useful for the environment over technique effect.
Ahmad et al. (2016), Apergis (2016), Ahmad et al. (2017),
However, Lopez (1994) and Cole and Rayner (2000) found that
Can and Gozgor (2017), Nasreen et al. (2017), and Pal and
trade liberalization is injurious for the environment by agreeing
Mitra (2017) observed the evidence for EKC hypothesis valid-
with the composite effect for manufacture. Fang et al. (2019)
ity. However, Shahbaz et al. (2015), Tutulmaz (2015), Dong
collected the data for 82 developing economies (they further
et al. (2016), Sugiawan and Managi (2016), and Gill et al.
divided these countries into sub-groups, 38 lower-middle-
(2018) establish a monotonic rising curve, but a U-shaped
income economies and 44 upper middle-income economies)
curve was determined by Chakravarty and Mandal (2016),
over the period 1970–2014 and applied fixed effects method
Dogan and Turkekul (2016), and Sapkota and Bastola
and found a positive relationship between TO and CO2 emis-
(2017), whereas Jaforullah and King (2017), Neve and
sion in both groups of the economies.
Hamaide (2017), Pal and Mitra (2017), Rehman and Rashid
To conclude the previous studies, we find that there are
(2017), and Zoundi (2017) concluded that there is no signifi-
controversial findings regarding the impact of different deter-
cant affiliation between EG and environmental pollutant.
minants of CO2 emission on it. Therefore, the current study
The second one emphasizes the association between EC and
uses a kinked exponential growth model to examine the ex-
carbon emissions. For instance, Halicioglu (2009) collected the
ponential growth rate of CO2 emission, economic growth,
data for Turkey from 1960 to 2005, applied the ARDL bounds
energy consumption, population, and trade openness in the
testing approach, and found a positive and Bi-directional relation-
individual dataset of 25 upper middle-income countries over
ship between EC and carbon emissions. Furthermore, Apergis
the period 1985–2014. This estimation provides information
and Payne (2009), Zhang and Cheng (2009), and Lean and
regarding the growth of the series in different sub-periods. The
2
Kuznets (1955) defined a reversed U-shaped relation between income study attempts to analyze the degree of association and cau-
inequality and economic growth. Grossman and Krueger (1991) later sation among the variables. Our findings may be helpful for
reestablished the Kuznets curve relationship with economic growth and envi- the policymakers, administrators, and environmentalists to
ronmental quality deprivation. Environmental Kuznets curve is an inverse U-
shaped curve which shows the connection between environmental quality and frame the policies regarding these variables for the upper
economic growth. middle-income economies.

Data and methodology
The present study uses annual data for CO2 emissions, eco-
nomic growth, energy consumption, total population, and
trade openness. The carbon dioxide emission is in kiloton
(kt), EG is GDP per capita at current US$, EC is kilogram
of oil equivalent per capita. The values of the total population3
are midyear estimates. Trade as a percentage of GDP is taken
as the proxy of trade openness. All the data are obtained from
the World Bank (2019). In this study, 25 countries are taken
into consideration for empirical investigation on the basis of
data availability, i.e., 1985 to 2014. All series are engaged
with log natural to overcome the variances. These countries
are upper middle-income group countries categorized by the
World Bank (2019). According to the World Bank (2019)
country classification, there are 60 countries falling in the
upper middle-income group. Our study has taken 25 coun-
tries, based on data availability. According to World Bank
(2019), the upper middle-income group countries are those
countries having gross national income (GNI) per capita is
between $3996 and $12,375. The selected upper middle-
income group countries are Albania, Algeria, Argentina,
Botswana, Brazil, Bulgaria, China, Colombia, Costa Rica,
Cuba, Dominican Republic, Ecuador, Gabon, Guatemala,
Jamaica, Jordan, Malaysia, Mauritius, Mexico, Paraguay,
Peru, Sri Lanka, South Africa, Thailand, and Turkey.
Kinked exponential growth model
The study has used the kinked exponential growth model de-
veloped by Boyce (1986) for the growth estimation of differ-
ent variables for 25 selected upper middle-income group
countries. Before the application of a kinked exponential
growth model, the study applies the multiple breaks point test
advocated by Bai and Perron (1998). The break point selection
has been taken based on the Schwarz criterion developed by
Schwarz (1978), which suggests the maximum break point.
Therefore, the two kinks growth model is applied as per the
criterion suggestion. The two kinks growth model can be rep-
resented as:
lnY t ¼ α1 þ β 1 ðD1 t þ D2 k 1 þ D3 k 1 Þ
þ β2 ðD2 t−D2 k 1 −D3 k 1 þ D3 k 2 Þ þ β3 ðD3 t−D3 k 2 Þ
þ ut ð1Þ
where lnYt is the dependent variable, which is used for
checking the growth rate, α1 is the intercept, βs are the slope
coefficients, Ds are representing the dummies for three spans,
and ks and t represents the kinks and time respectively.
3
“Total population is based on the de facto definition of population, which
counts all residents regardless of legal status or citizenship. The values shown
are midyear estimates” (World Bank WDI, 2019).
Environ Sci Pollut Res
The results of the kink exponential growth of five variables
for three different sub-periods in the 25 selected countries are
shown in Table 1. The kinked exponential estimates for these
countries with negative signs depicted that in every sub-period,
the particular variable in the particular country is declining and
rising otherwise. At the same time, the results in the given table
also show the level of significance with asterisks and the standard
error in the brackets. In this study, we explain the kinked expo-
nential growth rate of selected variables for one country, i.e.,
Albania. In the first sub-period from 1985 to 1999, there was a
negative growth rate of carbon emission in Albania; it declines
with the rate of − 11.1 and it is significant at 1% level. In the
second sub-period from 2000 to 2006, it rises with a growth rate
of 0.11 with 1% significance level, and in the third sub-period
from 2007 to 2014, there is no significant changes taking place.
The constant value is 9.14, which is also significant at 1% level.
The variable EG decline in the first sub-period from 1985 to
1993 with a rate of − 0.08 and the result is significant at 1% level.
In the second sub-period from 1994 to 2010, it grows with a rate
of 0.14 and it is significant at 1% level. The constant value is
6.72, which is significant at 1% level. The EC in the first sub-
period from 1985 to 1995 declines with the rate of 0.06; it is
significant at 1% level. In the second and third sub-periods from
1996 to 2005 and 2006–2014, there is no significant changes
taking place. The constant value of EC is 6.97, which is signif-
icant at 1% level. The variable POP, in the first sub-period from
1985 to 1991, rises with the rate of 0.01, and it is significant at
1% level. In the second sub-period from 1992 to 2011, it de-
clines, and in the third sub-period, there are no significant change
exhibited. The constant value of POP is 14.88, which is signifi-
cant at 1% level. The TO increases in the first sub-period from
1985 to 1994, with 2.96 growth rate; it is significant at 5% level.
In the second sub-period from 1995 to 2009, again it rises with a
growth rate of 1.21, which is significant at 10% level. In the third
sub-period from 2010 to 2014, there is no significant growth that
has been reported. The constant value of TO is 28.32, which is
significant at 1% level. Similarly, for the rest of the selected
countries, the study has estimated the kink exponential growth
of five selected variables, which are mentioned in Table 1.
Theoretical model
Further, we model CO2 emission as a function of the variables
under consideration as follows:
CO2 ¼ f ðEG; EC; POP; TOÞ ð2Þ
where CO2, EG, EC, POP, and TO represent the carbon diox-
ide emissions, economic growth, energy consumption, popu-
lation, and trade openness respectively. We claim that these
mentioned variables are the essential production factors as
well as leading players in the creation of CO2.
Environ Sci Pollut Res

