Tese Por Compendios V5

CASTILLA LA MANCHA UNIVERSITY - CUENCA
DEPARTAMENT OF ECONOMICS AND MANAGEMENT
DOCTORAL THESIS
Interplay of Energy, Economy, and Environment: Insights from
Brics, Visegrad, and Portugal.
DOCTORANDA
Maria Clara Contente dos Santos Parente
DIRECTORES
Profesor Doctor D. José Maria Cantos
Profesor Doctor D. Daniel Balsalobre Lorente
Profesor Doctor D. Nuno Carlos Leitão
Cuenca 2023
Interplay of Energy, Economy, and Environment: Insights from Brics, Visegrad, and Portugal.
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Acknowledgments
To my professors
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Content
Acknowledgments ............................................................................................... 3
Content ................................................................................................................... 4
List of Tables ........................................................................................................ 7
List of Figures ..................................................................................................... 10
ABSTRACT ......................................................................................................... 11
CHAPTER 1 ......................................................................................................... 14
INTRODUCTION.......................................................................................... 14
1.1. Introduction ......................................................................................... 14
1.2. Justification .......................................................................................... 16
1.3. Objectives ............................................................................................. 17
1.4. Thesis Structure ................................................................................... 19
CHAPTER 2 ........................................................................................................ 21
THE INFLUENCE OF ECONOMIC COMPLEXITY PROCESSES AND
RENEWABLE ENERGY ON CO2 EMISSIONS OF BRICS. WHAT
ABOUT INDUSTRY 4.0?.................................................................................. 21
2.1. Introduction ......................................................................................... 21
2.2 Literature Review ............................................................................... 23
2.3 Data and Methods ............................................................................... 29
2.3.1 Empirical methodology ................................................................... 30
2.3.2. Empirical methodology: Pollution emissions and industry 4.0 .. 32
2.4 Empirical results and discussion .......................................................... 34
2.5 Conclusion and implications ................................................................. 41
CHAPTER 3 ........................................................................................................ 44
REVISITING THE EFFECTS OF ENERGY, POPULATION, FOREIGN
DIRECT INVESTMENT, AND ECONOMIC GROWTH IN VISEGRAD
COUNTRIES UNDER THE EKC SCHEME ................................................. 44
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3.1. Introduction ......................................................................................... 44

3.2 Literature Review ................................................................................ 46
3.2.1. The linkages between economic growth, renewable energy,
non‑renewable energy, and carbon dioxide emissions. ............................ 47
3.2.2. The causality between foreign direct investment and pollution
emissions .......................................................................................................... 52
3.3. Data and econometric strategy ............................................................. 55
3.4. Empirical results...................................................................................... 59
3.5. Conclusions .............................................................................................. 71
CHAPTER 4 ........................................................................................................ 75
THE IMPACT OF ECONOMIC GROWTH, INTERNATIONAL TRADE
AND CARBON DIOXIDE EMISSIONS ON PORTUGUESE ENERGY
CONSUMPTION ............................................................................................... 75
4.1 Introduction .............................................................................................. 75
4.2 Literature Review ..................................................................................... 78
4.2.1 Economic Growth and Energy Use .................................................... 78
4.2.2 International Trade, Carbon Dioxide Emissions, and Energy Use
........................................................................................................................... 81
4.3 Methodology ............................................................................................. 84
4.4 Results ........................................................................................................ 87
4.5 Conclusions ............................................................................................... 96
CHAPTER V ..................................................................................................... 100
CONCLUSIONS .............................................................................................. 100
5.1. Objectives ........................................................................................... 102
5.2. Results ................................................................................................. 104
5.2.1 BRICS .................................................................................................... 106
5.2.2 Visegrad Countries ............................................................................. 106
5.2.3 Portugal ................................................................................................. 107
5.4. Future Studies ........................................................................................ 108
5.4.1 Limitations ........................................................................................... 112
5.4.2 Future Directions ................................................................................ 112
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References...................................................................................................... 115
Apprendix ...................................................................................................... 152
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List of Tables
Table 1a Variables Description………………………………………….. 30
Table 1b Variables used to represent Industry 4.0 in BRICS countries… 30
Table 2 Descriptive statistics. ............................................................................ 34
Table 3 Correlation matrix................................................................................. 35
Table 4 Unit root tests. ....................................................................................... 36
Table 5 Cross-section dependence: Pesaran (CD test)................................... 37
Table 6 Unit root test: second generation (CIPS) with constant. ................. 37
Table 7 VIF test on multicollinearity. ............................................................... 37
Table 8 Panel cointegration Test results with intercept and trend. ............. 37
Table 9 Fully modified least squares (FMOLS) and dynamic least squares
(DOLS). ................................................................................................................. 38
Table 10 Impact of Industry 4.0 on CO2 emissions (lcopc) in BRICS
countries. .............................................................................................................. 40
Table 11 Descriptive Statistics model 1 ........................................................... 60
Table 12 Correlations between variables model 1 ......................................... 60
Table 13 Descriptive Statitics model 2 ............................................................. 60
Table 14 Correlations between variables model 2 ......................................... 61
Table 15 Panel unit root test .............................................................................. 61
Table 16 VIF test for model 1 ............................................................................ 61
Table 17 VIF test for model 2 ............................................................................ 62
Table 18 Diagnostic tests model 1 .................................................................... 62
Table 19 Diagnostic tests model 2 .................................................................... 62
Table 20 Hausman test model 1 ........................................................................ 62
Table 21 Hausman test model 2 ........................................................................ 63
Table 22 Model 1: dependent variable LogCO2 with PMG-ARDL model . 63
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Table 23 Model 1: dependent variable LogCO2 with PMG-ARDL in short
run Czech Republic ............................................................................................ 65
run Hungary ........................................................................................................ 66
run Poland ........................................................................................................... 66
run Slovakia ......................................................................................................... 66
Table 27 Model 2: dependent variable LogGDP with PMG-ARDL model 67
Table 28 Model 2: Depedent Variable LogGDP with FMOLS ..................... 69
Table 29 Descriptive Statistics ........................................................................... 89
Table 30 Correlations between the Variables Used in This Research ......... 89
Table 31 Unit Root Test: ADF Criteria ............................................................. 91
Table 32 Lag Length Criteria Emissions on Portuguese Energy Use with
Cointegration Regression .................................................................................. 91
Table 33 The Impact of Economic Growth, Iinternational Tade, Ccarbon
Dioxide Emissions on Portuguese Eenergy Use with Cointegration
Regressions. ......................................................................................................... 92
Table 34 The Impact of Economic Growth, International Trade, and Carbon
Dioxide Emissions on Portuguese Energy Use with ARDL Model ............ 92
Table 35 The Impact of Economic Growth, International Trade, Carbon
Dioxide Emissions on Portuguese Energy Use with ARDL and Bound Test
............................................................................................................................... 94
Table 36 The Diagnostic ARDL: The Durbin-Watson ................................... 94
Table 37 The Diagnostic ARDL: Autocorrelation Test .................................. 94
Table 38 The Diagnostic ARDL: Homoskedasticity Versus
Heteroskedasticity .............................................................................................. 95
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Table 39 Granger Causality Wald Test ........................................................... 95
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List of Figures
Figure 1 - Climate Change Factors (Own Production) .................................. 16
Figure 2 Linear Trend on Per capita Carbon emissions in BRICS ............... 26
Figure 3 CO2 & Industry 4.0 in BRICS ............................................................. 31
Figure 4 U-inverted economic Complexity-EKC. .......................................... 33
Figure 5 Graph absract. ...................................................................................... 40
Figure 6 Model 1 ................................................................................................ 64
Figure 7 Model 2 ................................................................................................. 70
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ABSTRACT
The need for urgent and effective global action on climate change is
real and pressing. The increasing impacts of climate change and the risk of
reaching irreversible tipping points show the potential for catastrophic
changes if policy efforts are unsuccessful. Emphasizing the need to swiftly
accelerate actions to peak and significantly reduce global emissions, aiming
for net-zero emissions, starting at once.
Governments are not only facing the challenge of climate change but
also grappling with other significant issues. The COVID-19 pandemic
(Andreoni 2021; C. A. Phillips et al. 2020; Ray et al. 2022; Tonne 2021) and
Russia's unwarranted, unjustifiable, and illegal war of aggression against
Ukraine have exposed the vulnerability of human systems both socially and
economically (Net Zero+ 2023). These events have highlighted the potential
threat economic disruptions pose to climate policy resilience (Ukraine War
and COVID Fuel Record Breaking Carbon Emissions in 2022, Report
Reveals _ Euronews). Additionally, societies are confronting longer-term
structural challenges such as a rapidly changing labour market, aging
populations, digital transformation of economies, and environmental
impacts associated with biodiversity loss and the deteriorating health of the
oceans (Net Zero+ 2023).
In that sense the present work aims to include some the major
concerns in today’s environmental change, where building systemic
resilience to climate impacts requires a comprehensive approach that goes
beyond adapting individual components to specific risks. It needs an
overarching strategy that integrates adaptation and mitigation efforts and
breaks down the compartmentalization of climate policy (Fuinhas,
Marques, and Koengkan 2017; Ranocchia and Lambertini 2021; UNO -

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United Nations Organization 2022; Wawrzyniak 2020) . While adaptation is
crucial in addressing existing climate impacts, it has its limitations,
emphasizing the importance of reducing emissions to minimize risks
according to Niklas, Alexander, and Dwyer (2022).
Achieving a resilient transition to a greener economy requires
synergies between adaptation and mitigation, as well as considering other
natural systems like biodiversity. The Energy Agency (2023) infer that
nature-based solutions exemplify how these synergies can be harnessed to
create cost-effective win-win policy options, although their implementation
is still limited.
To meet adaptation needs, financial flows and investments must
align with resilience objectives. Governments play a crucial role in creating
an enabling environment for increased adaptation spending. Multilateral
development banks can have a significant impact through the strategic use
of grant or concessional finance, but this may necessitate institutional
reforms.
Ultimately the present work delves into the intricate dynamics
between energy, economy, and the environment in various regions, namely
BRICS nations (Balsalobre-Lorente et al. 2023) , Visegrad (Nuno Carlos
Leitão et al. 2023) member countries, and Portugal (N. C Leitão, Contente
dos Santos Parente, and Balsalobre-Lorente 2023). The studies explore the
relationship between per capita CO2 emissions, renewable energy,
economic complexity index, foreign direct investment (FDI), and their
impact on environmental sustainability and economic growth. The findings
emphasize the significance of renewable energies, the need for sustainable
practices, and the importance of policy interventions to foster cleaner
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energy solutions. These articles provide valuable insights and policy
recommendations for achieving a balance between economic development
and environmental preservation.
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CHAPTER 1
INTRODUCTION
1.1. Introduction
The urgency of the climate crisis is underscored by the increasing
likelihood of crossing climate system tipping points. These tipping points
represent critical thresholds in the global climate system, beyond which
irreversible and potentially abrupt changes to our environment become
inevitable. Such changes could occur within relatively short timeframes,
surpassing the ability of human societies to adapt and resulting in
widespread and catastrophic impacts.
Recent scientific findings (Elsevier’s Analytical Services 2021; Net
Zero+ 2023) indicate that climate system tipping points are anticipated to
occur at lower levels of warming than previously believed. Even at the
current levels of warming, the possibility of certain tipping points cannot
be disregarded. This realization has significant implications for
policymaking in the near term. Urgent and accelerated action on climate
change is imperative. Merely aiming for net-zero emissions by a specific
date is insufficient; the trajectory followed to achieve this goal is crucial in
mitigating the risks associated with tipping points. It is vital to make every
effort to limit temperature overshoot beyond 1.5°C to minimize the risks
associated with these tipping points.
Addressing the urgent need for global action on climate change,
several studies have shed light on crucial aspects of the problem. The first
study focuses on the BRICS countries, exploring the relationship between
carbon emissions, economic complexity, renewable energy, and foreign
direct investment. It confirms the presence of the environmental Kuznets
curve, indicating a decreasing impact of economic development on

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environmental degradation. Additionally, it supports the Pollution Haven
Hypothesis, suggesting that economic growth takes precedence over
environmental regulations in these countries. The study also investigates
the potential impact of Industry 4.0 technologies on carbon emissions,
finding a modest effect in the short term but a potential contribution to
emission neutrality in the long term.
The second study examines the connection between environmental
sustainability and economic growth in the Visegrad countries. It reveals a
positive correlation between economic growth and pollution emissions, but
also highlights the diminishing adverse effects of pollution as income per
capita increases. The study emphasizes the role of energy consumption in
carbon emissions and advocates for a transition to renewable energy
sources. It further supports the pollution halo hypothesis, demonstrating
that foreign direct investment contributes to increased pollution levels.
Urbanization and sustainable foreign investments are identified as key
drivers of economic expansion in the Visegrad countries.
In Portugal, the third study investigates the interrelationships among
carbon dioxide emissions, economic growth, international trade, and
energy consumption. It confirms a long-term relationship among these
variables and reveals that international trade induces energy consumption,
in line with neoclassical international trade theories and the Pollution
Haven Hypothesis. Moreover, the study highlights the positive impact of
energy consumption on carbon dioxide emissions, emphasizing the energy
dependence of the Portuguese economy. The analysis identifies
bidirectional relationships among the variables, emphasizing their mutual
influences.
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Overall, these studies contribute significantly to our understanding
of the relationship between economic development, carbon emissions,
renewable energy, foreign direct investment, and international trade. They
emphasize the importance of sustainable practices and call for a balanced
approach to economic growth and environmental sustainability in various
economic contexts.
Economic
Development
Technology Carbon
and Inovation Emissions
Climate
Change
International Renewable
Trade Energy
Foreign Direct
Investment
Figure 1 - Climate Change Factors (Own Production based on
publications).
1.2. Justification
A key objective of climate policy should be to achieve cost reductions
that make carbon-free technologies competitive with high-carbon
alternatives. This not only helps in making these technologies more
accessible but also accelerates their diffusion, which is vital for achieving
medium-term carbon emissions reductions.
In summary, while innovation and industrial policies are crucial for
achieving carbon neutrality, they should be part of a broader package of
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climate policies. Technology policy supports the development of clean
technologies, but demand-side policies are needed to incentivize their
adoption until they become economically competitive. However, demand-
side policies alone cannot replace the need for technology policy due to
barriers and market failures. A comprehensive approach that combines
both technology and demand-side policies is necessary to overcome these
challenges and facilitate a successful transition to a low-carbon economy.
1.3. Objectives
In summary, the pursuit of carbon neutrality necessitates a holistic
and integrated approach that encompasses various policy measures. While
innovation and industrial policies play a critical role in driving the
development and deployment of low-carbon technologies, they cannot
operate in isolation. These policies should be embedded within a broader
package of climate policies that address the multifaceted challenges of
transitioning to a sustainable and low-carbon future.
Technology policy serves as a catalyst for advancing clean
technologies by supporting research and development efforts, fostering
innovation ecosystems, and providing financial incentives for their
commercialization. By promoting breakthroughs in technology, such as
renewable energy systems, energy-efficient solutions, and sustainable
transportation, technology policy creates a foundation for achieving carbon
neutrality.
However, even with advancements in clean technologies, their
widespread adoption can be hindered by economic factors. To bridge this
gap, demand-side policies come into play. These policies aim to create
favourable market conditions and incentives that make low-carbon options
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economically attractive to consumers, businesses, and industries. They may
include measures such as carbon pricing, renewable energy subsidies,
energy efficiency incentives, and green procurement practices. By
stimulating demand for sustainable products and services, demand-side
policies drive market transformation and accelerate the transition to a low-
carbon economy.
Nevertheless, it is crucial to recognize that demand-side policies
alone are insufficient to overcome the barriers and market failures that exist
in the research, development, and demonstration stages of clean
technologies. This is where technology policy complements demand-side
measures by addressing these specific challenges. It provides support for
early-stage research, facilitates technology transfer and diffusion, fosters
collaboration between academia and industry, and promotes standards and
regulations that incentivize the adoption of clean technologies.
By integrating both technology and demand-side policies, countries
can develop a comprehensive and synergistic approach to climate action.
This approach leverages the strengths of each policy dimension, addressing
both the supply and demand sides of the equation. It creates an enabling
environment for innovation, fosters economic competitiveness, and drives
sustainable consumption and production patterns.
Moreover, the integration of technology and demand-side policies
within a broader package of climate policies allows for the effective
coordination and alignment of efforts across sectors and stakeholders. It
ensures that the transition to a low-carbon economy is inclusive, just, and
equitable, taking into account the needs and interests of various actors,
including businesses, workers, communities, and vulnerable populations.
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In conclusion, the journey towards carbon neutrality requires a
comprehensive strategy that combines innovation and industrial policies
with a range of complementary climate policies. By harmonizing
technology advancements with demand-side measures, countries can
overcome barriers, accelerate the adoption of clean technologies, and foster
a sustainable and low-carbon future. This integrated approach paves the
way for a resilient and prosperous society that mitigates the impacts of
climate change and embraces sustainable development.
1.4. Thesis Structure
The present work is presented in the following way:
Chapter 1 Introduction: Introduces the climate crisis and the
increasing likelihood of crossing climate system tipping points,
emphasizing the need for urgent and accelerated action. Justification:
Discusses the importance of achieving cost reductions and making carbon-
free technologies competitive with high-carbon alternatives. Objectives:
Outlines the objectives of the document, emphasizing the need for a holistic
and integrated approach to climate policies that combine innovation,
industrial policies, and demand-side measures.
Chapter 2: This chapter focuses on factors contributing to climate
change, discussing the interrelationships among carbon emissions,
economic growth, international trade, and energy consumption. and the
impact of Industry 4.0 technologies on carbon emissions.
Emphasizing the importance of a comprehensive approach that
integrates technology and demand-side policies for achieving carbon
neutrality and driving sustainable development.
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Chapter 3 provides insights into the complex relationship between
environmental factors and economic growth in the Visegrad countries,
highlighting the importance of sustainable practices, renewable energy, and
effective environmental regulations for achieving balanced and sustainable
development.
Chapter 4 provides empirical evidence of the relationships between
carbon dioxide emissions, economic growth, international trade, and
energy consumption in Portugal. The findings suggest that trade can
contribute to increased energy consumption, and energy consumption has
a positive impact on carbon dioxide emissions. The bidirectional
relationships observed among these variables highlight the complex
interplay between economic factors and environmental sustainability.
Chapter 5 provides a comprehensive analysis of the research
findings and draws conclusions based on the results obtained from the
previous chapters. It focuses on summarizing the main findings, discussing
their policy implications, suggesting future research directions, and
concluding the study.
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CHAPTER 2
THE INFLUENCE OF ECONOMIC COMPLEXITY PROCESSES
AND RENEWABLE ENERGY ON CO2 EMISSIONS OF BRICS. WHAT
ABOUT INDUSTRY 4.0?
2.1. Introduction
The extreme behaviour of the climate, increasingly frequent in recent
decades, has caused international organizations such as the World
Meteorological Organization (WMO) or the OECD to consider the problem
generated as a global emergency, encouraging developed and less
developing nations to adopt anti-pollution measures to stop the
environmental deterioration (OECD GREEN GROWTH PAPERS 2019;
World Meteorological Organization (WMO) 2021). According to these
reports, reducing carbon emissions should be an inexcusable priority for all
governments, which implies reducing the use of polluting energy sources,
increasing the use of renewable energies, and controlling this energy
substitution process.
The impact of carbon emissions on pollution levels has made them a
primary global concern in recent decades. Industry, agriculture, and human
activity are the main drivers of climate change in developing and developed
nations, with CO2 being the primary cause of global greenhouse gas
emissions. Regardless of a nation’s level of economic development, CO2 is
frequently cited as a significant driver of environmental degradation
(Khezri, Heshmati, and Khodaei 2022). In our analysis, we chose BRICS
countries becausethey have similar levels of development and are highly
dependent on fossil energy due to their industrial nature (Iwaro and
Mwasha 2010; Khezri, Heshmati, and Khodaei 2022).
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According to Intergovernmental Panel on Climate Change-IPCC
(Reay et al. 2007), in the last fifty years, human activity has been the most
critical factor in the increase in pollution, contributing around 70%.
Different analyses include the BRICS countries due to their significant
contribution to environmental deterioration (Azam and Haseeb 2021; J.
Chen et al. 2022; Khezri, Heshmati, and Khodaei 2022; Usman and
Makhdum 2021). Therefore, the present study examines CO2 emissions and
the relationship between Foreign Direct Investment, the Economic
Complexity Index and Renewable Energy. Our differential contribution to
the body of existing literature focuses on the fact that the selected variables
have not been used simultaneously by the panel of BRICS countries.
Indeed, some studies have included BRICs in their research but have
not measured the influence of foreign direct investment on CO2 emissions.
Different authors have estimated the impact of foreign direct investment
on carbon emissions(Azam and Haseeb 2021; Azevedo, Sartori, and
Campos 2018; Jahangir Alam et al. 2012; Khattak et al. 2020), and other
authors have found that renewable energy diminishes carbon emissions
(Nuno Carlos Leitão, Balsalobre-Lorente, and Cantos-Cantos 2021b; Ortiz
et al. 2021; Rahman, Alam, and Velayutham 2022).
On the other hand, the analysis of the economic complexity index
(ECI) includes the consideration of productive resources, available
infrastructure, knowledge, and human capital, that is, a country’s
production elements, which reflect production sources, existing
infrastructures, knowledge, and human capital (Albeaik et al.; Doğan et al.
2021). In this sense, economic expansion, natural reserves, and many
private and public infrastructures are viewed as negatives for greener
sustainability development, but on the other hand, economic complexity