Table 1 Results of Kinked Exponential Growth Model

Variables Sub- Coefficients Sub- Coefficients Sub- Coefficients

periods (Std. error) periods (Std. error) periods (Std. error)

Albania Algeria Argentina

lnCO2 1985–1999 − 0.11***(0.01) 1985–1990 0.01(0.01) 1985–1999 0.02***(0.00)
2000–2006 0.11***(0.02) 1991–2000 0.007(0.00) 2000–2004 0.01**(0.00)
2007–2014 0.00 (0.00) 2001–2014 0.02***(0.00) 2005–2014 0.03***(0.00)
Constant 9.14***(0.14) Constant 11.2***(0.06) Constant 11.54***(0.03)
lnEG 1985–1993 − 0.08***(0.02) 1985–1995 − 0.00***(0.00) 1985–1991 0.16***(0.05)
1994–2010 0.14***(0.00) 1996–1999 0.00(0.01) 1992–2002 − 0.02(0.01)
2011–2014 − 0.01(0.04) 2000–2014 0.09***(0.00) 2002–2014 0.07***(0.01)
Constant 6.72***(0.14) Constant 8.04***(0.06) Constant 7.69***(0.26)
lnEC 1985–1995 − 0.06***(0.01) 1985–1991 0.01***(0.00) 1985–2001 0.00***(0.00)
1996–2005 0.02(0.01) 1992–1997 − 0.01***(0.00) 2002–2009 0.01***(0.01)
2006–2014 0.01(0.03) 1998–2014 0.02***(0.00) 2010–2014 0.01*(0.00)
Constant 6.97***(0.11) Constant 6.68***(0.02) Constant 7.24***(0.01)
lnPOP 1985–1991 0.01***(0.00) 1985–1995 0.02***(0.00) 1985–1992 0.01***(0.00)
1992–2011 − 0.00***(0.00) 1996–2008 0.01***(0.00) 1993–2000 0.01***(9.47)
2012–2014 − 0.00(0.00) 2009–2014 0.01***(0.00) 2001–2014 0.01***(5.53)
Constant 14.88***(0.00) Constant 16.90***(0.00) Constant 17.20***(0.00)
TO 1985–1994 2.96**(1.29) 1985–1993 0.79(0.49) 1985–1994 − 0.27(0.47)
1995–2009 1.21*(0.64) 1994–2009 1.66***(0.19) 1995–2002 2.68***(0.41)
2010–2014 0.95(0.86) 2010–2014 − 2.09***(0.72) 2002–2014 − 0.19(0.29)
Constant 28.32***(9.24) Constant 39.77***(3.25) Constant 17.08***(3.23)
Botswana Brazil Bulgaria
lnCO2 1985–1990 0.21***(0.02) 1985–1996 0.03***(0.00) 1985–1991 − 0.08***(0.01)
1991–2011 0.00***(0.00) 1997–2010 0.02***(0.00) 1992–2003 − 0.02***(0.00)
2012–2014 0.07**(0.03) 2011–2014 0.06***(0.00) 2004–2014 − 0.00(0.00)
Constant 6.59***(0.12) Constant 12.07***(0.02) Constant 11.60***(0.07)
lnEG 1985–1990 0.20***(0.01) 1985–1999 0.05***(0.01) 1985–1991 − 0.12***(0.03)
1991–2003 0.02***(0.00) 2000–2005 − 0.01(0.02) 1992–2004 0.03**(0.01)
2004–2014 0.06***(0.00) 2006–2014 0.14***(0.02) 2005–2014 0.06***(0.00)
Constant 6.76***(0.08) Constant 7.54***(0.12) Constant 8.07***(0.19)
lnEC 1985–1994 0.02***(0.00) 1985–1990 − 0.00 (0.00) 1985–1991 − 0.04***(0.01)
1995–2009 0.00 (0.00) 1991–2001 0.01***(0.00) 1992–1997 − 0.02***(0.00)
2010–2014 0.02***(0.00) 2002–2014 0.02***(0.00) 1998–2014 0.00 (0.00)
Constant 6.68***(0.02) Constant 6.90***(0.01) Constant 8.26***(0.05)
lnPOP 1985–1991 0.03***(0.00) 1985–1994 0.01***(0.00) 1985–1990 − 0.00***(0.00)
1992–2000 0.02***(0.00) 1995–2004 0.01***(0.00) 1991–2002 − 0.00***(0.00)
2001–2014 0.01***(0.00) 2005–2014 0.00***(0.00) 2002–2014 − 0.00***(0.00)
Constant 13.84***(0.00) Constant 18.70***(0.00) Constant 16.02***(0.00)
TO 1985–1995 − 2.93***(0.50) 1985–1999 0.26**(0.12) 1985–2004 0.05(0.42)
1996–2010 0.01 (0.28) 2000–2005 1.52***(0.25) 2005–2009 5.52***(1.60)
2011–2014 6.59***(1.27) 2006–2014 − 0.55***(0.19) 2010–2014 3.06(2.02)
Constant 122.93***(3.95) Constant 15.43***(1.19) Constant 84.02***(5.24)
China Colombia Costa Rica
lnCO2 1985–1998 0.03***(0.00) 1985–1995 0.02***(0.00) 1985–1994 0.07***(0.00)
1999–2004 0.06***(0.00) 1996–2005 − 0.01***(0.00) 1995–2007 0.04***(0.00)
2005–2014 0.08***(0.00) 2006–2014 0.04***(0.00) 2008–2014 0.00 (0.00)
Constant 14.49***(0.04) Constant 10.75***(0.02) Constant 7.65***(0.03)
lnEG 1985–1994 0.06***(0.00) 1985–1994 0.08***(0.01) 1985–1992 0.09***(0.00)
1995–2007 0.12***(0.00) 1995–2004 0.02***(0.00) 1993–2006 0.05***(0.00)
2008–2014 0.17***(0.01) 2005–2014 0.11***(0.00) 2007–2014 0.09***(0.00)
Constant 5.44***(0.00) Constant 6.80***(0.07) Constant 7.08***(0.05)
lnEC 1985–2002 0.02***(0.00) 1985–1992 0.04***(0.00) 1985–1992 0.04***(0.00)
2003–2006 0.10***(0.00) 1993–2004 0.02***(0.00) 1993–2004 0.02***(0.00)
2007–2014 0.05***(0.00) 2005–2014 0.02***(0.00) 2005–2014 0.02***(0.00)
Constant 6.47***(0.01) Constant 6.05***(0.05) Constant 6.05***(0.05)
lnPOP 1985–1992 0.01***(0.00) 1985–1997 0.01***(0.00) 1985–1998 0.02***(0.00)
1993–2001 0.01***(0.00) 1998–2006 0.01***(0.00) 1999–2004 0.01***(0.00)
2002–2014 0.00***(9.21) 2007–2014 0.01***(0.00) 2005–2014 0.01***(0.00)
Constant 20.75***(0.00) Constant 17.19***(0.00) Constant 14.79***(0.00)
TO 1985–2003 1.47***(0.20) 1985–1994 0.90***(0.15) 1985–2001 1.60***(0.21)
2004–2008 2.96***(0.71) 1995–2003 − 0.05(0.12) 2002–2009 − 1.21***(0.40)
2009–2014 − 2.78***(0.74) 2004–2014 0.28**(0.10) 2010–2014 − 3.06***(0.77)
Constant 18.27***(2.43) Constant 27.25***(1.08) Constant 63.08***(2.32)
Cuba Dominican Rep. Ecuador
lnCO2 1985–1995 − 0.03***(0.00) 1985–1995 0.07***(0.00) 1985–1990 0.01(0.02)
1996–2010 0.00*(0.00) 1996–2004 0.03***(0.00) 1991–1994 0.00(0.02)
2011–2014 0.05**(0.01) 2005–2014 0.00(0.00) 1995–2014 0.04***(0.00)
Constant 10.55***(0.06) Constant 8.84***(0.05) Constant 9.71***(0.11)
 Environ Sci Pollut Res

Table 1 (continued)

Variables Sub- Coefficients Sub- Coefficients Sub- Coefficients

periods (Std. error) periods (Std. error) periods (Std. error)

lnEG 1985–1992 − 0.00(0.01) 1985–2000 0.09***(0.00) 1985–1989 − 0.04(0.03)

1993–1996 − 0.02(0.01) 2001–2005 0.02(0.01) 1990–1999 0.01**(0.00)
1997–2014 0.06***(0.00) 2006–2014 0.07***(0.01) 2000–2014 0.07***(0.00)
Constant 7.81***(0.07) Constant 6.50***(0.06) Constant 7.51***(0.14)
lnEC 1985–1990 0.02(0.01) 1985–1994 0.02***(0.00) 1985–1995 0.01**(0.00)
1991–1994 − 0.11***(0.01) 1995–2003 0.02***(0.00) 1996–2009 0.00***(0.00)
1995–2014 − 0.00(0.00) 2004–2014 − 0.00**(0.00) 2010–2014 0.03***(0.00)
Constant 7.29***(0.05) Constant 6.22***(0.03) Constant 6.36***(0.03)
lnPOP 1985–1991 0.01***(0.00) 1985–1995 0.01***(0.00) 1985–1995 0.02***(0.00)
1992–2003 0.00***(9.99) 1996–2004 0.01***(9.83) 1996–2002 0.01***(0.00)
2004–2014 0.00*(0.00) 2005–2014 0.01***(9.81) 2003–2014 0.01***(9.67)
Constant 16.11***(0.00) Constant 15.66***(0.00) Constant 15.99***(0.00)
TO 1985–1990 − 1.80*(1.01) 1985–1992 3.03***(1.06) 1985–2003 0.78***(0.16)
1991–1994 − 11.14***(0.80) 1993–2005 − 0.09 (0.42) 2004–2009 1.71***(0.48)
1995–2014 0.83***(0.14) 2006–2014 − 2.17***(0.66) 2010–2014 − 0.38(0.71)
Constant 80.80***(4.11) Constant 50.47***(6.16) Constant 36.91***(1.94)
Gabon Guatemala Jamaica
lnCO2 1985–1989 − 0.02(0.02) 1985–2005 0.06***(0.00) 1985–1989 0.12***(0.03)
1990–2006 − 0.00(0.00) 2006–2011 − 0.01**(0.00) 1990–2007 0.02***(0.00)
2007–2014 0.01*(0.00) 2012–2014 0.10***(0.01) 2008–2014 − 0.07***(0.01)
Constant 8.60***(0.09) Constant 8.09***(0.02) Constant 8.26***(0.12)
lnEG 1985–1993 0.01(0.01) 1985–1989 − 0.04*(0.02) 1985–1991 0.08***(0.01)
1994–2004 0.00(0.01) 1990–1999 0.05***(0.00) 1992–1998 0.08***(0.01)
2005–2014 0.08***(0.01) 2000–2014 0.05***(0.00) 1999–2014 0.03***(0.00)
Constant 8.32***(0.12) Constant 6.96***(0.09) Constant 6.89***(0.08)
lnEC 1985–2002 − 0.00(0.00) 1985–1999 0.02***(0.00) 1985–1990 0.12***(0.01)
2003–2011 0.09***(0.01) 2000–2009 0.00***(6.90) 1991–2008 0.01***(0.00)
2012–2014 − 0.06(0.03) 2010–2014 0.07***(0.00) 2009–2014 − 0.07***(0.01)
Constant 7.25***(0.06) Constant 6.03***(0.02) Constant 6.36***(0.08)
lnPOP 1985–1994 0.02***(0.00) 1985–1997 0.02***(4.95) 1985–1991 0.00***(0.00)
1995–2007 0.02***(0.00) 1998–2008 0.02***(4.65) 1992–2001 0.00***(6.97)
2008–2014 0.03***(0.00) 2009–2014 0.02***(0.00) 2002–2014 0.00***(5.51)
Constant 13.59***(0.00) Constant 15.90***(0.00) Constant 14.65***(0.00)
TO 1985–1989 − 7.26**(2.12) 1985–1991 1.21 (1.05) 1985–1997 − 1.15(0.70)
1990–2001 0.88*(0.43) 1992–2001 2.04***(0.43) 1998–2009 0.04(0.60)
2002–2014 − 0.72*(0.41) 2002–2014 0.30 (0.34) 2010–2014 − 2.37 (1.74)
Constant 115***(7.98) Constant 28.72***(5.26) Constant 106.97***(6.17)
Jordan Malaysia Mauritius
lnCO2 1985–1992 0.04***(0.00) 1985–1995 0.12***(0.00) 1985–1990 0.13***(0.01)
1993–2004 0.04***(0.00) 1996–2000 0.03***(0.00) 1991–2000 0.07***(0.00)
2005–2014 0.02***(0.00) 2001–2014 0.04***(0.00) 2001–2014 0.03***(0.00)
Constant 9.00***(0.04) Constant 10.26***(0.04) Constant 6.38***(0.06)
lnEG 1985–1989 − 0.16***(0.03) 1985–1989 0.08*(0.04) 1985–1989 0.06 (0.04)
1990–2006 0.03***(0.00) 1990–1998 0.04***(0.01) 1990–1995 0.11***(0.01)
2007–2014 0.09***(0.01) 1999–2014 0.06***(0.00) 1996–2014 0.04***(0.00)
Constant 7.87***(0.14) Constant 7.40***(0.15) Constant 7.53***(0.14)
lnEC 1985–2004 0.00***(0.00) 1985–1991 0.07***(0.00) 1985–1990 0.06***(0.00)
2005–2010 0.01 (0.00) 1992–2009 0.03***(0.00) 1991–2000 0.03***(0.00)
2011–2014 − 0.04***(0.01) 2010–2014 0.00 (0.00) 2001–2014 0.02***(0.00)
Constant 6.77***(0.02) Constant 6.78***(0.04) Constant 6.02***(0.02)
lnPOP 1985–1996 0.04***(0.00) 1985–1999 0.02***(0.00) 1985–1992 0.00***(0.00)
1997–2006 0.02***(0.00) 2000–2009 0.02***(0.00) 1993–2003 0.01***(0.00)
2007–2014 0.05***(0.00) 2010–2014 0.01***(0.00) 2004–2014 0.00***(0.00)
Constant 14.81***(0.00) Constant 16.54***(0.00) Constant 13.82***(0.00)
TO 1985–1989 8.94**(3.95) 1985–2001 7.34***(0.40) 1985–1991 2.69**(1.11)
1990–2004 0.15(0.65) 2002–2008 − 4.98***(0.85) 1992–2002 − 0.85*(0.42)
2005–2014 − 0.49(1.05) 2009–2014 − 7.76***(1.22) 2003–2014 − 0.87**(0.40)
Constant 83.13***(15.16) Constant 97.54***(4.35) Constant 113***(5.64)
Mexico Paraguay Peru
lnCO2 1985–1990 0.01**(0.00) 1985–1994 0.08***(0.01) 1985–1989 0.00(0.02)
1991–2005 0.02***(0.00) 1995–2000 0.03***(0.01) 1990–2001 0.01***(0.00)
2006–2014 0.01***(0.00) 2001–2014 0.02***(0.02) 2002–2014 0.06***(0.00)
Constant 12.56***(0.03) Constant 7.24***(0.06) Constant 9.97***(0.09)
lnEG 1985–1989 0.06(0.04) 1985–1997 0.06***(0.00) 1985–1995 0.11***(0.00)
1990–1995 0.11***(0.01) 1998–2004 − 0.03***(0.01) 1996–2002 − 0.00(0.00)
1996–2014 0.04***(0.00) 2005–2014 0.14***(0.00) 2003–2014 0.10***(0.00)
Constant 7.53***(0.14) Constant 6.76***(0.06) Constant 6.44***(0.06)
lnEC 1985–1995 0.00**(0.00) 1985–1990 0.04***(0.01) 1985–1993 − 0.03***(0.00)
Environ Sci Pollut Res