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and trade are viewed as positives (Breitenbach, Chisadza, and Clance 2022;
Buhari, Lorente, and Ali Nasir 2020; Caglar et al. 2022; Romero and
Gramkow 2020; Usman, Jahanger, et al. 2022). As a result of this research,
several BRICS economies could develop fresh perspectives on
sustainability.
Finally, this study also tries to answer two questions to which the
economic literature barely contributes empirical works: how does Industry
4.0 influence CO2 emissions? Does this relationship behave as a non-linear
inverted U shape?
Our work is developed in five sections in addition to this
introduction. Section 2 is “Literature Review,” which analyses the relevant
literature. Section 3 is “Data and Methods,” which includes appropriate
econometric and empirical methods and data. Section 4 addresses the
empirical results discussion, and Section 5 does the same with the
conclusions and recommendations for future research.
2.2. Literature Review
This section explains the relationship between per capita Carbon
Dioxide Emissions, Economic Complexity Index, Renewable Energy, and
Inward Foreign Direct Investment using the most significant research
available. The research on BRICS countries is plentiful (J. Chen et al. 2021;
J. Chen et al. 2022), being amongst fossil energy dependence, trade (Ibrahim
and Ajide 2021) and renewable energy, and CO2 emissions (Danish et al.
2019). The abundance of studies on CO2 emissions is due to its impact on
environmental degradation, and this is one of the most relevant topics in
today’s research literature (Emre Caglar 2020; Nuno Carlos Leitão 2014;
Nathaniel et al.; Shahbaz, Nasir, and Roubaud 2018a; Sinha, Shahbaz, and
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Balsalobre 2017; H. Wang 2022). Some studies analyzed emissions from
several perspectives in BRICS, and other developing economies, ranging
from electricity consumption (i.e., energy intensity), trade openness,
financial development and renewable energy under the EKC perspective
(Acheampong 2019; Acheampong, Adams, and Boateng 2019; Ganda 2019;
Jiang, Khattak, and Rahman 2021; Pata 2018; Rana and Sharma 2019; Rout,
Gupta, and Sahoo 2022; Zafar et al. 2019). These studies traditionally have
inferred a U-shape connection between ecological degradation and
economic growth, i.e., ecological degradation rises as income reaches a limit
and it decreases (see Fig. 1).
CO2 per capita is also used as a relevant variable under EKC
(Environmental Kuznets Curve) (Altıntaş and Kassouri 2020; Duro and
Padilla 2008; Xiaoyan Li, Liu, and Ni 2021; Parker and Bhatti 2020), ranging
from policy indicators, income differences, energy intensity and consequent
rise in Carbon Dioxide Emissions per capita.
Fossil fuel dependence is concurrently referred to as a significant
contributor to environmental degradation (J. Chen et al. 2022; B. Li and
Haneklaus 2022; Martins et al. 2021), implying CO2 emissions are
extrapolated due to fossil fuel consumption and production.
Most EKC studies refer to the primary ecological quality indicator as
it can affect a greener environment (CO2 emissions, waste, etc.); as our
globalized world is facing rapid growth, renewable energy is seen as the
right path to achieve Carbon Dioxide neutrality. Some activities such as
agriculture, population, technology, economic development and trade
balance are seen as aggravators to ecologic footprint and interfere with
greener sustainability and increase degradation. Most of these studies have
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confirmed the EKC hypothesis for the nations under analysis (Balsalobre-
Lorente, Ibáñez-Luzón, et al. 2022a; Chang and Fang 2022; Yongming
Huang et al. 2022; Pata 2021; Rout, Gupta, and Sahoo 2022; Usman and
Makhdum 2021), validating the primary ecological quality indicator (such
as CO2 emissions and waste).
The Economic Complexity Index can be used to predict the expected
income level of countries and economic growth (Hidalgo and Hausmann
2009) and greenhouse emissions (Hartmann et al. 2017). An essential
element of the calculation methodology is the principle of affinity, that is,
compatibility between an economy (or territory) and an activity (Hidalgo et
al. 2018). Therefore, the Economic Complexity Index (ECI) is a measure of
the capacity of an economy that can be inferred from data connecting
locations with the activities present in them. ECI methodology measures
production, exports, knowledge and quality and has, for the past decades,
been subject to various studies implying its impact on environmental
degradation as a first approach (Hausmann and Hidalgo 2011). However,
environmental quality, culture and GDP infer a reduction of environmental
degradation in the long run (Can and Gozgor 2017; Lapatinas, Litina, and
Zanaj 2021; Nuno Carlos Leitão, Balsalobre-Lorente, and Cantos-Cantos
2021b; Neagu 2020; Sun et al. 2022). The Economic Complexity Index has
been studied under the DOLS and FMOLS methods (Can and Gozgor 2017;
Neagu and Teodoru 2019), demonstrating that low levels of the index are
associated with a greater presence of CO2 emissions, in addition to a high
level of energy consumption and greenhouse emissions correspond to less
econHalkosomic complexity.
According to Pollution Haven Hypothesis (PHV), Inward Foreign
Direct Investment (FDI) has also been proven to play an important role in
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CO2 emissions. In this sense, some nations prefer less stringent
environmental rules resulting in higher pollution levels, although countries
are accepting foreign investment with stricter environmental regulations
leading to environmental improvements (Pollution Halo Hypothesis -
PHH) (Aliyu and Ismail 2015; Balsalobre-Lorente et al. 2019; Kisswani and
Zaitouni 2021; Mcnally 1999; Singhania and Saini 2021; Yilanci, Bozoklu,
and Gorus 2020)
Figure 2 Linear Trend on Per capita Carbon emissions in BRICS
The selected panel of countries under study have been subject to
different econometric approaches. Some studies use ARDL cointegration,
Westerlund’s cointegration and PMG – Pooled Mean Group and second-
generation and heterogeneity panel (Pata 2021; Rout, Gupta, and Sahoo
2022).
Other econometric approaches include both long-run and short-run
analysis using FMOLS (Fully Modified Ordinary Least Squares), DOLS
(Dynamic Ordinary Least Squares) or ARDL to measure long-run elasticity
for different sets of countries and variables (Balsalobre-Lorente, Ibáñez-
Luzón, et al. 2022a; M. W. A. Khan et al. 2019; Nuno Carlos Leitão,
Balsalobre-Lorente, and Cantos-Cantos 2021c). ARDL method was used to
study the Foreign Direct Investment, negative impact on Renewable Energy
and consequently on Environment degradation (Bello, Solarin, and Yen
2018; Hussain and Rehman; Ibrahiem 2015; J. Z. Teng et al. 2021; Wan et al.
26
2022);. The results of the empirical studies do not coincide with the expected
impact of foreign direct investment (FDI) on CO2 emissions, which may
affect the countries represented in the same data panel in different ways
(Fehime AYDIN 2023). Even FDI could have positive effects on CO2
emissions in the short term but negative ones in the long term, behaving in
a non-linear way.
On the other hand, industry 4.0 is a concept that today represents a
new era in industrial development characterized by the purpose of
obtaining more efficient production using new technologies (i.e., IoT and
cybernetic systems) that represent an extreme advance in the digitization of
companies and in the interconnection of external and internal networks. All
this new strategy is subject to a series of restrictions (Environmental
Defense Fund 2018; Manoukian 2018; Smit 2016), such as improving energy
efficiency, reducing emissions of polluting particles and waste, the
reduction of the intensity of use of non-renewable natural resources and the
adaptation in the educational and professional training system to orient it
to the new demand for required jobs.
This idea took shape with the initiative of the German government
in 2011 to gain competitiveness in the world (Kagermann, Wolf-Dieter, and
Wahlster 2011; Pereira and Romero 2017; Ślusarczyk 2018; Wahlster 2011)
The intensification of various climatic catastrophes in the last decade and,
above all, the emergence of the pandemic caused by COVID’19 and its
health, economic and security of supply consequences has had the
consequence of redesigning a set of restrictions that must require Industry
4.0 in Europe. Of all of them, for this work, we are interested in two: the
need to preserve the environment and the need to reduce the weakness of
large economies to guarantee a stable supply of certain raw materials,

27
especially those that constitute the base of the main sources of primary
energy. In short, the security of supply cannot be separated from the
strategic security of nations and environmental security threatened by
increasingly frequent natural catastrophes. For this reason, the paradigm of
sustainable development today is based on three pillars: environmental
protection, social justice, and economic development (Koilo 2019).
Regarding environmental sustainability, it is still not clear what the
impact of the new industry 4.0 will be on the environment, for example, in
terms of additive manufacturing (Ford and Despeisse 2016). There is also
no unanimity about how it will impact the job market (Jelonek and Urbaniec
2019) or what the final impact of 3D printing will be (Burritt and Christ
2016) argue that a positive impact is expected if the industry can achieve
complete digitalization that further improves products and services and if
it is possible to interact with the environment outside the company in real-
time. Tim et al. (2018) makes a regulatory approach on how production
processes could contribute to sustainable use of natural resources and the
elimination of polluting waste; many qualitative studies and few
quantitative ones (Xiaoyan Li, Liu, and Ni 2021).
The recent and progressive implementation of Industry 4.0 prevents
us from having regular statistics on its implementation and evolution in
today’s world, so the databases cannot integrate a historical sequence that
affects all the technologies involved.(Oláh et al. 2020) contain a graphic
synthesis that lists six technologies that could form the hard core of industry
4.0: the Internet of Things (IoT), Big Data Analytics, Cloud Computing, 3D
Printing, Augmented Reality and Robotic Systems, while (Blanco 2017)
another three are added, cybersecurity, additive manufacturing, and 3D
simulation. Through the appropriate processes, it is expected to obtain three

28
types of sustainable results: economic, improved automation processes and
their safety, and greater environmental protection. In addition, these
results must be harmonized with the 17 Sustainable Development Goals
(SDGs) proclaimed by the UN, a challenge to achieve Society 5.0 (United
Nations 2015).
As stated in section 1, the BRICS countries constitute the leading
group that contributes to CO2 emissions worldwide. Not in vain do they
group 40% of the world’s population. However, it cannot be said that they
share a similar structure to their economies. From the point of view of the
objectives of this study, the two largest BRICS countries in terms of per
capita pollution, Russia, and South Africa, in that order, maintain very
different economic growth strategies: Russia bases it on the abundance of
sources of Fossil energy, and South Africa has specialized in mining,
metallurgical, automobile, chemical, and fertilizer industries, which are
highly polluting. Fig. 2 shows the different positions of each of the BRICS
countries in ICT technologies and polluting emissions. Along with the two
countries mentioned, the case of South Africa stands out for its high level of
polluting emissions per capita and the low weight of its ICT industry,
while India maintains relatively low levels of CO2 emissions and low levels
of ICT industry, a situation like Brazil. Five realities must be considered
when concluding the industry 4.0 - CO2 emissions relationship.
2.3. Data and Methods
Table 1 lists the variables and their sources, as well as the expected
signs. This panel of countries was chosen due to their rising CO2 emissions
trend. The dependent variable chosen is Carbon Dioxide Emissions per
Capita (LCOPC), and the independent variables are Renewable En- ergy
(LREW), Economic Complexity Index (ECI), and Economic Complexity

29
Index squared (ECI2), which measures the turning point of the increasing
phase of the variable. Using the Environmental Kuznets Curve empirical
evidence approach, it is intended to evaluate the behaviour of the variables
towards carbon dioxide emissions per capita and their relationship with
different development stages for BRICS countries.
Regarding the econometric approach, FMOLS and DOLS are used to
test panel data cointegration and first and second-generation unit roots
(Kao 1999). In addition, variance inflation factor (VIF) proofs assess the
multicollinearity problems of our sample.
2.3.1. Empirical methodology
In this section, we present the model specification and the
hypotheses to be tested.
LCOPC = α0 + α1LREW + α2ECI + α3ECI2 + α4LFDI + μit (1)
The following hypothesis has been formulated using the EKC
(Environmental Kuznets Curve) arguments.
H1. The composition effect (in EKC) negatively relates economic complexity
to CO2 emissions.
In the short term, the economic complexity index has a positive
impact on carbon dioxide emissions; however, in the long term, the
opposite occurs, expecting a negative correlation between both variables,
that is, a turner point is produced in the function from which the increase
in economic complexity produces a reduction in CO2 emissions.
Graphically, an inverted U is observed (See Fig. 3). Previous studies also
support this (Antonietti and Franco 2021; Balsalobre-Lorente, Driha, et al.
2022; Can and Gozgor 2017).
30
Figure 3 CO2 & Industry 4.0 in BRICS
Source: World Bank. ICT: (ICT goods imports/Total imports) + (ICT goods
exports/Total exports).
CO2(pc): Carbon dioxide emissions per capita.
Table 1a Variables Description
Variable Expected Sign Source