Table 1 (continued)

Variables Sub- Coefficients Sub- Coefficients Sub- Coefficients

periods (Std. error) periods (Std. error) periods (Std. error)

1996–2008 0.00***(0.00) 1991–2000 − 0.00(0.00) 1994–2006 0.00***(0.00)

2009–2014 − 0.00(0.00) 2001–2014 − 0.00(0.00) 2007–2014 0.05***(0.00)
Constant 7.24***(0.01) Constant 6.37***(0.05) Constant 6.33***(0.02)
lnPOP 1985–1991 0.01***(0.00) 1985–1994 0.02***(0.00) 1985–1992 0.02***(0.00)
1992–1997 0.01***(0.00) 1995–2003 0.02***(0.00) 1993–2001 0.01***(0.00)
1998–2014 0.01***(4.12) 2004–2014 0.01***(0.00) 2002–2014 0.00***(0.00)
Constant 18.12***(0.00) Constant 15.09***(0.00) Constant 16.77***(0.00)
TO 1985–1989 2.82**(1.35) 1985–1994 6.59***(0.64) 1985–1990 − 3.74***(0.91)
1990–1995 1.02*(0.55) 1995–2002 − 4.30***(0.55) 1991–2005 1.40***(0.20)
1996–2014 1.27***(0.16) 2003–2014 − 0.56(0.39) 2006–2014 1.03***(0.36)
Constant 22.80***(4.81) Constant 51.05***(4.32) Constant 44.11***(1.13)
Sri Lanka South Africa Thailand
lnCO2 1985–1990 − 0.01(0.01) 1985–1994 0.00(0.00) 1985–1998 0.10***(0.00)
1991–2000 0.09***(0.00) 1995–2004 0.02***(0.00) 1999–2006 0.03***(0.00)
2001–2014 0.03***(0.00) 2005–2014 0.01***(0.00) 2007–2014 0.03***(0.00)
Constant 8.27***(0.04) Constant 12.69***(0.03) Constant 10.71***(0.04)
lnEG 1985–2001 0.05***(0.00) 1985–1993 0.07***(0.01) 1985–1997 0.10***(0.00)
2002–2010 0.10***(0.00) 1994–2003 0.00 (0.01) 1998–2002 − 0.07***(0.01)
2011–2014 0.13***(0.02) 2004–2014 0.07***(0.01) 2003–2014 0.10***(0.00)
Constant 5.86***(0.04) Constant 7.53***(0.10) Constant 6.58***(0.07)
lnEC 1985–1996 0.00***(0.00) 1985–1992 − 0.02***(0.00) 1985–1998 0.07***(0.00)
1997–2000 0.05***(0.05) 1993–2008 0.00***(0.00) 1999–2003 0.02***(0.00)
2001–2014 0.01***(0.00) 2009–2014 − 0.00(0.00) 2004–2014 0.03***(0.00)
Constant 5.72***(0.02) Constant 7.95***(0.02) Constant 6.12***(0.03)
lnPOP 1985–1993 0.01***(0.00) 1985–1997 0.02***(0.00) 1985–1990 0.01***(0.00)
1994–2004 0.00***(0.00) 1998–2010 0.01***(0.00) 1991–2003 0.01***(8.76)
2005–2014 0.00***(0.00) 2011–2014 0.01***(0.00) 2004–2014 0.00***(0.00)
Constant 16.58***(0.00) Constant 17.28***(0.00) Constant 17.75***(0.00)
TO 1985–2001 1.66***(0.18) 1985–1991 − 2.84***(0.61) 1985–2000 3.89***(0.32)
2002–2009 − 3.46***(0.00) 1992–2009 1.25***(0.14) 2001–2004 5.09***(1.05)
2010–2014 − 1.85**(0.69) 2010–2014 0.21 (0.61) 2005–2014 0.75(0.50)
Constant 58.30***(2.06) Constant 57.36***(3.23) Constant 46.83***(3.26)
Turkey
Variables Sub-periods Coefficient (standard error)
lnCO2 1985–2001 0.03***(0.00)
2002–2006 0.03***(0.00)
2007–2014 0.04***(0.00)
Constant 11.62***(0.02)
lnEG 1985–2001 0.05***(0.00)
2002–2009 0.11***(0.01)
2010–2014 0.03(0.02)
Constant 7.32***(0.07)
lnEC 1985–2001 0.02***(0.00)
2002–2006 0.02***(0.00)
2007–2014 0.02***(0.00)
Constant 6.72***(0.00)
lnPOP 1985–1994 0.01***(0.00)
1995–2007 0.01***(0.00)
2008–2014 0.01***(0.00)
Constant 17.69***(0.00)
TO 1985–1994 0.71 (0.45)
1995–1998 1.94**(0.72)
1999–2014 0.34*(0.18)
Constant 30.35***(2.88)