LCOPC (Logarithm of Carbon Dioxide Emissions per capita) World Bank 2023
LREW (Logarithm of Renewable energy) (-) Impact on LCOPC World Bank 2023
ECI (Economic Complexity Index) (+) Impact on LCOPC World Bank 2023
ECI2 (Economic Complexity Index Squared) (-) Impact on LCOPC World Bank 2023
LFDI (Logarithm of Inward Foreign Direct Investment (+/-) Impact on LCOPC World Bank 2023
Table 1b Variables used to represent Industry 4.0 in BRICS countries.
Variable Description Expected Sign

lcop Logarithm of per capita carbon dioxide emissions
lexpictpc Logarithm of per capita ICT services exports (BoP, current US$ (+) Impact on LCOPC
lexpictpc 2 lexpictpc square (-) Impact on LCOPC
%icte Percentage of ICT services exports/total exports of services, BoP (+) Impact on LCOPC
2
%icte %icte square (-) Impact on LCOPC
%ictgei (Exports ICT goods/exports goods) + (imports ICT goods/import goods) (%) (+) Impact on LCOPC
%ictgei 2 %ictei square (-) Impact on LCOPC
Source of dates: World Bank 2023
The following hypothesis is based on Pollution Haven – PHV and
Pollution Halo PHH.
31
H2. CO2 emissions can present a negative/positive correlation with
Foreign Direct Investment (FDI).
The Pollution Haven Hypothesis (PHV) supports that Foreign Direct
Investment increases environmental degradation. By contrast, other studies
consider that FDI reduces environmental degradation, validating the
Pollution Halo Hypothesis (Baek 2016; Piao et al. 2021; Rezza 2013).
H3. Renewable energy stimulates improvements in the environment. Green
energy use contributes to minimizing the environmental footprint (Bello,
Solarin, and Yen 2018; Ibrahiem 2015; J. Z. Teng et al. 2021; Wan et al. 2022)
and renewable energy is seen as the right path to achieve Carbon Dioxide
neutrality. The use of renewable energy and other sources of clean energy
reduces pollution levels.
2.3.2. Empirical methodology: Pollution emissions and industry 4.0
We have also carried out an empirical study to obtain evidence of the
role that industry 4.0 is playing in the CO2 emissions of the BRICS countries.
Few possibilities for obtaining representative variables of industry 4.0 in the
large databases of international organizations that can cover these old
countries. We have used some variables from the World Bank (2023), and
we have verified that the variables available in the UNCTAD database are
not adequate to capture the impact of Industry 4.0 on polluting emissions,
in addition to having a shorter time sequence. Table 1b presents the
variables used to estimate the impact of Industry 4.0 on CO2 emissions.
Many authors have pointed out services linked to information and
communication technologies (ICT) as one of the main supports of this
industry (H. Li, Qiu, and Wu 2021; Mourtzis, Angelopoulos, and
Panopoulos 2022; Oláh et al. 2020; Peraković, Periša, and Zorić 2020). Since
32
the length of these data series is significantly shorter than those used for the
regressions in Table 9, it is not appropriate to use them in a joint analysis of
equation (1). We want to confirm two hypotheses:
H1’. ICT technologies increase CO2 emissions.
H2’. It is expected that, in the long term, ICT technology can help reduce
polluting emissions and contribute to the neutrality of environmental impact. We
expect the pollutant emissions function derived from these variables can be an
inverted U shape. This is the simplified model to be estimated:
lCOpc = α′0 + α′1 ict + α′2 ict2 + μ’it
Where the ICT variable represents the weight of ICT technology in
the economy of each BRICS country and will be defined in three different
ways, as indicated in Table 1b.
Figure 4 U-inverted economic Complexity-EKC.
33
2.4. Empirical results and discussion
Descriptive statistics for the variables involved in equation (1) are
presented in Table 2. The variables also present a positive Kurtosis
(leptokurtic), and Renewable Energy and Inward Foreign Direct Investment
present the highest maximum values. The correlation matrix is presented in
Table 3. LFDI (Inward Foreign Direct Investment) is positively correlated
with LCOPC (Carbon Dioxide Emissions). On the contrary, LREW, ECI and
ECI2 (Renewable Energy, Economic Complexity, and Economic
Complexity squared) are negatively correlated with LCOPC (Carbon
Dioxide Emissions). To test first difference integration, we performed the
traditional first generation of unit root tests for panel data (Im, Pesaran, and
Shin 2003; Levin, Lin, and Chu 2002; P. C. B. Phillips and Perron 1988),
(expressing that all variables used are integrated at the first difference, also
Augmented Dickey-Fuller - Fisher and Philips Perron tests infer the same
conclusion, and the results are presented in Table 4. Pesaran CD Test
(Pesaran 2007)to control independence between individuals is presented in
Table 5. CIPS-Test, second-generation Unit Root t (Pesaran 2007), was
performed due to cross-section dependence between the variables.
Table 2 Descriptive statistics.
Descriptive statistics.
Description LCOPC LREW ECI ECI2 LFDI
Mean 0.589 1.249 0.337 0.155 6.421
Median 0.505 1.404 0.300 0.090 9.399
Maximum 1.066 1.736 0.860 0.739 10.873
Minimum -0.102 0.502 - 0.050 0.000 -0.299
Std. Dev. 0.386 0.435 0.205 0.177 4.672
Skewness - 0.174 - 0.594 0.746 1.750 -0.568
Kurtosis 1.525 1.892 3.136 5.379 1.369
Probability 0.004 0.002 0.005 0.000 0.000
Observations 112 112 112 112 112
34
Table 3 Correlation matrix.
Description LCOPC LREW ECI ECI2 LFDI

LCOPC 1.000
LREW -0.904 1.000
ECI -0.052 -0.033 1.000
2
ECI -0.034 -0.042 0.955 1.000
LFDI 0.315 -0.480 -0.303 -0.280 1.000
Table 6 shows our results showing that the variables are stationary
according to the second-generation unit root tests. Before continuing the
econometric estimation model, the subsequent step was to test
multicollinearity. In the presence of multicollinearity, the values of the
coefficients are affected by other variables in the model, and the p-values
are unreliable. Table 7 presents VIF (variance inflation factor) test, showing
that variables LREW and LFDI do not present multicollinearity.
In the case of the ECI and ECI2 variables, with test values higher than
5, they present multicollinearity with each other, so only the size of these
two coefficients is affected, but it does not affect the predictive capacity of
the model or the statistics on the goodness of fit. These are two variables
related by a quadratic function, where the only important thing is to verify
that the coefficients have opposite signs, and multicollinearity is not a
problem here.
In Table 8, we present the results for long-run cointegration between
variables (Kao 1999), comprehending all the variables. LCOPC, LREW, ECI,
and LFDI present long-run cointegration. The FMOLS and DOLS estimates
are presented in Table 9, and it is confirmed that the signs of the variables
35
are those that prevail in the reviewed literature, but later we will discuss
the sign obtained for the variable LFDI.
These tests also confirm that Economic Complexity Index and it
square confirm the EKC hypothesis with 1% statistical significance (see Fig.
3), as has been observed in other findings (Can and Gozgor 2017; Laverde-
Rojas and Correa 2021; Neagu 2019; Sadeghi et al. 2020). The expected sign
is also obtained in the parameter that represents renewable energy,
demonstrating that it contributes to the achievement of neutrality of
polluting emissions by human activity (see Fig. 4).
Table 4 Unit root tests.
Level First Difference

Statistic P-Value Statistic P-Value
Method LCOPC DLCOPC
Levin Lin & Chu t* 1.729** (0.042) -2.055** (0.020)
Im. Pesaran and Shun W-stat -1.836** (0.033) -3.589*** (0.000)
ADF-Fisher Chi-Square 24.722*** (0.006) 32.805*** (0.000)
PP – Fisher Chi Square 20.301** (0.027) 50.640*** (0.000)
Method LREW DLREW
Levin Lin & Chu t* 1.075 (0.859) -2.194*** (0.014)
Im. Pesaran and Shun W-stat 1.929 (0.973) -3.664*** (0.000)
ADF-Fisher Chi-Square 5.961 (0.819) 34.869*** (0.000)
PP – Fisher Chi Square 5.641 (0.845) 48.737*** (0.000)
Method ECI DECI
Levin Lin & Chu t* 1.295 (0.902) -0.638 (0.262)
Im. Pesaran and Shun W-stat 1.316 (0.906) -5.700*** (0.000)
ADF-Fisher Chi-Square 4.285 (0.934) 49.579*** (0.000)
Method ECI 2 DECI 2
Levin Lin & Chu t* -1.212 (0.012) -4.444*** (0.000)
Im. Pesaran and Shun W-stat -2.039** (0.020) -7.202*** (0.000)
ADF-Fisher Chi-Square 22.692** (0.011) 65.630*** (0.000)
PP – Fisher Chi Square 17.904* (0.056) 96.031*** (0.000)
Method LFDI DLFDI
Levin Lin & Chu t* -3.774*** (0.000) -2.483*** (0.006)
Im. Pesaran and Shun W-stat -1.328* (0.092) - 6.019*** (0.000)
ADF-Fisher Chi-Square 22.166** (0.014) 53.678 (0.000)
* Statistically significant at 10% ** Statistically significant at 5% ***
Statistically significant at 1%.

36
Table 5 Cross-section dependence: Pesaran (CD test).
Variable Statistic P-Value

LCOPC 89.579*** (0.000)
LREW 130.372*** (0.000)
ECI 4.041*** (0.000)
2
ECI 7.798*** (0.000)
LFDI 2.698*** (0.000)
*** Statistically significant at 1%.
Table 6 Unit root test: second generation (CIPS) with constant.
Variable T-Statistic P-Value

LCOPC -2.909*** (0.000)
LREW -2.268** (0.050)
ECI -2.264** (0.050)
2
ECI -3.119*** (0.000)
LFDI -2.206** (0.050)
** Statistically significant at 5% *** Statistically significant at 1%.
Table 7 VIF test on multicollinearity.
Variables VIF 1/VIF

LREW 1.32 0.75
ECI 10.58 0.09
ECI2 10.36 0.09
LFDI 1.25 0.79
Mean VIF 5.87 0.44
Table 8 Panel cointegration Test results with intercept and trend.
t-Statistic Prob.
ADF -1.388a (0.082)
Residual Variance 0.00035
HAC Variance 0.000326
a Statistically significant at 10%.
37
Table 9 Fully modified least squares (FMOLS) and dynamic least squares
(DOLS).
Variables FMOLS DOLS

ECI 0.635*** (0.000) 0.503*** (0.007)
2
ECI -0.767*** (0.000) -0.6295*** (0.002)
LREW -0.902*** (0.000) -0.370** (0.027)
LFDI 0.035** (0.050) 0.017 (0.464)
S.E. of regression 0.047 0.030
Long-run variance 0.003 0.000
Mean dependent var 0.593 0.592
S.D. dependent var 0.383 0.384
Sum Squared Resid 0.218 0.025
Observations 107 97
In addition, when we use the FMOLS method, the present study also
demonstrates that inward foreign direct investment increases carbon
dioxide emissions per capita to statistically significant levels, consistent
with the PHV-Pollution Haven Hypothesis, as some authors have recently
obtained empirical evidence, i.e., Yanyan Huang et al. (2022) for G20
economies and Balsalobre-Lorente, Driha, et al. (2022) for BRICS countries.
However, other recent studies have also obtained evidence favourable to
the Pollution Halo hypothesis, i.e., (Ochoa-Moreno, Quito, and Moreno-
Hurtado (2021) for 20 Latin American countries and (Chaouachi and
Balsalobre-Lorente 2022) for MINT countries. Even a recent study by
Ahmad, Jabeen, and Wu (2021) supports one hypothesis and the opposite,
depending on the Chinese province. This evidence supports that in the
selected panel, there is an attraction of dirty industry in host countries,
revealing the necessity of changes in regulation aimed at attracting high-
tech industry to the BRICS. In this sense, advances in Industry 4.0 would
enhance an environmentally friendly industry, attracting foreign business.
38
Regarding the tasks carried out to estimate Equation (2),
unfortunately, in international databases, there are neither sufficiently
comprehensive nor long enough variables to measure ICT activity.
Moreover, the environmental impact of Industry 4.0 is not only due to the
provision of services (which is a minor issue) but also to the production of
goods that support ICT services and the rest of automation of industrial
processes, networks and durable consumer goods that incorporate high
technology. In this study, we have tested three variables to measure the
environmental impact of industry 4.0 (see Table 2): the export of ICT
services per capita (lexpictpc), the percentage that the export of these
services represents over the total exports (%icte), and the sum of the relative
weights representing exports and imports of ICT goods (%ictgei). Table 10
summarizes the results of the estimations made using four different
methods.
The first observation from Table 10 is that only one parameter
(lexpictpc2) is not statistically significant in one estimation when the DOLS
method is used with the explanatory variable “logarithm of ICT services per
capita”. Second, in all cases, the parameters obtained when the square of
the variables is used show a minus sign, indicating that it is very probable
that the positive contribution of 4.0 technologies to CO2 emissions reaches
a maximum, from which manufacturing and the use of ICT goods and
services will push down polluting emissions. Third, the parameters
obtained using the logarithm of ICT services exports per capita-lexpictpc and
lexpictpc2 variables are considerably higher than those obtained with the
rest of the variables, and the size of the parameters obtained with these two
variables are very sensitive to the estimation method used.
39
Figure 5 Graph absract.
Source: Prepared by authors.
Table 10 Impact of Industry 4.0 on CO2 emissions (lcopc) in BRICS
countries.
Variables Panel Least Squares Panel FMOLS Panel DOLS Panel Quantile Regr. Median Average Coef.
Proxy variable for Industry 4.0: lexpictpc
lexpictpc 0.87843*** 0.14456*** 0.07591** 1.81497*** 0.7449
2
lexpictpc -0.29844*** 0.03309*** 0.033526 -0.93435*** -0.3248
Proxy variable for Industry 4.0: %icte
%icte 0.14099*** 0.16416*** 0.22238*** 0.15741*** 0.1712
2
%icte -0.00298*** -0.00349*** -0.004724 -0.00332 -0.0036
Proxy variable for Industry 4.0: %ictgei
%ictgei 0.06498*** 0.06814*** 0.06883*** 0.04831*** 0.0626
%ictgei 2 -0.00099*** -0.00104*** -0.00105*** -0.00064*** -0.0037
40
All these considerations lead us to affirm that the use of the
percentage of ICT services exports over total services exports-%ictgei
variable is more appropriate to approximate the impact of industry 4.0 on
CO2 emissions: the parameters obtained are significant at 1%, they are not
very sensitive to the change in estimation method. They are smaller than
the other parameters. An increase of 1 point (in a scale of 0–200) in the value
of the variable results in an increase of 0.06% in CO2 emissions. In this case,
given that the variables used are mere approximations of the accurate
measurement of Industry 4.0 and that the model is very simplified, it makes
no sense to calculate the turning point of each variable.
2.5. Conclusion and implications
Our study asses the linkage between per capita Carbon Dioxide
Emissions, Renewable Energy, Economic Complexity Index and Foreign
Direct Investment in BRICS nations for 1995–2018. The choice of these
countries regards the similarity of their development level due to their
reliance on unclean energy sources strongly impacting Carbon Dioxide
Emissions (Azam and Haseeb 2021; Iwaro and Mwasha 2010). However,
they maintain essential differences in the level of polluting emissions per
capita and the level of introduction of information and communication
technologies (ICT) (see Fig. 2).
The estimates of the environmental Kuznets function (EKC) based on
the impact of the economic complexity index on CO2 emissions leave no
room for doubt. There is a positive impact, although, in the long term, there
is a turning point from which the Economic complexity contributes to
reducing polluting emissions. This evidence is similar to the evidence
obtained when the GDP variable is used to study the impact on CO2
emissions.
41
In addition, the empirical findings suggest that renewable energy
contributes negatively to carbon dioxide emissions, while foreign direct
investment increases these emissions, confirming the Pollution Haven
Hypothesis (PHV). This empirical evidence suggests that authorities should
promote the use of cleaner energy if they intend to reduce environmental
pollution, while a long-term improvement in the economic complexity
index does not contribute to increasing pollution. In short, the results are
compatible with sustainable growth under these parameters. It is also
possible to conclude that Pollution Haven – PHV is present in BRICS
nations, where Inward Foreign Direct Investment (FDI) has been shown to
impact CO2 emissions significantly, and nations prefer less stringent
environmental regulations.
This study also includes a novel empirical methodology to obtain an
approximate estimate of the environmental impact that the set of
technologies known as Industry 4.0 is causing. Despite the absence of more
adequate statistics and the short sequences of data available, the
contribution of information and communication technologies to
environmental deterioration seems moderate (less than 0.1% for each point
of increase in the weight of these technologies), and the results show that
they may have a turning point from which they put downward pressure on
carbon emissions.
Future research should study the fit of variables such as trade, the
financial development, among others that have impacted pollution levels
worldwide. For example, the application of intra-industry trade indicators
(static or dynamic) appears essential for understanding whether the BRICS
case is based on a monopolistic competition structure associated with an
innovation factor or whether it will be explained by the theory of