The numbers in parentheses with each coefficient estimate are the standard errors. ***, **, and * denote statistical significance at 1%, 5%, and 10%
levels, respectively

The production function approach is applied to assess the
production of CO2 with reference to economic growth, energy
consumption, and population. In 1928, Cobb and Douglas
instigated a well-known two-factor production function to ex-
plain the distribution of the national income through
production functions. However, in this study, we have reno-
vated the two-factor production function to the multi-factor
Cobb–Douglas production function which is given below:
CO2 ¼ bEGk EC 1−k POP1−ð1−K Þ TO1−½1−ð1−K Þ ð3Þ
 Environ Sci Pollut Res

where b is the total factor productivity, k, 1 − k, 1 − (1 − K), hypothesis of γi < 0 for all i. This test is based on the approach
and 1 − [1 − (1 − K)] denote the elasticities. of mean group, which utilizes the mean of tyi statistics to
The generalized form of the Cobb–Douglas production execute the following Z statistic:
  rffiffiffiffiffiffiffiffiffiffiffiffiffiffiffi
 ffi
function is written as:
pffiffiffiffi 
f ðx1 ; …; xn Þ ¼ Axα1 1 …xαn n ð4Þ Z ¼ N t−E t = Var t ð8Þ

where xi > 0(i = 1…n), A is a positive constant, and α1, …, αn where t = (1/N)∑Ni¼1 t yi ; the terms E (tÞ and Var (tÞ are the
are nonzero constants.
mean and variance of each tyi statistic respectively, and Z
To examine the association and causation matter, cross-
converges to a standard normal distribution.
sectional dependence tests, first-generation panel unit root
However, the first-generation unit root tests failed to
tests, second-generation unit root test, panel cointegration,
mitigate the requirement of a test which allows for
panel Granger causality analysis, panel FMOLS and panel
cross-sectional dependence, during the investigation of
DOLS estimators are employed in this study.
panel unit root. Therefore, Pesaran (2007) formulated a
The cross-sectional dependence testing is a very im-
test for testing the unit root in the cross-sectional depen-
portant diagnostic which should be investigated before
dent panel which is known as Pesaran’s CADF test. The
performing the panel analysis. The null hypothesis for
test can be formulated as:
the cross-sectional dependence test is no cross-section
dependence. There are certain tests for cross-sectional N
CIPSðN ; T Þ ¼ N −1 ∑ t i ðN ; T Þ ð9Þ
dependence, the Lagrange multiplier (LM) test formulat- i¼1
ed by Breusch and Pagan (1980) is used in this study,
because N < T and it is suitable for such a situation. The The ti(N, T) represents the cross-sectional augmented
below equation is constructed on the basis of Eq. (2) dickey fuller statistic for the ith cross-sectional unit.
representing the LM test statistic: For panel cointegration analysis, Kao (1999) and Pedroni
(1999) cointegration tests are employed. Pedroni
yit ¼ αi þ β i xit i ¼ 1; 2; 3…N t ¼ 1; 2; 3 ð5Þ cointegration can be represented as:
where yit is the dependent variable and αi and βi are the yit ¼ αit þ δit t þ X i βi þ εit ð10Þ
intercepts and slope coefficients for the specific country
respectively. Further, the LM test statistic is estimated where yit and Xit are the apparent variables with dimensions of
as: (N*T)×1 and (N*T)×m, respectively, whereas the Kao test for
N −1 N panel cointegration can be represented as:
LM ¼ T ∑ ∑ ρbij →d χ2N ðN −1Þ 2
= ð6Þ
i¼1 j¼iþ1 yit ¼ αi þ βxit þ εit ð11Þ
where ρbij denotes the sample estimate of the pairwise
where αi is the fixed effect changing across the cross-
correlation of the residuals.
sectional observations, β is the slope parameter, yit and
LLC (Levin et al. 2002) and IPS tests (Im et al. 2003) are
xit are independent random walks for all i. The residual
implemented to test the panel unit root. LLC is a panel-based
series εit should be I(1) series.
ADF test that limits the parameters γi by keeping them
The proposed models for the study are created on the basis
undistinguishable across cross-sectional regions:
of regression proposed by Pedroni (2000).
k
Δyit ¼ αi þ γ i yit−1 þ ∑ α j Δyit− j εit ð7Þ lnCO2it ¼ αi þ β i lnEGit þ βi lnECit þ βi lnPOPit
j¼i
þ β i TOit þ μit i
where t = 1…, T is the time periods and i = 1…N members of
the panel. The null hypothesis of LLC test is γi = γ = 0 for all i, ¼ 1; 2; …; N t ¼ 1; 2; …; T ð12Þ
against the alternate hypothesis of γ1 = γ2… = γ < 0 for all i,
with the test-based statistics t y ¼ b
y=s:e:ðbyÞ. In this test, γ is
limited by being kept across regions under both the hypothe- where lnCO2it is the carbon dioxide emission with log natural,
sis, which is considered as the drawback of this test. Because lnEGit is the log GDP per capita, lnPOPit is the log population,
of this reason, IPS (2003) eases the sensitivity of the identical TOit is the trade openness with time t and ith countries. The
first-order AR coefficients of LLC test and allows γ to diverge carbon dioxide emissions and its determinants are
across the region under the alternate hypothesis. The null hy- cointegrated with slopes βi, which may or may not be homo-
pothesis of IPS test is γ = 0 for all i, against the alternative geneous across i.
Environ Sci Pollut Res

lnCO2it ¼ αi þ β i lnEGit þ βi lnECit þ βi lnPOPit The group mean FMOLS estimators are specified as:
ki
þ β i TOit þ ∑ γ ik ΔlnEGit−k
k¼−k i

ki ki
þ ∑ δik ΔlnECit−k þ ∑ ϑik ΔlnPOPit−k
k¼−k i k¼−k i

ki
þ ∑ ωik ΔTOit−k þ uit ð13Þ
k¼−k i

  2 −1  T     2 −1  T   
* N T T
b
β GMF ¼ N
−1
∑ ∑ lnEGit −lnEGi ∑ lnEGit −lnEGi lnCO*2it −Tb
γ i ∑ lnECit −lnECi ∑ lnECit −lnECi lnCO*2it −T b
γi ð14Þ
1 t¼1 t¼1 t¼1 t¼1
 2 −1  T    2 −1  T  
T   T 
∑ lnPOPit −lnPOPi ∑ lnPOPit −lnPOPi lnCO*2it −Tb
γ i ∑ TOit −TOi ∑ lnTOit −lnTOi lnCO*2it −T b
γi
t¼1 t¼1 t¼1 t¼1