42
comparative advantages (Balogh and Leitão 2019; Chaouachi and
Balsalobre-Lorente 2022a). In the same way, it is necessary to know in
greater depth the environmental impact of the new technologies associated
with Industry 4.0. To do this, international organizations must provide
adequate databases that compare countries’ efforts to achieve emissions
neutrality of these thriving technologies.
43
CHAPTER 3
REVISITING THE EFFECTS OF ENERGY, POPULATION,
FOREIGN DIRECT INVESTMENT, AND ECONOMIC GROWTH IN
VISEGRAD COUNTRIES UNDER THE EKC SCHEME
3.1. Introduction
The relationship between economic growth and climate change has
been the object of research in the study areas associated with sustainability
and energy and environmental economics (Ali, Radulescu, Lorente, et al.
2022; Balsalobre-Lorente et al. 2021a; Balsalobre-Lorente, Ibáñez-Luzón, et
al. 2022b; Barut et al. 2023; Fuinhas et al. 2021a; Nuno Carlos Leitão,
Balsalobre-Lorente, and Cantos-Cantos 2021a; Radulescu et al. 2018). As can
be observed, two types of empirical studies are interconnected: the
environmental Kuznets curve (EKC) and the determinants of economic
growth.
The empirical studies have explained these two linkages based on
foreign direct investment (FDI), international trade and population, energy
consumption, renewable energy, and polluting emissions. Moreover, these
studies have been applied in the most diverse countries or continents, using
different econometric strategies such as panel data or time series. For
instance, Singhania and Saini (2021) tested the environmental Kuznets
curve (EKC) and the effect of foreign direct investment on pollution haven
hypotheses (PHP) in developing and developed countries.
The study by Radulescu et al. (2018) evaluated the implementation
of the EU strategy for six Central and Eastern European countries to
understand the relationships between economic growth, competitiveness,
and sustainability. The authors conclude that higher education,
44
consumption of renewable energy, and employability are the success
factors for achieving sustainable economic development in the six studied
economies.
Another significant contribution was considered by Polcyn et al.
(2022). The authors demonstrate that economic growth, carbon dioxide
emissions, and consumption of non- renewable energy contribute to the
increase of renewable energy in EU countries.
The present investigation seeks to evaluate these two interactions.
On the one hand, to assess the EKC applied to the Visegrad group of
countries and, on the other hand, to evaluate the new determinants of
economic growth considering classic variables such as population and
FDI, but introducing new explanatory factors, such as renewable energies
and energy consumption.
This article focuses on the links between the environmental Kuznets
curve (EKC) and the explanatory factors of applied economic growth, as
mentioned in the Visegrad countries. At first, it will be interesting to see if
the EKC hypotheses are confirmed, namely, an inverted U-shaped curve
between economic growth and carbon dioxide emissions, as well as the
impact of energy consumption and foreign direct investment on carbon
dioxide emissions. Then, this analysis will be evaluated for each of the four
countries from a short-term perspective to assess later the set of the four
countries in the short and long term. Secondly, we address the impact of
renewable and non-renewable energies, foreign direct investment, and
population on economic growth. Finally, we are interested in
understanding how these independent variables contribute to achieving
economic growth in the studied economies.
45
Some studies (e.g.,Florea et al., 2020; Jóźwik et al., 2021; Simionescu
et al., 2021) considered the hypotheses of the Kuznets environmental curve
applied to Visegrad countries or Central and Eastern Europe. In this line,
the empirical study of Simionescu et al. (2021) showed that EKC is
confirmed in the Central and Eastern European countries. Besides, the
authors explained the relationship between economic growth, renewable
energy, and carbon dioxide emissions.
In the next step, we present the objectives of this investigation. The
main objective will be to test the EKC assumptions applied to the Visegrad
countries and new growth factors, thus issuing a set of measures and
recommendations for economic and energy policymakers.
Another objective will be to summarize recent literature considering
the determinants of the EKC curve and economic growth.
The following section presents the literature review. Subsequently,
we examine the material, methods, and theoretical hypotheses to be tested
in the “Data and econometric strategy” section. So, “Empirical results”
section emerges the analysis of results, and finally, the conclusions and
some recommendations.
3.2 Literature Review
This section presents a set of empirical studies, allowing us to
substantiate the econometric results we will explain in the “Empirical
results” section. A meta-analysis of recent studies evaluating the links
between economic growth and the hypotheses of the Kuznets
environmental curve is carried out, and the consumption of renewable and
non-renewable energy, the population and foreign direct investment both
46
on carbon dioxide emissions and economic growth are presented here in
state of the art.
3.2.1. The linkages between economic growth, renewable energy,
non‑renewable energy, and carbon dioxide emissions.
As a rule, empirical studies (e.g., Balsalobre-Lorente et al., 2021b;
Fuinhas et al., 2021b; Leitão et al., 2021b; Sharif et al., 2019) argue for a
positive correlation between economic growth and carbon dioxide
emissions. However, in the long run, studies find a negative relationship
between per capita income and carbon dioxide emissions, considering that
developed countries are more concerned with environmental degradation
and seek to implement measures for sustainable development. In this
context, the literature suggests a positive relationship between energy
consumption (e.g., Ali, Radulescu, Balsalobre Lorente, et al., 2022; Fuinhas
et al., 2021b) and a negative association between renewable energy and
carbon dioxide emissions (e.g., Balsalobre-Lorente et al., 2021b; Leitão et al.,
2021b) Thus, energy consumption is associated with economic growth
practices, where climate change and pollution emissions occur. In contrast,
renewable energies reduce carbon dioxide emissions and greenhouse
effects.
The more careful analysis allows us to observe that the literature
advances with different types of curves that evaluate the relationship
between economic growth and environmental degradation, namely, N-
shaped, an inverted N-shaped, an inverted U-Shaped (the more usual), the
U-shaped, and monotonic (positive or negative impact of economic growth
on CO2 emissions).
47
The investigation of Sharif et al. (2019) considers the relationships
between renewable and non-renewable energies as well as the impact of
financial development and the hypotheses of the Kuznets environmental
curve applied to the panel data study for 74 economies with different types
of development. The results obtained through the FMOLS and DOLS
estimators demonstrate that renewable energies are negatively correlated
with carbon dioxide emissions, whereas non-renewable energies are
positively correlated with polluting emissions. Furthermore, the
environmental Kuznets curve confirms the underlying hypotheses, and
financial development makes it possible to improve environmental
damage. In this line, the empirical study by Sharif et al. (2020a; 2020b)
applied to the case of Turkey, using an econometric time series strategy,
namely, a quantile autoregressive lagged, shows that renewable energies
improve the environment and that, in the long term, economic growth is
associated with sustainability practices. Therefore, the study also proves
that the consumption of non-renewable energy increases climate change
and the carbon footprint.
The study of Suki et al.(2020) tested the Kuznets environment curve
for the Malaysian experience, and the empirical results showed that
globalization and economic growth stimulate climate change. However,
social and economic globalization promotes air quality and the
environment in the long run. Subsequently, the interconnection between
tourism, globalization, and the Malaysian environmental Kuznets curve
was investigated by Sharif et al. (2020a; 2020b), and the results revealed that
the hypotheses of the EKC are valid for Malaysia. The variable of tourism
aimed to obtain environmental improvements. Nevertheless, globalization
and transportation services increase pollution emissions.
48
The study by Rehman et al. (2022) demonstrates that the Maldives
must implement sustainability measures to avoid environmental
degradation. In this context, the authors used the NARDL estimator as an
econometric strategy, and the results demonstrate that there is both short-
and long-run positive and negative effect of economic growth, trade in
services, and renewable energy on carbon dioxide emissions; these impacts
are associated with positive and negative shocks on the Maldivian
economy. Furthermore, the study shows that urbanization negatively
correlates with CO2 emissions.
Considering a panel ARDL model, Ahmed et al.(2022) analyzed the
relationship between energy consumption, economic growth,
militarization, and carbon dioxide emissions for OECD countries. The
empirical results showed that economic growth is positive in the short and
long run with CO2 emissions. The variable of renewable energy negatively
affects carbon dioxide emissions, showing that renewable energy aims to
decrease pollution emissions. Besides, fossil energy and military
expenditure positively correlate with pollution emissions, demonstrating
that these variables stimulate climate change. Moreover, the research of
Haldar and Sethi (2021) applied a panel ARDL methodology, a
cointegration model (FMOLS), and dynamic panel data (GMM- System)
from developing countries. The authors concluded that the hypothesis of
the environmental Kuznets curve is valid in this study, i.e., income per
capita and squared income per capita present a positive and negative effect
on carbon dioxide emissions. Renewable energy confirms a negative impact
on carbon dioxide emissions, supporting the hypothesis that renewable
energy decreases carbon dioxide emissions. This study also observes that
energy consumption is directly associated with CO2 emissions.
49
The experience of OECD and non-OECD countries was investigated
by Kang (2021) using panel data (pooled OLS, fixed effects, and random
effects). The sample of all nations and non-OECD countries using fixed
effects and random effects showed that income per capita and squared
income per capita are according to the environmental Kuznets curve.
Additionally, energy consumption encourages ecological damage, and
renewable energy encourages sustainable practices.
For instance, Cui et al. (2021) considered the linkages between
economic growth, energy consumption, investments, trade, population,
and pollutants. The authors used dynamic panel data (first differences and
orthogonal deviations) for the case of China. Considering sulfur dioxide
emissions as the dependent variable, the empirical results indicated that
economic growth confirms a sharp curve with SO2 emissions. Furthermore,
international trade and energy consumption push SO2 emissions.
Myszczyszyn and Supron (2021)evaluated the linkages of economic
growth, energy consumption, and carbon dioxide emissions to Visegrad
countries using the ARDL and vector error correction models (VECM).
Considering the long run in Poland, the authors confirmed a bidirectional
causality between energy consumption and carbon dioxide emissions and
economic growth and energy consumption. Furthermore, the nexus
between economic growth and CO2 emissions are also observed in a
bidirectional relationship. In Slovakia, Myszczyszyn and Supron
(2021)concluded that bidirectional causality exists between energy
consumption and carbon emissions and unidirectional causality between
income per capita and carbon dioxide emissions. Further- more, they found
a unidirectional causality between income and carbon emissions in the
Czech Republic. Finally, Hungary observed a bidirectional causality

50
between economic growth and energy consumption. In this context, the
empirical work of Simionescu et al. (2021b) considered the Visegrad
countries and the Baltic states for the period 1996 to 2019 with the ARDL
model, namely, pooled mean group (PMG). In the long run, the econometric
results demonstrated that economic growth is, according to the EKC
hypothesis, that energy is negatively correlated with CO2 emissions. Then,
the empirical study of Wawrzyniak(Wawrzyniak 2020) applied to Visegrad
countries and the European Union demonstrated that carbon dioxide
emissions and climate change decrease considering energy efficiency and
renewable energy use. In this context, Li et al. (2020) studied the
relationship between CO2 emissions and energy in Eastern Europe and
Central Asia, and the empirical results demonstrated that energy efficiency
reduces carbon emissions. Nevertheless, the study also indicated that
economic growth and economic activities accelerate pollution. Moreover,
the variables of oil prices and FDI do not influence pollution emissions, i.e.,
Li et al.(2020) do not find any statistical significance between these variables
and CO2 emissions.
The Eurozone was investigated byKėdaitienė and Klyvienė (2020)
using a panel vector autoregressive model. The empirical results
demonstrated linkages between economic growth, energy, and pollution.
However, the rules and environmental policy aim to decrease pollution
levels.
Another interesting article is the investigation of Sharif et al. (2017)
where the authors studied the dynamic relationship between electric energy
consumption and economic growth, considering cointegration models.
The results demonstrated a unidirectional causality between energy
consumption and economic growth in the long run. The empirical study
51
also showed bidirectional causality between energy consumption and
economic growth in the medium term.
Majewska and Gierałtowska (2022) evaluated the effect of economic
growth on carbon dioxide emissions in Central and Eastern Europe using
different regressions. The regression that introduces explanatory variables
income per capita squared per capita and energy consumption validated
the arguments of the EKC curve. However, the econometric results were
inconclusive when the authors used renewable energy, urbanization, and
human development as independent variables.
Gyamfi et al. (2022) considered the seven developing countries
between 1995 and 2016. The authors applied panel cointegration data, and
the results validate the EKC hypotheses, and the urban population and
railway transport are negatively associated with carbon dioxide emissions.
Besides, the variable of fossil energy is directly correlated with pollution
emissions.
Finally, for African experience, the recent study of İnal et al. (2022)
reveals that renewable energy is not directly correlated with economic
growth. However, the authors argue that carbon dioxide emissions
positively affect economic growth in Algeria, Equatorial Guinea, and Egypt
between 1990 and 2014.
3.2.2. The causality between foreign direct investment and
pollution emissions
Another essential variable is the foreign direct investment (FDI)
which assesses globalization and its impact on pollution emissions. It is
observed that the literature is not consensual regarding the effect of FDI on
carbon dioxide emissions. Thus, Cole et al.(2011), Zhu et al. (2016), and
52
Ochoa-Moreno et al. (2021) demonstrate a positive association between FDI
and CO2 emissions; these results are according to the pollution haven
hypothesis (PHHH). However, recent studies by Demena and Afesorgbor
(2020) and Marques and Caetano (2020) show that FDI allows for reducing
carbon dioxide emissions, as it is associated with innovation factors and
explained by the pollution halo hypothesis (PHHH).
The relationship between FDI and pollution emissions was
investigated by Demena and Afesorgbor (2020) using panel data for
developed and developing countries. The results indicated that foreign
direct investment promotes the environment, i.e., decreasing pollution
emissions. In this line, Ochoa-Moreno et al. (2021) tested the correlation
between FDI and CO2 emissions in Latin American countries. They
observed FDI is positively correlated with CO2 emissions, showing that
their results are according to the polluting haven hypothesis (PHHH).
The link between EKC and FDI for Algeria was studied by
Chaouachi and Balsalobre-Lorente (2022) using cointegration models. The
authors use an ARDL model to show an N-curve between economic growth
and ecological footprint. Furthermore, the variables of electricity and FDI
influence the positivity of environmental damage. Nevertheless, the
interaction between electricity consumption aims to decrease pollution.
Another contribution for high- and middle-income countries was
investigated by Marques and Caetano (2020) with a panel ARDL model. In
the long run, the empirical study of Marques and Caetano (2020) showed
that carbon dioxide emissions decreased because foreign direct investment
is negatively correlated with CO2 emissions, and this relationship is
53
explained by innovation. In middle-income countries, the environmental
tax is negatively associated with pollution in the long run.
Kisswani and Zaitouni (2021) tested the pollution haven hypothesis
(PHHH) applied to four Asian countries from 1971 to 2014 using an ARDL
model, and the authors found that PHH is validated for the Philippines. The
results for Malaysia, Singapore, and Thailand are explained by the pollution
halo hypothesis (PHHH), i.e., MNE (multinational enterprises) export
cleaner technology, and these firms stimulate environmental
improvements. Nevertheless, the recent article of Singhania and Saini
(Singhania and Saini 2021) considered countries with different states of
development using dynamic panel data (GMM-System), and they found a
positive relationship between FDI and carbon dioxide emissions, reflecting
environmental damage.
The impacts of FDI, renewable energy, energy consumption,
economic growth, institution quality, and globalization on carbon dioxide
emissions were investigated by Teng et al. (2021)considering pooled mean
group estimator (PMG), and the results demonstrated that renewable
energy stimulates the environmental improvements. Furthermore, the
variables of foreign direct investment, energy consumption, economic
growth, institution quality, and globalization are positively impacted by
carbon dioxide emissions.
The Gulf Cooperation Council countries’ experience was
investigated by Zmami and Ben-Salha (2020). First, the econometric results
using the panel ARDL model showed that FDI is negatively correlated with
CO2 emissions in the short run, validating the arguments of the pollution
halo hypothesis; however, in the long run, the authors found a positive
54
correlation between FDI and carbon dioxide emissions, so the result is
explained by PHHH (pollution haven hypothesis). Then, Zmami and Ben-
Salha (2020) concluded that FDI and energy consumption stimulate
environmental degradation. This process is connected with the attraction of
foreign businesses with low tech, so in consequence, it is required to
advance in the regulation processes aimed to attract high tech and
sustainable business, where the promotion of renewable sources is critical
for obtaining this result (Balsalobre-Lorente, Ibáñez-Luzón, et al. 2022b).
From the literature review presented, it is observed that most studies
focus on the EKC hypotheses or economic growth and sustainability. We
keep a gap in the literature since, in our understanding, we cannot
dissociate the EKC hypotheses from economic growth. However, state-of-
the-art allows our research to group these linkages, becoming balanced
research.
3.3. Data and econometric strategy
This section describes the methods used and presents the formulated
equations and the hypotheses supporting the results analysis section. Our
sample was collected for the four Visegrad countries, namely, the Czech
Republic, Hungary, Poland, and Slovakia, from 1990 to 2018. The nexus
between renewable energy, non-renewable energy, urban population,
foreign direct investment, economic growth, and carbon dioxide emissions
will be assessed. This investigation considers an equation to test the
environmental Kuznets curve and another equation for economic growth in
the Visegrad countries group.
The methods used to test these links are the ARDL model, namely,
pooled mean group (PMG), and a panel cointegration (FMOLS—fully
55
modified least squares) for the second equation. We also performed
preliminary tests of panel unit roots and multicollinearity and the Hausman
test to observe the properties of the variables under study.
Next, we present the models used in the empirical study and the
expected signs for each independent variable, considering the literature
review.
In model 1, all variables used in the equation are expressed in the
logarithm form. In this context, μit represents white noise; the first
difference is characterized by Δ; and the error correction by ψECT. The
dependent variable is carbon dioxide emissions per capita from the World
Development Indicators of the World Bank. The independent variables are
income per capita (GDP), squared income per capita (GDP2), energy
consumption (ENERG), and foreign direct investment (FDI). All
independent variables are collected from World Bank.
Next, we present the hypotheses to be tested for model 1 and the
description of the independent variables.
H1: Are the Visegrad countries in a development stage, and do they respect
environmental rules and concerns?
Verifying this hypothesis implies a positive impact of economic
growth on carbon dioxide emissions at an early stage and, later, a negative
association between squared income per capita and carbon dioxide
56
emissions. The environmental literature on the Kuznets curve (EKC)
applied to Visegrad countries such as Simionescu et al. (2021b),
Wawrzyniak (2020), and Kėdaitienė and Klyvienė (2020) support the
formulated hypothesis. Moreover, the empirical studies of Suki et al. 2020),
Sharif et al.(2020a;2020b), and Kang (Kang 2021) also found similar results.
GDP—gross domestic product established on purchasing power
parity (PPP).
GDP2—squared gross domestic product instituted on purchasing
power parity (PPP).
H2: Does energy use stimulate the greenhouse effect and increase carbon
dioxide emissions?
Empirical studies by Ali et al. (2022b) , Ahmed et al. (2022), Cui et al.
(2021), Haldar and Sethi (2021.) and Kang(2021) demonstrate a positive
correlation between energy consumption and carbon dioxide emissions.
ENERG—energy use (kg of oil equivalent per capita).
H3: Is FDI directly associated with carbon dioxide emissions?
On the contrary, does it allow the reduction of greenhouse effects in
the Visegrad group of countries?
The literature review shows that there are two opinions. Thus, there
are studies such as Cole et al. (2011), Zhu et al. (2016b), Ochoa–Moreno et
al. (2021), Chaouachi and Balsalobre-Lorente (2022), Kisswani and Zaitouni
(2021), and Teng et al., (2021.) which demonstrate that FDI stimulates
However, Demena & Afesorgbor, (2020b) and Marques & Caetano,
(2020) support the hypothesis that the FDI makes it possible to reduce
climate change.
57
FDI—foreign direct investment, net inflows (% of GDP). In the
following, we consider the determinants of economic growth in Visegrad
countries. Then, model 2 assumes the following expression:
H4: Does renewable and non-renewable energy consumption stimulate
economic growth in Visegrad countries?
The studies by Simionescu et al. (2021b), Myszczyszyn and Supron
(2021), and Wawrzyniak (2020) demonstrate that energy use promotes
economic growth. Besides, the empirical studies of Ahmed et al. (2022), İnal
et al. (2022), and Rehman et al. (2022) also give support to hypothesis 4.
RENEW—renewable energy consumption (% of total final energy
consumption).
H5: To what extent do FDI and urban population contribute to economic
growth in Visegrad countries?
The economic theory considers that FDI and urban population allow
the economies understudy to achieve economic growth. Thus, for instance,
Chaudhury et al. (2020), Sarker and Khan (2020), and Hobbs et al.
(2021)refer that foreign direct investment is an essential variable in studying
economic growth. In addition, the importance of the population in
achieving growth levels is also highlighted, as mentioned by Peterson
(2017), Baker et al., (2005).
58
3.4. Empirical results
This section presents the empirical results for the Visegrad group of
countries. Thus, we started with the tests of the properties on the variables
used in the two models, namely, the tests of the unit-roots Levin, Lin, and
Chu, ADF–Fisher chi-square–Dickey and Fuller, Phillips–Perron, Im,
Pesaran, and Shin, see for instance Levin et al., (2002) and Choi, (2001), the
multicollinearity test (e.g., Leitão et al., 2021c); Belsey et al., (1980);
(Koengkan, Losekann, and Fuinhas 2019) and the Hausman, (1978) test. The
Hausman test allows testing the hypothesis of random effects (RE) versus
fixed effects (FE).
Since the variables do not present problems in terms of their
properties, it was possible to estimate the two models using the ARDL
model, namely, pooled mean group (PMG). We also considered the panel
cointegration (FMOLS—fully modified least squared) for the second
equation to test the economic growth determinants in Visegrad countries.
Next, we present the descriptive statistics and the correlations
between the variables used for model 1 and model 2 (Tables 11, 12, 13, and
14). For both model 1 and model 2, income per capita (LogGDP) and energy
consumption (Log-ENERG) are the variables that have the highest values
for the maximums. Furthermore, it is observed in model 1 that the variables
income per capita (LogGDP), squared income per capita (LogGDP2), and
foreign direct investment (LogFDI) have a negative skew. In contrast, in
model 2, only energy consumption and the urban population have a
positive skew. Then Table 15 presents the stationarity of the variables used
in two models in this investigation, considering the Levin Lin, the Chu
ADF-Fischer chi-square, Phillips- Peron, and Im-Pesaran-Shin tests. We
observe that the variables are stationary in the first difference.
59
The multicollinearity test for model 1 and model 2 is described in
Tables 16 and 17. As we can observe, the value of the mean–variance
inflation factor (VIF) is 2.74 (model 1) and 1.20 (model 2). According.
Fuinhas et al., (2021b), (Leitão et al., 2021a), and Koengkan & Fuinhas, (2020)
these values are low multicollinearity.
Table 11 Descriptive Statistics model 1
2
Statistics LogCO 2 LogGDP LogGDP LogENERG LogFDI
Mean 0.892 4.317 1.672 3.483 0.553
Median 0.893 4.342 1.633 3.435 0.585
Maximum 1.103 4.558 2.433 3.653 1.702
Minimum 0.615 4.021 0.630 3.364 -0.870
Std. Dev. 0.121 0.135 0.363 0.093 0.423
Skewness 0.013 -0.286 -0.151 0.407 -0.541
Kurtosis 2.182 2.292 3.235 1.668 4.994
Probability 0.276 0.204 0.755 0.009 0.000
Observations 92 92 92 92 92
Table 12 Correlations between variables model 1
Statistics LogCO 2 LogGDP LogGDP 2 LogENERG LogFDI

LogCO 2 1.000
LogGDP 0.177 1.000
2
LogGDP -0.065 0.767 1.000
LogENERG 0.705 0.481 0.088 1.000
LogFDI -0.282 0.320 0.246 -0.026 1.000
Table 13 Descriptive Statistics model 2
Statistics LogGDP LogENERG LogRENEW LogFDI LogPOP

Mean 4.317 3.483 0.836 0.553 1.805
Median 4.342 3.435 0.816 0.585 1.791
Maximum 4.558 3.653 1.217 1.702 1.874
Minimum 4.021 3.364 0.315 -0.870 1.732
Std. Dev. 0.135 0.093 0.182 0.423 0.045
Skewness -0.286 0.407 -0.151 -0.541 0.112
Kurtosis 2.292 1.668 3.235 4.994 1.788
Probability 0.215 0.009 0.755 0.000 0.055
Observations 92 92 92 92 92
60
Table 14 Correlations between variables model 2
Variables LogGDP LogENERG LogRENEW LogFDI LogPOP

LogGDP 1.000
LogENERG 0.487 1.000
LogRENEW 0.767 0.088 1.000
LogFDI 0.320 -0.026 0.246 1.000
LogPOP 0.477 0.408 0.198 0.270 1.000
Table 15 Panel unit root test
Levin Lin & Chu t* Im. Pesaran and Shin W -stat ADF-Fisher Chi-Square PP – Fisher Chi Square
Statistic p value Statistic p value Statistic p value Statistic p value
Variables (levels)
c
LogCO 2 -1.468 0.071 -0.493 0.311 8.342 0.401 13.150 0.107
LogGDP -1.883a 0.030 0.959 0.831 3.308 0.914 0.886 0.999
LogENERG 0.336 0.632 -0.982 0.163 10.035 0.263 20.807a 0.007
LogRENEW -2.225b 0.013 -0.669 0.252 11.868 0.157 8.887 0.352
b a
LogFDI -0.709 0.239 -0.999 0.158 17.414 0.026 31.593 0.000
LogPOP -2.093b 0.018 -0.327 0.372 10.498 0.232 4.382 0.821
Variables (first dif.)
D(LogCO 2) -4.621a 0.000 -5.129a 0.000 40.413a 0.000 79.215a 0.000
a a a
D(LogGDP) -0.906 0.182 -3.407 0.000 25.973 0.001 62.076 0.000
D(LogENERG) -3.424a 0.000 -4.645a 0.000 35.940a 0.000 65.468a 0.000
D(LogRENEW) -5.971a 0.000 -5.827a 0.000 47.103a 0.000 62.614a 0.000
D(LogFDI) -4195a 0.000 -4.985a 0.000 41.117a 0.000 102.300a 0.000
a a a a
D(LogPOP) -2.951 0.001 -4.211 0.000 32.491 0.000 61.728 0.000
All variables are in logarithm form; a 1%, b 5%, c 10% statistically significant.
Table 16 VIF test for model 1
Variables VIF 1/VIF

LogGDP 4.65 0.215
LogGDP 2 3.29 0.304
LogENERG 1.84 0.542
LogFDI 1.19 0.841
Mean VIF 2.74
61
Table 17 VIF test for model 2
Variables VIF 1/VIF

LogENERG 1.23 0.812
LogRENEW 1.09 0.919
LogFDI 1.16 0.868
LogPOP 1.34 0.745
Mean VIF 1.2
Table 18 Diagnostic tests model 1
Test Statistic Prob

a
Breusch-Pagan LM 26.530 0.000
a
Pesaran scaled LM 5.927 0.000
a
Pesaran CD 3.976 0.000
a 1% statistically significant
Table 19 Diagnostic tests model 2
Test Statistic Prob

a
Breusch-Pagan LM 25.378 0.000
a
Pesaran scaled LM 5.594 0.000
a
Pesaran CD 3.143 0.000
a
1% statistically significant
Table 20 Hausman test model 1
Variables Fixed Random Var(Diff.) Prob

LogGDP 0.151 -0.132 0.012 0.009
2
LogGDP 0.233 -0.012 0.003 0.000
LogENERG 0.788 0.997 0.006 0.005
LogFDI -0.165 -0.064 0.000 0.000
Chi2 (4) = 21.387***
The statistic (Chi2) is significant at 1% (***) and demonstrates the fixed
effects prevail over random effects.
62
Table 21 Hausman test model 2
Variables Fixed Random Var(Diff.) Prob

LogENERG 0.375 0.496 0.000 0.000
LogRENEW -0.064 0.447 0.004 0.000
LogFDI 0.039 0.032 0.000 0.441
LogPOP 1.100 0.593 0.004 0.000
Chi2 (4) = 72.083***
The statistic (Chi2) is significant at 1% (***) and demonstrates the fixed
effects prevail over random effects.
Table 22 Model 1: dependent variable LogCO2 with PMG-ARDL model
Variables Coeffiecient Std. Error t -Statistic Prob

Long-run equation
LogGDP -0.132a 0.008 -14.809 0.000
b
LogGDP2 -0.007 0.004 -2.038 0.046
a
LogENERG 0.988 0.033 30.392 0.000
b
LogFDI 0.006 0.002 2.229 0.029
Short-run equation
ECT(-1) -0.418 0.266 -1.566 0.122
a
D(LogGDP) 0.152 0.055 2.754 0.007
2 c
D(LogGDP ) -0.039 0.021 -1.795 0.077
c
D(LogENERG) 0.453 0.236 1.922 0.059
a
D/LogFDI) -0.008 0.003 -3..123 0.003
C -0.800 0.493 -1.623 0.109
All variables are in logarithm form; a

1%, b
5% and c
10% statistically
significant.
Tables 18 and 19 test cross-section dependence between the variables
used in this investigation. According to Pesaran, (2007) and Breusch &
Pagan, (1979), the variables used in model 1 and model 2 have cross-section
dependence.
Next, we present the Hausman test for each of the respective models
(see Tables 20 and 21). The Hausman test establishes a comparison between
63
the fixed and random effects estimators. As we see from the Hausman test,
fixed effects prevail in both models.
Model 1 is presented in Table 22, using pooled mean group (see Fig.
1). We observe the effects of the long and short run.
Figure 6 Model 1
Considering the short-run equation, all independent variables are
statistically significant. Therefore, the environmental Kuznets curve (EKC)
arguments are valid, i.e., income per capita (LogGDP) positively correlates
with CO2 emissions. The variable is statistically significant at a 1% level,
indicating that economic growth is directly affected and associated with
climate change. On the other hand, the squared income per capita
(LogGDP2) negatively affects carbon dioxide emissions and is statistically
significant at 10%. This result demonstrates that economic activities in the
development phase practice sustainable measurements. The previous
studies of Visegrad experience as Simionescu et al., (2021b), Wawrzyniak,
(2020) , and Majewska & Gierałtowska, (2022) also found the same
tendency.
In the long run, the effects show that income per capita (LogGDP) and
squared income per capita (LogGDP2) negatively impact carbon dioxide
64
emissions. These results confirm that economic growth decreases pollution
emissions Fuinhas et al., (2021a), Leitão et al., (2021b); Mehmood et al.,
(2022);Suki et al., (2020);Sharif, Afshan, et al., (2020a); Sharif, Baris-
Tuzemen, et al., (2020b); Godil et al., (2021);Suki et(Kang 2021; Suki et al.
2020). At this stage, countries seek to use measures to improve the
environment. Besides, the energy consumption variable (LogENERG)
positively impacts carbon dioxide emissions, demonstrating that non-
renewable energy accelerates greenhouse effects. The empirical works of
Ahmed et al., (2022); Ali, Radulescu, Balsalobre Lorente, et al., (2022b); Cui
et al., )2021); Haldar & Sethi, 2021.; Kang, 2021) give support to our result.
Another important conclusion of our research is that foreign direct
investment is directly correlated with CO2 emissions in the long run. Our
result is according to the polluting halo hypothesis (PHH). The empirical
studies of Chaouachi & Balsalobre-Lorente, (2022b); Cole et al., (2011);
Kisswani & Zaitouni, (2021); Ochoa-Moreno et al., (2021); J. Z. Teng et al.,
(2021); Zhu et al., (2016b) also found a positive impact.
In the next step, we can observe the short run by each country of the
Visegrad group.
run Czech Republic
Czech Republic
Variables Coefficient Std. Error t-Statistic Prob
a
ECT(-1) -0.154 0.006 -22.680 0.000
c
D(LogGDP) 0.068 0.025 2.704 0.073
2 a
D(LogGDP ) -0.100 0.001 -7.949 0.000
a
D(LogENERG) 0.588 0.018 31.857 0.000
a
D(LogFDI) -0.003 0.002 -14.173 0.000
a
C -0.297 0.025 -11.823 0.001
All variables are in logarithm form; a 1% and c 10% statistically significant.
65
run Hungary
Hungary
a
ECT(-1) -0.163 0.012 -14.085 0.000
D(LogGDP) 0.047 0.044 1.053 0.369
D(LogGDP 2 ) -0.031a 0.006 -50.487 0.000
a
D(LogENERG) 0.864 0.003 23.831 0.000
a
D(LogFDI) -0.015 0.001 -136.820 0.000
a
C -0.336 0.048 -6.922 0.006
All variables are in logarithm form; a 1% statistically significant.
run Poland
Poland
a
ECT(-1) -1.216 0.026 -45.958 0.000
a
D(LogGDP) 0.228 0.010 22.765 0.000
2 a
D(LogGDP ) -0.009 0.000 -574.627 0.000
a
D(LogENERG) -0.226 0.023 -9.542 0.002
a
D(LogFDI) -0.005 0.000 -1101.422 0.000
a
C -2.280 0.113 -20.226 0.006
All variables are in logarithm form; a 1% statistically significant.
run Slovakia
66
Slovakia
ECT(-1) -0.418 0.266 -1.566 0.122
D(LogGDP) 0.152a 0.055 2.754 0.007
2 c
D(LogGDP ) -0.039 0.021 -1.795 0.077
c
D(LogENERG) -0.453 0.236 1.922 0.059
a
D(LogFDI) -0.008 0.003 -3.123 0.003
C -0.800 0.493 -1.623 0.109
All variables are in logarithm form; a 1% and c 10% statistically significant.
Table 27 Model 2: dependent variable LogGDP with PMG-ARDL model
Variables Coeffiecient Std. Error t -Statistic Prob

Long-run equation
LogENERG 2.981a 0.833 3.579 0.000
a
LogRENEW 0.943 0.236 3.995 0.000
a
LogFDI 0.175 0.059 2.981 0.004
c
LogPOP 10.093 10.401 1.836 0.071
Short-run equation
ECT(-1) -0.083c 0.048 -1.720 0.090
D(LogENERG) 0.048 0.095 0.511 0.611
D(LogRENEW) -0.087 0.067 -1.287 0.203
b
D(LogFDI) -0.009 0.004 -2.077 0.042
c
D(LogPOP) -4.055 2.379 -1.705 0.093
c
C -3.489 2.079 -1.677 0.098
All variables are in logarithm form; a