  b is an important diagnostic which should be investigated prior

where lnCO*2it ¼ lnCO2it −lnCO2it −Ω21i ΔlnEGit and so
b
Ω22i to performing the panel analysis. The results are depicted in
 
b b 0 bΩ21i b b 0 Table 2, which clearly shows that the null hypothesis of no
on… and b
γ i ¼ Γ21i þ Ω21i − Γ21i þ Ω22i :
bΩ22i cross-sectional dependence (correlation) is rejected at 1% lev-
N el of significance. The results are exhibited a strong cross-
b* ¼ N −1 ∑
Between dimensions, the estimator is β GMF
i¼1 sectional dependence.
β*CFM;i where β*CFM;i is the conventional FMOLS estimator
applied to ith country of the panel.
The group mean panel DOLS estimator can be constructed Unit root testing
as:
First-generation unit root tests
 −1  
b
*
−1
N T 0 T g
g
β GMD ¼ N ∑ ∑ Z Z
it it ∑ Z it lnCO 2it ð15Þ
1 t¼1 t¼1 The first-generation unit root tests proposed by Levin et al.
(2002) and Im et al. (2003) are employed. These two re-
where Zit is a 2(K + 1)1 vector of regressors. nowned tests are used to determine whether the series are
comprising a unit root or not. The results are reported in
Z it ¼ lnEGit −lnEGit ; ΔlnEGit−k ; …; ΔlnEGitþk Table 3, which reveals a mixture of I(0) and I(1); some vari-
ables are stationary at level, whereas most of the variables
g
g 2 ¼ lnCO2 −lnCO2 .
And lnCO it it it become stationary after the first difference.
Between dimensions, DOLS estimator can be created as:
* N
b
β −1
GMD ¼ N ∑ β*CD;i ð16Þ Second-generation unit root test
i¼1

In the “First-generation unit root tests” sub-section, the first-

where β*CD;i is the conventional DOLS estimator applied to ith
country of the panel.
Findings and discussion
Cross-sectional dependence test
The study begins with the results performed by the cross-
sectional dependence test as proposed by the Breusch and
Pagan (1980) LM test. The cross-sectional dependence testing
generation unit root tests are performed, but prior to that, the
study has also checked the cross-sectional dependence which
requires a test which allows for cross-sectional dependence,
during the investigation of panel unit root. However, the first-
generation unit root tests failed to mitigate this requirement.
Therefore, Pesaran (2007) formulated a test for testing the unit
root in the cross-sectional dependent panel which is known as
Pesaran’s CADF test. The results of Pesaran’s CADF tests are
shown in Table 4. The results exhibited that EC and TO are
non-stationary at level and became stationary after the first
difference. All other variables are stationary at level.

Panel cointegration
The panel cointegration connection between carbon diox-
ide emissions and other explanatory variables like EG,
EC, POP, and TO is examined through Pedroni (1999)
and Kao (1999) tests. The results of panel cointegration
tests are described in Table 5. The techniques proposed
by Pedroni (1999) applied two tests for cointegration,
namely the between- and the within-dimensions. The
within-dimension includes the four statistics, namely
panel v-statistic, panel rho-statistic, panel PP-statistic,
and panel ADF-statistic. The within-dimension with
weighted statistics also consists of four statistics: panel
v-statistic, panel rho-statistic, panel PP-statistic, and pan-
el ADF-statistic. In the between-dimension, a set of tests
includes group rho-statistic, group PP-statistic, and group
ADF-statistic. According to Pedroni, in the within-
dimension statistic group, the AR coefficients through
different countries for the unit root tests on the assessed
residuals considers collective time factors and heteroge-
neity across the countries. The between-dimension statis-
tics are built on the basis of the individual AR coeffi-
cient average connected with the unit root tests of the
residual for each country. The results of panel
cointegration techniques reveal that the null hypothesis
of no cointegration is rejected for eight tests: panel rho-
statistic, panel PP-statistic, panel ADF-statistic, panel
weighted rho-statistic, panel PP-weighted statistic, panel
ADF-weighted statistic, group PP-statistic, and group
ADF-statistic at 1% and 5% levels of significance with
intercept and with intercept and trend. However, the ma-
jority of the tests are rejecting the null hypothesis. Thus,
we conclude that a panel cointegration among the vari-
ables exists. The study also utilized the Kao (1999) test
for panel cointegration. The result of the Kao test is
reported in Table 2. The Kao test also supports the
results of Pedroni (1999) tests and rejecting the null
hypothesis at 1% level of significance, suggesting that
there is a panel cointegration among the series. Our
results of long-run equilibrium among the variables are
similar to the results of Sebri and Ben-Salha (2014);
Shahbaz et al. (2012), Baek and Kim (2013), and
Shahbaz et al. (2015).
Table 2 Residuals cross-
sectional dependence results Tests Variables
lnCO2
Breusch–Pagan LM 5257.41***
p values 0.000
Source: Authors’ own calculation. *** denotes significance levels at 1%
Environ Sci Pollut Res
Panel causality analysis
Having established a cointegration by Pedroni (1999) and Kao
(1999) in Table 2, we observe the directional relationship
between the variables in panel context. The results of panel
Granger causality are specified in Table 6. The results confirm
a uni-directional causality from carbon emissions to the pop-
ulation. The rise in carbon dioxide emissions affects positively
to population growth. A long-run Granger causality affirms
from EG to carbon dioxide emissions. It shows that carbon
dioxide emission is controlled by EG in the upper middle-
income group countries. Thus, the carbon dioxide emission-
controlled policies would have very less effect on EG of these
countries. There may be a reason for this causality process.
The EG is the result of the expansion of trade and manufactur-
ing sectors wherever energy is used as a primary input that
releases carbon dioxide. The result also confirms a long-run
Granger causality EG to EC for upper middle-income group
countries. Thus, energy management policy would affect
slightly to the growth of the economy. However, the panel
Granger causality test result indicates that there is a bi-
directional relationship between POP and EG. Therefore,
any negative shock on population growth will affect negative-
ly to EG and vice versa.
There is a bi-directional causality between TO and EG.
Therefore, every single negative shock in trade openness
may cause a negative impact on the economic growth of these
countries and vice versa. The study has also found a uni-
directional causality from TO to EC.
Our findings of uni-directional links between CO2 emissions
and POP, EG, and CO2 emissions and between EG and EC are
similar with the results of Knapp and Mookerjee (1996), Apergis
and Payne (2009), and Zhang and Cheng (2009) respectively.
The result of the bi-directional relationship between TO and EG
is consistent with the results of Klasra (2011).
Panel FMOLS and DOLS estimation
Pedroni (2000) advocated a new influential test associated
with single-equation methods which inspects directly the cir-
cumstance on the cointegration vector which is necessary for
holding robust relation. Moreover, these approaches agree to
pose the null hypothesis in a more natural form, so that it
lnEG lnEC lnPOP TO
6677.65*** 3626.77*** 8446.50*** 2185.95***
0.000 0.000 0.000 0.000
Environ Sci Pollut Res