1%, b
5% and c
10% statistically
significant.
As we can examine between Tables 23, 24, 25, and 26, the EKC
assumptions are validated except for Hungary.
Model 2 evaluates the determinants of economic growth reported in
Table 27. We see that all explanatory variables are statistically significant at
a 1% and 10% level in the long run. The coefficients of energy consumption
(LogENERG) and renewable energy (LogRENEW) contribute to obtaining
economic growth.
67
These results are according to previous studies by Ahmed et al., 2022;
Balsalobre-Lorente et al., 2021c; Fuinhas et al., 2021b; İnal et al., 2022; Leitão
et al., 2021b; Majewska & Gierałtowska, 2022; Myszczyszyn & Suproń, 2021;
Rehman et al., 2022) give support to our result.
Another recent study by Krkošková, (2021) considered the causality
between energy consumption and economic growth, using the Granger
method and vector correction model (VECM) applied to Visegrad countries.
The results demonstrated that energy consumption presents a
unidirectional causality with economic growth in Hungary, Slovakia, and
the Czech Republic, except Poland. Our results regarding energy policy
(renewable and non-renewable) and its impact on economic growth are
supported by the empirical study by Brodny J & Tutak M, (2021). The study
by Brodny J & Tutak M, (2021) revealed that Hungary, Slovakia, and the
Czech Republic are the countries with good energy security and
sustainability indicators.
In general, theoretical and empirical models consider foreign direct
investment crucial to promoting economic growth. Our result reveals that
the coefficient of FDI is statistically significant at a 1% level, showing that
foreign direct investment accelerates economic growth. In this context, for
instance, Sarker & Khan, (2020), Chaudhury et al., (2020) and Gokmen,
(2021) also found a positive correlation between foreign direct investment
and growth.
Other studies, such as Jambor et al., (1995) and Su et al., (2018),
demonstrate the importance of foreign investment in achieving economic
growth. The empirical research of Jambor et al., (1995) using panel data,
namely, fixed effects for Central and Eastern Europe countries, showed that
foreign direct investment, tourist inflows, trade intensity, and bank credit
68
promote economic growth. Therefore, the authors also found a negative
correlation between carbon dioxide emissions and economic development,
which showed that carbon dioxide emissions lose importance for achieving
economic growth. The study by (W. Su et al. 2018) Su et al. (2018) evidences
a strong association between corruption and international investment.
According to the authors, the high rate of bribery decreases FDI inflows.
The relationship between urban population and population growth
is directly associated with economic growth and economic development
(Baker, Delong, and Krugman 2005; Peterson 2017; Piketty and
Goldhammer 2015). According to our result, population (LogPOP) causes
economic growth.
The recent study by Boltho, (2020) for Latvia, Lithuania, Slovakia,
and Slovenia shows convergence in the countries under analysis. The
author establishes a degree of comparability of these countries with the
Eurozone members.
Table 28 Model 2: Depedent Variable LogGDP with FMOLS
Variables Coefiicient Std. Error t-Statistic Prob

LogENERG 0.864a 0.317 2.728 0.008
LogRENEW 0.518a 0.038 13.554 0.000
LogFDI 0.036b 0.018 2.043 0.045
a
LogPOP -4.228 1.085 -3.896 0.000
All variables are in logarithm form; a 1%, and b 5% statistically significant.
69
Figure 7 Model 2
Besides, in the short run, we observe that the speed of adjustment
(ECT) presents a negative and is statistically significant at 10%, revealing
convergence between the Czech Republic, Hungary, Poland, and Slovakia.
Table 28 presents the long-run coefficients for the growth model
using the panel fully modified least squared (FMOLS) estimator.
The independent variables of energy consumption (LogENERG),
renewable energy (LogRENEW), and urban population (LogPOP) have a
statistical significance of 1%.
Regarding foreign direct investment, it is observed that this variable
presents statistical significance at 5% (see Fig. 7).
Then, considering the expected signals and the hypotheses
formulated, we show energy consumption (LogENERG), renewable
energies (LogRENEW), and foreign direct investment (LogFDI) in line with
the literature. On the other hand, the population (LogPOP) finds a sign
contrary to expected expectations. The more detailed analysis allows us to
infer that the elasticity of energy consumption (LogENERG) increases
economic growth by 0.864% and renewable energy by 0.518%. In addition,
it is also shown that foreign direct investment (FDI) is positive (0.036%).
70
The results show that the urban population does not seem to
contribute to an increase in economic growth, with a decrease in growth of
− 4.228%.
3.5. Conclusions
This research evaluated the four Visegrad member countries (Czech
Republic, Hungary, Poland, and Slovakia) from 1990 to 2018. Two different
equations were formulated in this context: the first tested the Kuznets
environmental equation,
and the second the determinants of economic growth. In the first
step, we focused on the properties of the variables under study using the
panel unit root test. The results showed us that the variables are stationary
at the first differences. Subsequently, complementary tests were carried out,
such as the multicollinearity and cross-section dependence tests. It was
observed that the models did not present multicollinearity problems, and
there was cross-dependence between the variables used in the two models.
Then, before specifying the equations through the pooled mean group,
panel ARDL model, we performed the Hausman test and found that fixed
effects are present in both models.
In terms of econometric results for the first model (EKC equation),
we observe the effects of the factors for each of the countries from a short-
run perspective. We also evaluate the short- and long-run results for all
Visegrad groups of countries. Thus, for all countries, it can be observed that
the hypotheses of the Kuznets environmental curve find theoretical support
in the short run; even more, in the long run, it can be concluded that
economic growth uses more sustainable measures or practices. Regarding
the consumption of non-renewable energy and foreign direct investment, it
is possible to conclude that these variables stimulate polluting emissions.
71
The results found are according to the studies by Myszczyszyn & Suproń,
(2021); Simionescu et al., (2021b); Wawrzyniak, (2020).
Carrying out a more detailed analysis for each country, we observed
the following results: (1) the speed of adjustment (ECT) presents a negative
and is statistically significant for the Czech Republic, Hungary, and Poland,
demonstrating that the emissions of carbon dioxide tend to decrease; (2)
Czech Republic, Poland, and Slovakia validate the hypotheses of the EKC
model. Finally, the impact of non-renewable energies (energy consumption)
and foreign direct investment (FDI) confirm the ideas that they are
positively correlated with carbon dioxide emissions, thus increasing
pollution levels. The studies by Chaouachi & Balsalobre-Lorente, (2022a);
Cui et al.,( 2021); Haldar & Sethi, (2021).; Kang, (2021); Marques & Caetano,
(2020); Singhania & Saini, (2021) give support to our results.
Regarding the equation of the determinants of economic growth, the
conclusions allow us to observe the following relationships. In the long
term, energy consumption and renewable energy promote economic
growth in Visegrad member countries. This conclusion finds empirical
support in the studies by Myszczyszyn & Suproń, (2021); Simionescu et al.,
(2021b); Wawrzyniak, (2020).Furthermore, the results obtained for the
population and foreign direct investment demonstrate that these factors
impacted economic growth, i.e., they are crucial determinants for achieving
economic growth. The results found for the Visegrad group have theoretical
and empirical support in numerous studies on the determinants of
economic growth (e.g., Chaouachi & Balsalobre-Lorente, 2022a; Ochoa-
Moreno et al., 2021; Peterson, 2017; Piketty Goldhammer, 2015).
In terms of recommendations, limitations, and future directions,
economic and energy policymakers should introduce sustainability
72
practices, namely, the use and development of renewable energies since
these agree to reduce the effects and greenhouse gasses and allow achieving
the economic growth of a sustainable form. On the other hand, international
investment inflows should be associated with innovation and product
differentiation practices using cleaner energies to preserve and improve the
environment. Some studies, such as Barut et al., (2023); Sharif, Afshan, et
al., (2020b); Sharif, Baris-Tuzemen, et al., (2020b); Sharif, Saha, et al., (2017);
and Suki et al., (2020) assess the impact of tourism and globalization in
terms of the environment and green logistics.
Therefore, extending the estimated econometric models to test the
effects of tourism and globalization and economic and financial factors on
economic growth in terms of climate change and green logistics in Visegrad
countries is interesting.
Regarding perspectives for future work, it is essential to note that it
will be interesting to assess the impact of trade intensity and its association
with environmental issues (e.g., (S. A. R. Khan et al. 2019; Nuno Carlos
Leitão and Balogh 2020; Nuno Carlos Leitão, Balsalobre-Lorente, and
Cantos-Cantos 2021b); applied to Visegrad countries. Another issue relates
to sustainably using clean energy in production via the endowments factor
(capital and labor) (Krajewski & Mackiewicz, 2019; Yao et al., 2023).
Following the recent empirical work of (Ali, et al., 2022b) we think to
incorporate these variables in further research to evaluate the effect of
endowment factors on carbon dioxide emissions and economic growth.
Furthermore, it is also essential to evaluate the effect of the
globalization index (KOF index, e.g., (S. A. R. Khan et al. 2019; Suki et al.
2020) and the structural adjustment and shock issues via the human
development index and the corruption index and the introduction of
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dummy variables that evaluate asymmetric shocks in terms of economic
and financial policy in terms of the environmental Kuznets curve and the
economic growth applied to the four Visegrad countries.
Finally, another interesting issue is related to the analysis of energy
intensity and its interaction with political policies and understanding to
what extent this shock follows a smooth adjustment or asymmetric shock.
Furthermore, to the variables mentioned above, it will be crucial to
introduce new variables such as public and private capital stock and public
policies on energy intensity, as (Santiago et al., (2020) for Latin American
and Caribbean countries. Still, our case for Visegrad countries is to assess
the impact of globalization and economic freedom on economic growth and
climate change.
74
CHAPTER 4
THE IMPACT OF ECONOMIC GROWTH, INTERNATIONAL
TRADE AND CARBON DIOXIDE EMISSIONS ON PORTUGUESE
ENERGY CONSUMPTION
4.1 Introduction
Over the past few years, energy and environmental economics have
gained a dynamic in international economics. Climate change and energy
efficiency have become the dominant issues in international affairs. In the
1990s, the environmental Kuznets curve (EKC) (Grossman and Krueger
1995) made it possible for economists worldwide to study the association
between economic growth and polluting emissions. Although this context
has been highly debated in the literature, economists have formulated and
continue to develop econometric models to understand the relationship
between climate change and economic growth.
Most studies demonstrate that developed economies tend to be
concerned with environmental issues and improvements. Indeed, the
various international ecological conferences also allowed economists and
policymakers to address this issue. In this context, Brown (2007) and
(Morris 2021) demonstrate that human environmental intervention cause
climate change. For instance, environmental degradation affects society and
human rights, emphasizing regions where desertification is observed or
rising sea levels, which affects the human species, forcing the weakest
populations to migrate.
Another issue introduced by the EKC is the relationship between
international trade, climate change, and energy efficiency. In this
association, three schools support the relationship between international
trade, energy demand, and carbon dioxide emissions. In this context, it is
75
possible to highlight the neoclassical theory of Heckscher-Ohlin that allows
us to verify that there are countries abundant in capital and others relatively
abundant in the labour factor. As can be seen, countries that are abundant
in capital tend to export differentiated products and, consequently, high
quality.
However, countries that export high-quality products are supported
by intra-industry trade and monopolistic competition models (Nuno Carlos
Leitão 2021a; Nuno Carlos Leitão and Balogh 2020).Thus, differentiated
trade will negatively correlate with climate change and greenhouse effects.
However, the strong dependence of energy resources on non-renewable
energy consumption may explain the positive correlation of international
trade with carbon dioxide emissions or non-renewable energy
consumption. In this context, in addition to the Heckscher-Ohlin model, it
is essential to highlight the pollution haven hypothesis (PHH) theory.
More recently, we have seen in the literature some studies that have
debated the issues of international trade with climate issues and energy
consumption in the Portuguese economy (Balsalobre-Lorente, Leitão, and
Bekun 2021; Nuno Carlos Leitão and Balsalobre-Lorente 2020).
As can be seen, the supply of energy consumption must be
improved, which is correlated with energy efficiency. However, energy
production is fundamentally associated with non-renewable energies, with
particular emphasis on fossil energies, which entail higher costs of
structural adjustment on the environment, namely via the intensity of
energy consumption and, consequently, an increase in the carbon dioxide
emissions and greenhouse effects (Filipovic, Verbi, and Radovanovic 2015;
Fuinhas et al. 2021c; Liu et al. 2021). In this context, we observe that the
linkage between carbon dioxide emissions and energy consumption can be
76
examined in the literature as a causal relationship between both variables.
Furthermore, several empirical studies mention that economic growth
involves the excessive use of non-renewable energies and promotes climate
change (Fuinhas, Marques, and Koengkan 2017; Nuno Carlos Leitão 2015;
Nuno Carlos Leitão and Balogh 2020; Ozturk, Aslan, and Kalyoncu 2010).
In this line, Jun et al. (2021) considered the relationship between
globalization, energy consumption, economic growth, and carbon dioxide
emissions in South Asia. The authors demonstrated that globalization,
economic development, and energy consumption encourage pollution
emissions.
Yang et al., 2021)evaluated the effects of green growth, renewable
energy, and globalization on pollution emissions in the United States. The
authors showed a causality between the explanatory variables and carbon
dioxide emissions in the long run. Similar conclusions confirmed (Nuno
Carlos Leitão and Shahbaz 2013) empirical study, when the authors applied
dynamic panel data for 18 countries with different development, showing
that globalization and energy consumption are positively correlated with
Having presented the chapter’s underlying questions, this
investigation seeks to contribute to the literature in three distinct ways: (1)
to show recent literature; (2) to assess the impact of economic growth,
international trade, and carbon dioxide emissions on energy consumption
and respective energy efficiency for the Portuguese case; and (3) present a
contribution to political decisionmakers in the field of economic and energy
policy.
The chapter is structured as follows: the literature review appears in
Section 4.2; in Section 4.3, we give the methodology used, the data and the
77
respective statistical sources, and the formulated hypotheses. Next, in
Sections 4.4, the econometric results and the discussion of the results are
demonstrated. Finally, in Section 4.5, conclusions and recommendations for
economic policy emerge.
4.2 Literature Review
The efficiency of energy has been discussed in empirical studies. This
section presents the linkage between international trade, economic growth,
carbon dioxide emissions, and energy use. Economic activity and
international trade need higher energy consumption levels in this context.
Besides, increased energy consumption causes environmental damage and
climate change, namely growing carbon dioxide emissions.
4.2.1. Economic Growth and Energy Use
Many studies found a positive bidirectional causality between
economic growth and energy use (Ayinde et al., 2019; Dritsaki & Dritsaki,
2014; Krkošková, 2021b; Mukhtarov et al., 2017; Tang & Tan, 2012; Yusoff et
al., 2020). Tang & Tan (2012) explored the linkage between electric
consumption and growth, considering the Portuguese experience for the
period 1974–2008. As a result, Tang & Tan (2012) confirmed the
bidirectional relationship between both variables and concluded that
Portugal presented higher dependence on energy consumption. The
research of Dritsaki & Dritsaki, (2014) considered the relationship between
energy use, carbon dioxide emissions, and economic growth for three
southern European countries (Greece, Spain, and Portugal) from 1960 to
2009. The authors used the cointegration panel data (fully modified least
squares and dynamic least squares). The econometric results showed that
economic growth and carbon dioxide emissions positively affect energy
use. Thus, economic activity needs higher energy demand levels, and
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climate change is stimulated by non-renewable energy use. (Nuno Carlos
Leitão and Balsalobre-Lorente 2020) considered the cointegration between
energy use, economic growth, urban population, and carbon dioxide
emissions for the Portuguese economy using the autoregressive distributed
model (ARDL) and vector autoregressive (VAR) model for the period 1960–
2015. The results revealed that carbon dioxide emissions, economic growth,
and exports are positively correlated with energy use in the long run. The
carbon dioxide emissions and economic growth of oil producing countries
in the Middle East between 1995 and 2017 were investigated by Zanjani et
al. (2021). The study demonstrated that governments should implement
standard policies to improve environmental and air quality. For instance,
the experience of Azerbaijan was studied by Mukhtarov et al. (2017),
considering VAR model for the period 1990–2015, and they found
bidirectional causality between economic growth and energy consumption
use. Ayinde et al. (2019) used the vector error correction model (VECM) to
evaluate the case of Nigeria, and the result found a bidirectional
relationship between foreign direct investment and energy consumption.
However, the study does not observe a causality between trade, energy
consumption, urbanization, and energy use. From a different perspective,
Yusoff et al. (2020), testing the link between energy use, economic growth,
and carbon dioxide emissions in Afghanistan, observed bidirectional
causality between economic growth and energy use. The experience of EU-
28 countries was considered by Filipovic et al. (2015). The authors
concluded that energy prices, taxes, and economic growth aim to decrease
the dependence on energy intensity. Besides, energy consumption has a
positive effect on energy intensity. The Visegrad countries, namely
Slovakia, Hungary, the Czech Republic, and Poland, were investigated by
79
Krkošková (2021b). The results demonstrate causality between economic
growth and energy use in Slovakia, Hungary, and the Czech Republic.
The correlation between financial development and energy use was
considered by Lefatsa & Garidzirai (2021). They used Granger causality as
an econometric strategy and an ARDL model. The empirical results
demonstrated that financial development and industrialization have a
unidirectional relationship with energy consumption. Furthermore, the
authors found a bidirectional nexus between urbanization and energy
consumption. Nevertheless, the relationship between economic growth and
energy use does not present any causality between the variables.
The empirical study of Vo et al., (2019) tested the role of non-
renewable energy use, renewable energy, economic growth, and population
on carbon dioxide emissions in countries is the Association of Southeast
Asian Nations (ASEAN). Regarding the results for Indonesia, Myanmar,
and Malaysia, it is possible to conclude that the relationship between
economic growth and pollution emissions is inconclusive. Furthermore,
energy use and population are positively associated with carbon dioxide
emissions. Koengkan (2018) research evaluates the effects of international
trade, economic growth, and financial openness on energy use by Bolivia,
Columbia, Ecuador, and Peru, applying dynamic panel data. International
trade and economic growth present a positive association with energy use.
However, financial openness demonstrated a negative impact on energy
use. The nexus of carbon dioxide emissions, energy consumption,
international trade, and economic growth was considered by (Wasti and
Zaidi 2020) who applied Kuwait to an ARDL model. The article
demonstrated that carbon dioxide emissions and energy consumption
stimulate economic growth. Besides, the causality of Granger found a
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bidirectional causality between pollution and energy consumption and one
unidirectional correlation between energy consumption and international
trade.
Lastly, the experience of Middle East/North African (MENA)
countries was considered by Saqib (2021). The study found a unidirectional
association between economic growth and energy consumption for six
economies (Algeria, Kuwait, Morocco, Qatar, Saudi Arabia, and Turkey).
4.2.2. International Trade, Carbon Dioxide Emissions, and Energy
Use
The issue of international trade and the energy demand, especially
non-renewable energy, can be explained through the Heckscher-Ohlin
theorem and the PHH theory. Both theories explain that exports and
international trade are associated with high levels of energy demand and,
consequently, carbon dioxide emissions and global warming increase. In
this context, the study by Alkhateeb & Mahmood (2019) applied to the case
of Egypt demonstrates that international trade and economic growth
depend on energy demand, indicating a positive impact with statistical
significance between trade and energy consumption. The same is valid for
economic activity and energy consumption. The association between trade,
economic growth, energy consumption, and pollution emissions in the
Turkish experience was investigated by Cetin et al. (2018). Using an ARDL
model, they observed that economic growth and energy consumption are
directly related to carbon dioxide emissions. A different perspective
presents the study by Leitão (2021) when considering the effect of
renewable energies and international trade on carbon dioxide emissions for
the Portuguese case. Leitão’s (2021) results show that international trade via
product differentiation is negatively correlated with climate change and
81
pollution emissions. In this case, the economic theory supporting these
econometric results is based on monopolistic competition, trade intensity,
or intra-industry trade Leitão & Balogh, (2020). The link between
international trade and energy consumption for Asian economies (Pakistan,
India, China, and Bangladesh) was considered by (Arif et al., (2017) .
Regarding the panel
ARDL model results, this study demonstrates that international
trade contributes to increased energy use demand. However, the authors
also found that international trade encourages economic growth.
Nevertheless, recent articles such as Odhiambo (2021) and Leitão &
Balsalobre-Lorente (2020) defend trade openness aimed to decrease energy
consumption. The Brazilian experience was investigated by Hdom &
Fuinhas (2020) from 1975 to 2016, using cointegration regressions and
Granger causality.
The empirical results reveal that trade has a bidirectional causality
with electric production, and natural gas presents a bidirectional causality
with economic growth. Litavcová & Chovancová (2021) considered the
investigation applied to 14 countries of the Danube regions between 1990
and 2019. The authors used the ARDL model and causality relationship
between the variable’s economic growth, energy use, and carbon dioxide
emissions for each country separately. The results showed a cointegration
between carbon dioxide emissions, energy use, and income per capita in
four countries: Austria, the Czech Republic, Slovakia, and Slovenia.
Furthermore, the causality results demonstrated a bidirectional relationship
in the long run between the variables used in this research for Bosnia and
Herzegovina (Litavcova and Chovancova 2021:13).
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The correlation between trade, energy use, economic growth, and
pollution emissions was reflected by Tariq Majeed & Asghar (2021) to
evaluate developing countries – D8 and G7 (developed economies). These
authors used a panel cointegration and causality, and the results confirmed
that pollution emissions positively impact economic growth, energy use,
and trade openness in D8 economies. Nevertheless, economic development
and international trade promote air quality in G7 economies. In this context,
Malik (2021) examined the association between income per capita, energy
consumption, and carbon dioxide emissions in Turkey using a generalised
method of moments (GMM) estimator with time series. The author
formulated three equations: (1) economic growth assumes a dependent
variable, (2) energy use was considered the dependent variable, and (3)
carbon dioxide emissions are the dependent variable.
Considering the results of the second equation, we observe that
carbon dioxide emissions and economic growth positively affect energy
consumption.
The results demonstrate that economic growth and gas emissions are
associated with high energy consumption.
The Southeast Asian countries were studied by (Nosheen, Iqbal, and
Hassan 2019) using time series (ARDL model). They found energy
consumption, international trade, and economic growth affect air quality.
Though, the financial development aims to decrease pollution emissions
and improve the improvement of the environment. Ozturk et al. (2022)
investigated the linkage between pilgrimage tourism, economic growth,
and energy consumption in Saudi Arabia. The authors used cointegration
regression (dynamic ordinary least squares (DOLS) and full modified
ordinary least squares (FMOLS). Considering the econometric results with
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DOLS, they found that energy consumption and pilgrimage tourism
positively impact climate change. Besides, there is bidirectional causality
between pilgrimage and economic growth and unidirectional causality
between tourism and air quality.
Subsequently, Hongxing et al. 2021) tested the relationship between
energy use and economic growth for African blocs. They found that foreign
aid, international trade, foreign direct investment, and pollution emissions
positively impact economic growth.
4.3 Methodology
This chapter assesses the effects of economic growth (GrossDPmp),
international trade (TR), and carbon dioxide emissions per capita (CP) on
energy consumption (ENC) for the Portuguese economy for the period
1970–2018, using times series, namely ARDL model and cointegration
models (FMOLS, canonical cointegration regression, and DOLS model). The
ARDL model and the cointegration diagnostic tests were obtained using the
STATA software Kripfganz & Schneider, 2020). Cointegration models were
determined using EViews software. For a better understanding of time
series cointegration models, see, for example, the developments of Phillips
& Hansen (1990), Park (1992), and Hamilton, (1994). Regarding
methodology, we started by testing the stationarity of the variables under
study using the Augmented Dickey-Fuller test statistic (ADF). Dickey &
Fuller (1979) argument can be presented as follows, as it is an equation of
the Ar (1) type:
Yt = pyt-1 + μit (1)
Note that yt is the variable under study, namely energy consumption
(LnENC), carbon dioxide emissions per capita (LnCP), gross domestic
product (GDP) at market price (LnGrossDPmp), and trade openness (LnTR).
84
Furthermore, p represents the regressors that describe the unit root. Finally,
μit means the error term. In this context, when p = 1, the study variable
presents unit root, i.e., the variable is not stationary.
Subsequently, the following equation was estimated:
LnENC= β0 + β1LnCP + β2LnGrossDPmp + β3LnTR + μit (2)
Where the dependent variable is energy consumption (LnENC), and
the explanatory variables are carbon dioxide emissions per capita (LnCP),
GDP at market price (LnGrossDPmp), and international trade (LnTR). The
random residual term assumes μit. All variables are in logarithmic form.
The dependent variable is expressed in the logarithm form of energy use
per capita and was collected from IEA Statistics and the World Bank data
set.
Following the contributions of Leitão, 2021), Sukhadolets et al.
(2021), Elfaki et al. (2021), and Saleem et al. (2021), Equation 2 can take the
following form for the ARDL model:
∆LnENC = α0 + α1∆ LnENCt-1 + α2 ∆LnCPt-1 + α3∆ LnGrossDPmpt-1 + α4
Ln∆TRt-1 + Σnt = 1α1∆ LnENCt-1 + Σnt = 0α2∆ LnCPt-1+ Σnt = 0α3∆LnGrossDPmt-1+ Σnt =
0α4∆ LogTRt-1 + γECMt-1 + e (3)
Where Δ symbolized the operator change, the corrected error term is
called ECMt-1, and the short- and long-term adjustment by γ Leitão, (2021).
As analyzed by Leitão (2021), (Nuno Carlos Leitão and Balogh 2020),
Pesaran et al. (2001) and Sukhadolets et al., (2021). the ARDL model is based
on two conditions:
Hypothesis zero:
α0 = α1LnENCt-1 = α2LnCPt-1 = α3LnGrossDPmpt-1 = α4Ln∆TRt-1,
signifies no relationship in the long run.
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Hypothesis alternative:
α0 ≠ α1 LnENCt-1 ≠ α2 LnCPt-1 ≠ α3LnGrossDPmpt-1 ≠ α4Ln∆TRt-1,
denotes the relationship in the long run.
Finally, we present Granger causality to understand the causality
between the variables under study. This methodology aims to test
unidirectional causality between two variables; on the contrary, there is
bidirectional causality between the variables. According to Engle &
Granger (1987), to obtain the causality between the variables, an
intermediate step is necessary; it is required to determine VAR and then
apply the Granger causality. This investigation used this procedure through
the STATA software.
The hypotheses presented below accounted for the literature review
realized in Section 4.2.
H1: (a) There exists a positive correlation between carbon dioxide emissions
and energy consumption.
H1: (b) Is there a bidirectional relationship between carbon dioxide
emissions and energy consumption?
Hypothesis 1b considers that Granger’s causality will be applied, and
we are interested in understanding whether there is a linkage between the
variables.
LnCP – logarithm of carbon dioxide emissions per capita. Data for
this variable were collected from the Carbon Dioxide Information Analysis
Center and the World Bank databases.
The studies by Leitão & Balsalobre-Lorente (2020), Lefatsa &
Garidzorai (2021) and and (Litavcová and Chovancová 2021) demonstrate
that excessive energy use translates into an increase in carbon dioxide
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emissions or vice versa. For instance, in this context, Kongkuah et al. (2021)
and (Amasyali & El-Gohary (2018) also defended this relationship between
the variables.
H2: Economic growth requires high levels of energy consumption.
In Hypothesis 2, we admit a strong dependence on energy
consumption for economic growth to occur. Numerous studies (Ayinde,
Celik, and Gylych 2019; Krkošková 2021b; Mukhtarov, Mikayilov, and
Ismayilov 2017; Szymczyk et al. 2021; Yusoff, Bekhet, and Mahrwarz 2020)
find a positive relationship between growth and energy consumption and
a causal relationship between both variables. For example, for the
Portuguese experience, the studies of (Shahbaz et al. 2015) and Moutinho et
al. (2017) also found this assumption between the variables.
LnGrossDPmp – logarithm of GDP at market price from the World
Bank national accounts data and Organization for Economic Cooperation
and Development (OECD) national accounts.
H3: International trade is heavily dependent on energy consumption.
In this hypothesis, we consider that the relationship between
international trade and energy consumption is based on the logic of the
Heckscher-Ohlin model and the PHH theory. Arif et al. (2017), Hdom &
Fuinhas, (2020), and Nosheen et al. (2019) find a positive effect of
international trade on energy consumption.
LnTR – logarithm of goods exports in the GDP percentage from the
World Bank national accounts data and OECD national accounts.
4.4 Results
In this section, we consider the empirical study. The objective will be
to analyze the properties of the variables used and the impact of economic
growth, international trade, and carbon dioxide emissions on energy
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consumption in Portugal. Furthermore, we are interested in knowing
whether the explanatory variables introduced in the equation contribute to
a smooth adjustment of energy consumption – that is, to a decrease in
energy consumption or, on the contrary, to an increase in energy
consumption. We begin the interpretation and empirical analysis of carbon
dioxide emissions, economic growth, and international trade effects on
energy consumption through descriptive statistics and correlations
between variables. Subsequently, we look at unit roots using the ADF
statistic. Next, the econometric model is presented with the cointegration
regressions (FMOLS, canonical cointegration regression, and DOLS) and
the ARDL model Kripfganz & Schneider (2020). Both estimation methods
allow the cointegration between the variables being studied to be assessed
in the long term Leitão (2021). Descriptive statistics are presented in Table
29. In a first analysis, the variables GDP at market price (LnGrossDPmp) and
energy consumption (LnENC) are those that present the highest values for
the maximum values (maximum statistic). The values skewness and
kurtosis allow us to evaluate the standard distribution statistics. The results
demonstrate that all the variables in studies have negative values in
skewness, which reveals that the skewed has values on the left. On the other
hand, it is still observed that kurtosis is positive, indicating a “heavy tail”
distribution.
The correlations between the variables considered in this study are
shown in Table 30, which are based on the association between explanatory
variables (carbon dioxide emissions per capita (LnCP); economic growth
(LnGrossDPmp), and trade openness (LnTR)) and the dependent variable
energy consumption (LnENC); we note that all explanatory variables are
positively correlated with energy consumption.
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Table 29 Descriptive Statistics
Descriptive Statistics
Note: The descriptive statistics were determined by EViews software. The
variables are expressed in logarithm form.
Table 30 Correlations between the Variables Used in This Research
Correlations between the Variables Used in This Research
Note: The correlations were determined by EViews software. The variables
are expressed in logarithm form.
The ADF test to observe whether the variables of energy
consumption (LnENC), carbon dioxide emissions per capita (LnCP), GDP at
market price (LnGrossDPmp), and trade openness (LnTR) have a unit root or
are stationary are presented in Table 31. Considering the equation in levels,
we can conclude that the variables of energy use (LnENC) and carbon
dioxide emission per capita (LnCP) are stationary. Besides, according to the
ADF test, all variables used in this investigation are integrated into the first
differences.
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Table 32 gives information about lag order selection criteria.
According to the results, we observe, using the Akaike information criterion
(AIC), that the VAR model should be estimated at order 2. Table 33 also
gives information about the statistics of LR (sequential modified; final
prediction error (FPE); Schwarz information criterion (SC); Hannan-Quinn
information criterion (HQ).
Table 33 presents the results with cointegration regressions to
estimate the long-run effects of carbon dioxide emissions, economic growth,
and international trade on energy use. The coefficient of carbon dioxide
emissions per capita (LnCP) positively affects energy consumption. The
variable is statistically significant at a 1% level, showing that pollution
emissions are associated with energy consumption. The studies of
Mukhtarov et al. (2017) and (Koengkan 2018) support our result. In
addition, previous studies carried out for the Portuguese economy, such as
Shahbaz et al. (2015), Leitão (2015), Leitão & Balsalobre-Lorente (2020),
found a bidirectional relationship between carbon dioxide emissions and
energy consumption.
The economic growth (LnGrossDPmp) is positively correlated with
energy use, and the variable is statistically significant at a 1% level.
Therefore, according to the literature review (Ayinde et al. 2019; Krkošková
2021b; Yusoff et al. 2020) economic activity needs higher energy use. The
coefficient of international trade (LnTR) positively impacts energy use,
showing that this result is described by the Heckscher-Ohlin model and the
PHH theory. In addition, the previous studies of Alkhateeb & Mahmood
(2019) and Hdom & Fuinhas (2020) found a positive association between
international trade and energy use.
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The results with the ARDL model are presented in Table 31. The
coefficients are similar to the short and long-run effects: the carbon dioxide
emissions (LnCP) variable is directly associated with energy demand, and
pollution emissions correlate with energy use intensity. For instance, the
empirical studies of Vo et al. (2019) and Leitão & Balsalobre-Lorente (2020)
support this relationship between carbon dioxide emissions and energy
demand.
Table 31 Unit Root Test: ADF Criteria
Note: p-value is in parentheses; *** (1%), and * (10%). The unit roots test was
determined by EViews software. The variables are expressed in logarithm
form.
Table 32 Lag Length Criteria Emissions on Portuguese Energy Use with
Cointegration Regression
Lag Log L LR FPE AIC SC HQ

0 247.3952 NA 1.42e-10 -11.32071 -15.15687 -11.26029
1 403.9427 276.6887* 2.07e-13 -17.85780 -17.03864* -17.55572*
2 420.3288 25.91294 2.08e-13 -17.87576* -16.40127 -17.33201
3 429.9804 13.46735 2.94e-13 -17.58049 -15.45066 -16.79507
Note: The lag length criteria were determined by EViews software.
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Table 33 The Impact of Economic Growth, International Tade, Carbon
Dioxide Emissions on Portuguese Energy Use with Cointegration Regressions.
Fully Modified Leat Canonical Cointegration

Variables Dynamic Least Squares
Squares Regression
LnCP 0.101*** (0.000) 0.100*** (0.000) 0.101*** (0.000)

LnGrossDPmp 0.830*** (0.000) 0.829*** (0.000) 0.835*** (0.000)
LnTR 0.146*** (0.001) 0.149*** (0.002) 0.161*** (0.000)
Constant 1.354*** (0.000) 1.350*** (0.000) 1.318*** (0.000)
Note: p-value is in parentheses; *** (1%). The cointegration regressions were
determined by EViews software. The variables are expressed in logarithm
form.
Table 34 The Impact of Economic Growth, International Trade, and Carbon
Dioxide Emissions on Portuguese Energy Use with ARDL Model
Variables ADJ
LnENC t-1 −0.625***(0.000) Long Run
LnCP 0.823*** (0.000)