Table 3 First-generation unit root results

Variables Liven, Lin, and Chu Im, Pesaran, and Shin

Intercept Intercept and trend Intercept Intercept and trend

Level
lnCO2 − 3.476*** (0.000) − 1.574* (0.057) 0.918 (0.820) 0.295 (0.616)
lnEG 0.908 (0.818) − 1.719** (0.042) 4.696 (1.000) − 0.749 (0.226)
lnEC − 0.994 (0.159) − 0.523 (0.300) 2.655 (0.996) 1.511 (0.934)
lnPOP 0.390 (0.651) − 13.396*** (0.000) 3.165 (0.999) − 12.577*** (0.000)
TO − 3.509*** (0.000) − 2.295** (0.010) − 2.251** (0.012) − 1.892** (0.029)
First differences
ΔlnCO2 – – − 13.586*** (0.000) − 11.841*** (0.000)
ΔlnEG – – − 11.984*** (0.000) − 9.480*** (0.000)
ΔlnEC − 7.105*** (0.000) − 5.141*** (0.000) − 10.481*** (0.000) − 9.170*** (0.000)
ΔlnPOP − 8.325*** (0.000) – − 8.040*** (0.000) –
ΔTO – – – –

Source: Author’s calculation. ***, **, and * denote significance levels at 1%, 5%, and 10% respectively

investigates whether or not a robust association between EC middle-income group countries and the result is significant at
and EG holds constantly for all panels. From the result of 1% level of significance which is similar to the results of Shi
panel FMOLS method, we reveal that in the long-run, there (2003). The positive impact of POP implies that the CO2
is a negative and significant connection between EG and car- emission increases with the increase in population.
bon emissions. The result of a negative association between Therefore, it is advised to the policymakers that there is a need
EG and carbon emissions is similar with the results of previ- to pay attention to this rising population issue. The association
ous works like those of Ang (2007), Halicioglu (2009), Jalil between TO and carbon emissions is negative in these coun-
and Mahmud (2009), Nasir and Rehman (2011), Shahbaz tries and the result is significant at 1% level. Our result is
et al. (2012), Baek and Kim (2013), Shahbaz et al. (2015), similar with the results of Shafik and Bandyopadhyay
Ahmad et al. (2016), Apergis (2016), Gozgor and Can (1992), Grether et al. (2007), Shahbaz et al. (2012), and
(2017), Ahmad et al. (2017), Can and Gozgor (2017), Shahbaz et al. (2013); in their study, they also have deter-
Gozgor (2017), Nasreen et al. (2017), and Pal and Mitra mined that TO is useful for the environment over technique
(2017). The coefficient is − 0.484 and it is significant at 1% effect. The values of R2 and adjusted R2 are 0.743 and 0.742
level of significance. The negative connection implies that the respectively, which reveals that the model is quite good. The
CO2 emission decrease with the increase in EG which shows results of FMOLS is depicted in Table 7.
the validity of the environmental Kuznets curve in the upper
middle-income countries. The EC has a positive and strong
connection with carbon emissions and the result is significant Table 4 Second-generation unit root test results
at 1% level. The elasticity is 0.623 which is significant at 1%
Variables Tests
level. The positive association of energy consumption and
carbon emissions is consistent with the results of Shahbaz T-bar Z[T- p values
et al. (2013), Gozgor and Can (2017), Jamel and Derbali bar]
(2016), and Can and Gozgor (2017). The positive impact of
lnCO2 − 2.09 − 1.74 0.04**
EC implies that the CO2 emission increase with the increase of
lnEG − 2.39 − 3.28 0.00***
EC. The results exhibit that these countries are consuming an
lnEC − 1.80 − 0.28 0.38
extreme level of energy or using energy-inefficient technolo-
gy, which degrades the quality of the environment. Therefore, lnPOP − 3.11 − 6.94 0.00***
these countries are advised to install energy-efficient technol- TO − 1.97 − 1.14 0.12
ogy and enhance their economies to explore the more renew- ΔlnEC − 3.11 − 6.97 0.00***
able sources of energy which will reduce the emission level. ΔTO − 3.63 − 9.63 0.00***
The elasticity of population is 0.643 which specifies a positive *** and ** denotes significance levels at 1% and 5% respectively. Δ
association between POP and carbon emissions in the upper denotes first difference
 Environ Sci Pollut Res

Table 5 Results of panel cointegration tests consistent with the results of Shahbaz et al. (2013), Jamel
Pedroni residual cointegration test and Derbali (2016), and Can and Gozgor (2017). The elastic-
ity of EC is 0.943, which is significant at 1% level. There is a
With intercept With trend and intercept positive and significant relationship between POP and carbon
emissions, the elasticity is 1.454, and it is significant at 1%
Statistics p value Statistics p value
level; this result is similar to the results of Shi (2003). There is
Within-dimension a positive association between TO and carbon emissions. The
Panel v-statistic 1.255 0.104 − 0.366 0.642 elasticity is 0.002, which is significant at 1% level of signifi-
Panel rho-statistic − 3.314*** 0.000 − 2.308** 0.010 cance. Our result of TO and carbon emission association is
Panel PP-statistic − 10.619*** 0.000 − 12.135*** 0.000 parallel to the results of Lopez (1994), Cole and Rayner
Panel ADF-statistic − 5.014*** 0.000 − 6.631*** 0.000 (2000), and Fang et al. (2019). Hence, our results support that
Weighted there is a composite effect of TO on carbon emissions, mean-
Panel v-statistic − 2.124 0.983 − 4.139 1.000 ing that the upper middle-income group countries have rela-
Panel rho-statistic − 2.674*** 0.003 − 2.183** 0.014
tively gained in dirty industries. The results of panel DOLS
Panel PP-statistic − 9.813*** 0.000 − 11.322*** 0.000
reported that with the change of these selected determinants of
Panel ADF-statistic − 3.012*** 0.001 − 3.055*** 0.001
carbon emissions, the carbon emissions will rise at least in
these upper middle-income countries. The values of R2 and
Between-dimension
adjusted R2 are 0.999 and 0.998, respectively, which confirm
Group rho-statistic − 0.682 0.247 0.483 0.685
that the model is quite a good fit.
Group PP-statistic − 9.811*** 0.000 − 11.415*** 0.000
Group ADF-statistic − 3.096*** 0.000 − 3.858*** 0.000
Kao test
ADF − 3.020*** 0.001
Conclusion and policy implications
Source: Author’s calculation. ***, **, and * denote significance levels at
1%, 5%, and 10% respectively In this paper, we estimated and discussed the kinked exponen-
tial growth rate, association, and causation between EG, EC,
POP, TO, and CO2 emissions for individual and panel dataset
of 25 upper middle-income countries over the period 1985–
The results of panel DOLS for upper middle-income group 2014. Before the application of kinked growth model, the
countries are exhibited in Table 8. The results reveal that there multiple break point test advocated by Bai and Perron
is a strong and significant association between carbon emis- (1998) is applied. For panel unit root inspection, the first-
sions and its determinants. There is a positive association be- generation and second-generation panel unit root tests are ap-
tween EG and carbon emissions. The elasticity of EG with plied. The second-generation unit root testing approach is
carbon emissions in the upper middle-income group countries used because the first-generation unit root tests failed to mit-
is 0.076, which is significant at 5% level. The results of EG igate the requirement of a test which allows for cross-sectional
and carbon emissions are consistent with the results of previ- dependence, during the investigation of panel unit root.
ous works like those of Shahbaz et al. (2015), Tutulmaz Therefore, the Pesaran (2007) second-generation unit root ap-
(2015), Dong et al. (2016), Sugiawan and Managi (2016), proach is applied before the application of panel cointegration
and Gill et al. (2018). There is a positive and significant asso- techniques, panel causality, and panel FMOLS and DOLS
ciation between EC and carbon emissions in these countries. techniques. The Kao and Pedroni tests for panel cointegration
The positive association of EC and carbon emissions are confirms a long-run cointegration among the variables.

Table 6 Panel Granger causality test results

ΔlnCO2 ΔlnEG ΔlnEC ΔlnPOP ΔTO

ΔlnCO2 – 0.588 (0.555) 2.304 (0.100) 3.438** (0.032) 1.685 (0.186)

ΔlnEG 4.049** (0.017) – 3.776** (0.023) 3.736** (0.024) 3.237** (0.039)
ΔlnEC 25.110 (2.955) 0.539 (0.583) – 2.010 (0.134) 0.579 (0.560)
ΔlnPOP 16.142 (1.403) 2.958* (0.052) 2.100 (0.123) – 0.160 (0.851)
ΔTO 2.133 (0.119) 6.647*** (0.001) 3.912** (0.020) 1.076 (0.341) –

Source: Author’s calculation. ***, **, and * denote significance levels at 1%, 5%, and 10% respectively
Environ Sci Pollut Res

Table 7 Results of FMOLS Derbali (2016), and Can and Gozgor (2017). The results ex-
Variables CO2 is the dependent variable hibit that these countries are consuming an extreme level of
energy or using energy-inefficient technology, which de-
Coefficient Std. error t statistic Prob. grades the quality of the environment. Therefore, the admin-
istrator and policymakers are advised to install the energy-
lnEG − 0.484*** 0.107 − 4.512 0.000
efficient technology and enhance their economies to explore
lnEC 0.623*** 0.169 3.693 0.000
the more renewable sources of energy which will reduce the
lnPOP 0.643*** 0.042 15.276 0.000
emission level. The positive impact of POP implies that the
TO − 0.007*** 0.002 − 3.423 0.001
CO2 emission increase with the increase in population. Our
R2 0.743
result of POP relation with CO2 emission is similar to the
Adjusted R2 0.742 result of Shi (2003). The rising population in these countries
Source: Authors’ own calculation. *** denotes significance levels at 1% leads to a rise in the demand for energy and demand for energy
assists in the consumption of more fossil fuels which ultimate-
ly raises the emissions and causes environmental degradation.
Therefore, it is advised to the policymakers that there is a need
to pay more attention to this rising population issue.
The findings of the paper are as follows: The results of
While analyzing the association between the variables
panel FMOLS, reveals that there is a negative association of
through panel DOLS, we examine that all four variables are
EG and TO with CO2 emission. The negative relation of EG
directly proportional to the CO2 emissions. From panel
with CO2 emission are in line with the previous studies like
Granger causality tests, we reveal that there is a uni-
those of Ahmad et al. (2016), Apergis (2016), Gozgor and
directional causality running from EG to CO2 emissions.
Can (2017), Ahmad et al. (2017), Can and Gozgor (2017),
Our result is in line with the study of Zhang and Cheng
Gozgor (2017), Nasreen et al. (2017), and Pal and Mitra
(2009) and Lean and Smyth (2010).
(2017). This negative association implies that the CO2 emis-
We take into consideration all the results of the associ-
sion decreases with the increase of economic growth, which
ations and causations related to the variables in the selected
supports the validity of EKC hypothesis. The negative asso-
countries. The results suggest that the policymakers, econ-
ciation of TO with CO2 emission is in line with Shahbaz et al.
omists, environmentalists, and administrators of these up-
(2012) and Shahbaz et al. (2013). According to Antweiler
per middle-income countries should give more importance
et al. (2001), the negative connection between TO and CO2
to promoting green technology to overcome the emissions.
emission comes under the technique effect classification
They should allocate considerably more funds and atten-
which implies that the technique effect diminishes the emis-
tion to clean and green energy generation to attain a
sions because it is believed that the importation of efficient
pollution-free environment because according to the re-
and environment-friendly technology may reduce emissions,
sults, the increasing EC in the long-run raises carbon emis-
whereas there is a positive association between EC and POP
sion. Furthermore, the rising population again poses a sig-
with CO2 emissions in these countries. The positive impact of
nificant challenge since the results exhibit that the rising
EC implies that the CO2 emission increases with the increase
population degrades environmental quality. Therefore, it is
of EC. The positive association of EC with CO2 emission is in
imperative to spread environmental awareness among the
line with the work of Gozgor and Can (2017), Jamel and
people so that the rising population can take the side of the
quality of the environment instead of its degradation. This
can be done through compulsory educational courses
starting at the grade school level and also through social
Table 8 Results of DOLS
media. In the current study, we are unable to comprise
Variables CO2 is the dependent variable variables like deforestation, industrialization, urbanization,
population density, electricity consumption, literacy rate (a
Coefficient Std. error t statistic Prob.
proxy of environment awareness)4 as additional determi-
lnEG 0.076** 0.030 2.506 0.012 nants of carbon dioxide emissions because of unavailabil-
lnEC 0.943*** 0.092 10.225 0.000 ity of data. Therefore, for further research, this study sug-
lnPOP 1.454*** 0.515 2.823 0.005 gests to include these variables.
TO 0.002*** 0.000 2.838 0.004
R2 0.999
Adjusted R2 0.998 4
The literacy rate may be an appropriate proxy of environment awareness
only and only if the environmental science is a compulsory discipline at all
Source: Authors’ own calculation. *** denotes significance levels at 1% the levels of formal education in these countries.

Acknowledgements The authors acknowledge the comments received
from the conference participants and paper panellists in the 56th Annual
Conference of the Indian Econometric Society (TIES), India, during 8-10
January 2020, held at School of Economics, Madurai Kamaraj
University, India. The authors are thankful to Professor Kamaiah Bandi,
Emeritus Professor, School of Economics, University of Hyderabad for
his insightful and constructive comments on the earlier draft of this paper.
We would also like to thank the editor and anonymous referees for their
thoughtful and valuable comments. However, the usual disclaimer
applies.
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