LnGrossDPmp 0.097* (0.051)
LnTR 0.108*** (0.000)
Variables Short Run
LLP D1 0.206* (0.092)
LnGrossDPmp D1 0.065** (0.049)
LD
Constant −0.988*** (0.004)
0.854*** (0.000)
Observations 42
Adj. R2 0.84
Note: p-value is in parentheses; *** (1%), and * (10%). The ARDL
model was determined by STATA software. The variables are expressed in
logarithm form.
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We observe that the adjustment coefficient (ADJ) negatively affects
energy use, and the lagged variable is statistically significant at a 1% level.
Furthermore, the empirical studies of Lefatsa et al., (2021), Odhiambo,
(2021), and Leitão & Balsalobre-Lorente, (2020) also found a negative
adjustment for energy consumption. In this context, we reflect on the
adjustment in energy demand and observe a smooth adjustment of energy
use.
The income per capita is directly correlated with energy
consumption and carbon dioxide emissions based on EKC postulations. For
example, Shahbaz et al., (2015) and Moutinho et al., (2017) support the
result.
Regarding the relationship between international Trade (LnTR) and
energy demand, we observe a positive effect, and the international trade is
statically significant at a 10% level in the short run. This result is according
to the studies of Koengkan, (2018), Nosheen et al., (2019), and Hdom &
Fuinhas, (2020).
Table 35 demonstrates a long-run association between the variables
in this study when we consider Kripfganz & Schneider, (2020) arguments
and the ARDL bounds test (Lefatsa, Sibanda, and Garidzirai 2021; Nuno
Carlos Leitão 2021a; Nuno Carlos Leitão and Balsalobre-Lorente 2020).
The following tables allow us to analyze the diagnostics of
autoregressive distributed lag. Thus, in Tables 36 and, 37 it is observed that
there are no serial correlation problems. The application of the white test
allows us to determine that the obtained value (0.450) is accepted for
homoscedasticity (Table 38).
The VAR model determined Granger causality statistics. Table 39
demonstrates a unidirectional relationship between energy consumption
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(LnENC) and carbon dioxide emissions per capita (LnCP). It also verifies
that there is a unidirectional relationship between international trade
(LnTR) and carbon dioxide emissions per capita (LnCP).
Table 35 The Impact of Economic Growth, International Trade, Carbon
Dioxide Emissions on Portuguese Energy Use with ARDL and Bound Test
10% 10% 5% 5% 1% 1% P-value P-value

Tests
I (0) I (1) I (0) I (1) I (0) I (1) I (0) I (1)
F 2.880 4.051 3.507 4.826 4.984 6.631 0.005 0.025
T −2.55 −3.44 −2.89 −3.83 −3.59 −4.60 0.001 0.018
Note: The diagnostic ARDL bounds test was determined by STATA
software
Table 36 The Diagnostic ARDL: The Durbin-Watson
Durbin-Watson d-statistic
(8.42) = 2.184
Note: The diagnostic ARDL was determined by STATA software.
Table 37 The Diagnostic ARDL: Autocorrelation Test
Bresch-Godfrey LM
Prob > Chi2=0.336
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Table 38 The Diagnostic ARDL: Homoskedasticity Versus
Heteroskedasticity
White Test
Prob > Chi2 = 0.4501
Table 39 Granger Causality Wald Test
Equation Excluded Chi2 Prob

LnENC LnCP 223.16*** (0.000)
LnEC LnGrossDPmp 5.8085* (0.055)
LnENC LTR 7.759** (0.021)
LnENC All 1131.4*** (0.000)
LnCP LnENC 0.132 (0.936)
LnCP LnGrossDPmp 0.335 (0.845)
LnCP LnTR 0.719 (0.698)
LnCP All 92.785*** (0.000)
LnGrossDPmp LnENC 83.613*** (0.000)
LnGrossDPmp LnCP 258.84*** (0.000)
LnGrossDPmp LTR 6.7391*** (0.000)
LnGrossDPmp All 708.66*** (0.000)
LnTR LnENC 19.434*** (0.000)
LnTR LnCP 48.393*** (0.000)
LnTR LnGrossDPmp 7.9836** (0.018)
LnTR All 117.45*** 0.000)
Note: p-value is in parentheses; *** (1%), and * (10%). The Granger causality
was determined by STATA software. The variables are expressed in
logarithm form.
Regarding the bidirectional relationship, we can refer to the link
between energy consumption (LnENC) and the GDP market price
(LnGrossDPmp). The empirical studies of Dritsaki et al., (2014), Mukhtarov
et al., (2017), and Krkošková, (2021) also found a bidirectional relationship
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between the variables demonstrating that economic growth needs energy
sources. Moreover, numerous studies have pointed to a similar conclusion
over the past few years. So then, our results corroborate with the formulated
hypothesis and numerous previous studies.
We also observe the bidirectional association between energy
consumption (LnENC) and international trade (LnTR). Odhiambo, (2021),
Wang et al., (2021) and L. M. Marques et al., (2017) give support to our
result. Once again, our results are supported by the Heckscher-Ohlin model
and demonstrate that export capacity is associated with the theory of
advantages.
In addition, the bidirectional relationships between economic
growth (LnGrossDPmp) and international trade (LnTR). The empirical
studies of S. Khan et al., 2018) and Intisar et al., (2020) also reflected a
bidirectional causality between the variables. Thus, theories of economic
growth demonstrate that international trade can promote economic growth.
Literature evidence that numerous scientific articles validate this result. For
instance, Elfaki et al., (2021) and Nguyen & Bui, (2021) are in line with this
permission.
4.5 Conclusions
In this section, we reflect on the results of the empirical study. Then,
we refer to recommendations for energy and economic policymakers and
present clues for future work.
The results obtained in the empirical study demonstrate that the
variables used are integrated into the first differences when applying the
unit root tests. Besides, it has also been observed that the variable energy
used (LnENC) and carbon dioxide emissions (LnCP) are stationary at levels
with the application of the ADF. The various tests used in this research
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show that the variable energy consumption, economic growth,
international trade, and carbon dioxide emissions are cointegrated in the
long term.
Regarding the model estimated with cointegration regressions and
the ARDL model, it is observed that carbon dioxide emissions are
associated with energy use, i.e., carbon dioxide emissions promote high
levels of nonrenewable energy consumption. Besides, international trade
and economic growth cause high levels of energy consumption. However,
the ARDL model allows us to verify that the adjustment costs via energy
consumption tend to decrease. This result showed that Portuguese energy
consumption is inclined to be a smooth adjustment cost. The empirical
studies of Lefatsa et al., (2021), Odhiambo, (2021), and Leitão & Balsalobre-
Lorente, (2020) also found a similar result. The results obtained by the
Granger methodology demonstrate a bidirectional relationship between
energy consumption variables and economic growth. Furthermore, there is
a bidirectional causality between energy consumption and international
trade. Lastly, there is a bidirectional association between economic growth
and international trade. The results presented are supported by recent
reports and energy balances prepared by the General Directorate of Energy
and Geology of the Portuguese Economy (DGEG). DGEG demonstrates
that primary energy consumption in the Portuguese economy is
fundamentally derived from oil and derivatives, natural gas, and biomass.
According to the reports, the past few years have seen a decline in coal.
These energy sources are highly harmful to public health and put
environmental health into question, particularly with greenhouse effects.
The same source demonstrates that Portugal’s energy dependence from
2010 onward is above 75%, a situation that remains until 2018. Furthermore,
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from 2005 to 2013, energy imports decreased; however, from 2013 to 2018,
there was a tendency for energy imports to increase. Several empirical
studies (Busu 2020; Hdom and Fuinhas 2020; Nuno Carlos Leitão 2021b;
Nuno Carlos Leitão and Balsalobre-Lorente 2020) demonstrate that
renewable energies contribute to economic growth and, consequently,
reduce the greenhouse effect. Additionally, as referred to in the literature,
it should be noted that the Kyoto Protocol (1997), Paris Agreement (2015),
and the Directive2009/28/EC contributed to the development and
implementation of renewable energies in the economy and society to
achieve sustainable development. Therefore, the Portuguese economy
should reduce its dependence on the external energy supply. In this context,
the Portuguese energy policy should continue implementing renewable
energies. Parallel to this issue, it will be necessary to create infrastructure
and public policies that cooperate closely with the private sector, as it
involves large public and private capital investments. In terms of clues for
future work, it is essential to mention that it would be interesting to
introduce other independent variables in the estimated model, such as
globalization, energy intensity, and human development index, to
understand how these variables allow for better energy demand. Following
the dominant hypothesis of international trade theories, the liberalization
and increased transactions in goods and services allow for better energy
demand. Still, carbon dioxide emissions and greenhouse effects tend to
increase. Another issue that seems interesting to us to investigate is the
transition to the digital economy and its relationship with decarbonization
– these two axes being associated with sustainable finance. Furthermore,
the pandemic (COVID-19) accelerated the digitalization process in the
world economy, and society became aware of the importance of
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decarbonization. In this context, the European economy has done some
work, but it is still a recent matter regarding the digital transition with the
introduction of the digital program. Regarding the economic policy
recommendations and policymakers, we can affirm that continuing less
polluting energy resources and cleaner practices and replacing these more
polluting resources and their transition to the digital economy will allow
sustainable economic development. However, as we have already
mentioned, it is still necessary for cooperation between public policies and
the business fabric with the objective of cleaner innovation in terms of
energy policy.
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CHAPTER 5
CONCLUSIONS
According to recent studies conducted by the Energy Agency in 2023
and Net Zero+ in 2023 (Energy Agency 2023; Net Zero+ 2023), the transition
to a low-carbon economy requires substantial reallocations across activities,
sectors, firms, workers, and technologies. As this transition unfolds, the
focus of climate policy has shifted towards comprehending and addressing
the costs involved. According to Chen et al. (2022); F. Wang et al. (2021) a
key goal of climate policy is to achieve cost reductions that render carbon-
free technologies competitive with high-carbon alternatives. By attaining
this objective, policymakers can effectively expedite the widespread
adoption of existing low-carbon technologies, which is crucial for making
significant strides in medium-term carbon emissions reductions.
In order to realize these objectives, innovation and industrial policies
(M. A. Brown and Baek 2010a; M. A. Brown and Baek 2010b; Xin Li and
Nam 2022) need to be at the forefront of strategies aimed at reaching carbon
neutrality. These policies should concentrate on both the development and
deployment of low-carbon technologies. The rationale behind these policies
lies in the recognition of the numerous barriers and market failures that
discourage low-carbon innovation. Some authors (Chen et al., 2022; Z. W.
Su et al., 2021; F. Wang et al., 2021) argue that by actively addressing these
obstacles, innovation and industrial policies provide a solid theoretical
foundation for their implementation. Moreover, innovation and industrial
policies have the advantage of complementing and, in some cases,
substituting carbon pricing mechanisms. While carbon prices are
considered an effective tool in addressing climate change, their
implementation can often be politically challenging. Therefore, innovation

100
and industrial policies can step in to fill the gaps and ensure progress is
made even in the absence of comprehensive carbon pricing.
By reducing technology costs and fostering the growth of new
carbon-efficient firms and sectors, innovation and industrial policies play a
crucial role in facilitating the adoption of more ambitious climate policies
(Akram et al. 2022; Jin and Kim 2019; Kumar et al. 2021; Murshed et al. 2022).
Additionally, these policies promote international technology diffusion,
which is particularly important for emerging economies that are projected
to contribute significantly to future emission growth. By sharing knowledge
and technology, innovation and industrial policies can help these
economies adopt sustainable practices and contribute to global emission
reduction efforts.
In summary, innovation and industrial policies focused on low-
carbon technology development and deployment are essential components
of climate strategies. These policies aim to reduce transition costs, overcome
barriers to innovation, and drive the widespread adoption of low-carbon
technologies (Balsalobre-Lorente, Leitão, and Bekun 2021; Guo et al. 2022;
Lin and Li 2022) . By doing so, they not only contribute to carbon emissions
reduction but also pave the way for the implementation of more ambitious
climate policies. Moreover, they enable the international diffusion of
sustainable technologies, playing a crucial role in curbing emissions in
emerging economies. Overall, innovation and industrial policies are vital in
the journey towards carbon neutrality and achieving substantial medium-
term reductions in greenhouse gas emissions.
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5.1. Objectives
1. To understand the relationship between per capita CO2 emissions,
renewable energy, economic complexity index, and foreign direct
investment (FDI) in BRICS nations.
The first article examines the relationship between per capita CO 2
emissions, renewable energy, economic complexity index, and foreign
direct investment (FDI) in BRICS nations. The study reveals that economic
complexity initially has a positive impact on CO2 emissions, but beyond a
certain point, it contributes to reducing polluting emissions. Renewable
energy is found to have a negative association with CO 2 emissions,
highlighting its potential in reducing environmental pollution. On the other
hand, FDI is found to increase CO2 emissions, supporting the Pollution
Haven Hypothesis. The study emphasizes the need for promoting cleaner
energy and further research on additional variables to better understand
pollution levels and the environmental impact of Industry 4.0 technologies.
2. To analyze the Kuznets environmental equation and the
determinants of economic growth in Visegrad member countries.
The second article focuses on the Visegrad member countries and
analyzes the Kuznets environmental equation and the determinants of
economic growth. The study confirms the hypothesis of the Kuznets
environmental curve, suggesting that economic growth leads to more
sustainable measures in the long run. Non-renewable energy consumption
and FDI are identified as factors that stimulate polluting emissions, while
energy consumption and renewable energy are found to promote economic
growth. The study recommends the introduction of sustainability practices,
102
development of renewable energies, and exploration of additional variables
for future research in the Visegrad countries.
3. To examine the relationship between energy consumption,
economic growth, international trade, and carbon dioxide emissions in
Portugal.
The third article examines the relationship between energy
consumption, economic growth, international trade, and carbon dioxide
emissions in Portugal. The study finds that high levels of nonrenewable
energy consumption contribute to increased carbon emissions, while
economic growth and international trade also contribute to higher energy
consumption. The results suggest a bidirectional association between
energy consumption and economic growth, as well as between energy
consumption and international trade. The study emphasizes the importance
of renewable energies for reducing greenhouse gas emissions and suggests
the need for further investigation into additional variables and the impact
of the transition to the digital economy. Policymakers are encouraged to
prioritize the adoption of cleaner energy resources and promote the
transition to a sustainable and digital economy.
Overall, these articles highlight the importance of sustainable energy
practices, the role of renewable energies in economic growth, and the need
for policy interventions to achieve environmental sustainability. They call
for further research to explore additional variables and deepen the
understanding of the environmental impact of emerging technologies,
while emphasizing the collaboration between public policies and the
private sector in driving innovation for cleaner energy solutions.
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In conclusion, the three articles discussed highlight the complex
relationship between economic development, energy consumption, carbon
emissions, and environmental sustainability. Each study provides valuable
insights and policy recommendations for addressing the challenges of
reducing pollution and achieving sustainable economic growth.
5.2. Results
In the first study focused on BRICS nations, researchers investigated
the relationship between per capita CO2 emissions, renewable energy,
economic complexity index, and foreign direct investment (FDI). The
findings revealed that economic complexity initially had a positive impact
on CO2 emissions, indicating that as countries develop economically, their
carbon emissions tend to increase. However, beyond a certain point,
economic complexity started contributing to a reduction in polluting
emissions, suggesting that more complex economies adopt greener
practices and technologies. The study also found a negative association
between renewable energy and CO2 emissions, highlighting the potential of
renewable sources in mitigating environmental pollution. On the other
hand, FDI was found to increase CO2 emissions, supporting the Pollution
Haven Hypothesis, which suggests that foreign investments may lead to
higher pollution levels due to less stringent environmental regulations. To
address these issues, the study recommended promoting cleaner energy
sources and conducting further research to better understand pollution
levels and the environmental impact of emerging Industry 4.0 technologies.
In the second study focused on the Visegrad member countries
(Czech Republic, Hungary, Poland, and Slovakia), researchers analyzed the
relationship between the Kuznets environmental equation and the
determinants of economic growth. The study confirmed the hypothesis of

104
the Kuznets environmental curve, which posits that economic growth leads
to more sustainable practices in the long run. Non-renewable energy
consumption and FDI were identified as factors that stimulate polluting
emissions, indicating that countries heavily reliant on non-renewable
energy sources and with significant foreign investments may experience
higher pollution levels. Conversely, the study found that energy
consumption and renewable energy were associated with economic
growth, suggesting that promoting sustainable energy practices can
contribute to economic development. The study recommended the
adoption of sustainability practices, the development of renewable
energies, and further exploration of additional variables to enhance
understanding of the determinants of economic growth in the Visegrad
countries.
The third study focused on Portugal and examined the relationship
between energy consumption, economic growth, international trade, and
carbon dioxide emissions. The findings indicated that high levels of non-
renewable energy consumption were linked to increased carbon emissions,
emphasizing the need to transition to cleaner energy sources. Economic
growth and international trade were also found to contribute to higher
energy consumption, suggesting that as countries develop economically
and engage in international trade, their energy demands increase. The
study revealed a bidirectional association between energy consumption
and economic growth, as well as between energy consumption and
international trade, highlighting the interdependency of these factors. The
study stressed the importance of renewable energies in reducing
greenhouse gas emissions and called for further investigation into
additional variables and the impact of the transition to the digital economy.
105
Policymakers were encouraged to prioritize the adoption of cleaner energy
resources and promote the transition to a sustainable and digital economy.
Collectively, these studies underscore the importance of adopting
sustainable energy practices and promoting renewable energies to achieve
environmental sustainability. They highlight the positive relationship
between renewable energy and economic growth while identifying the
negative impact of non-renewable energy consumption and FDI on
pollution levels. The studies emphasize the need for policy interventions
and further research to explore additional variables and deepen the
understanding of the environmental impact of emerging technologies.
Additionally, they stress the importance of collaboration between public
policies and the private sector in driving innovation for cleaner energy
solutions, ultimately contributing to a more sustainable future.
5.2.1. BRICS
Similarities: The study found a positive association between
economic complexity and CO2 emissions initially, suggesting that economic
development contributes to increased carbon emissions. Both renewable
energy and FDI were identified as influential factors.
Differences: The study revealed a turning point where economic
complexity started contributing to a reduction in polluting emissions,
indicating the adoption of greener practices. This specific finding sets it
apart from the other studies.
5.2.2. Visegrad Countries

Similarities: The study confirmed the Kuznets environmental curve
hypothesis, indicating that economic growth leads to more sustainable
practices in the long run. It also identified non-renewable energy
consumption and FDI as factors stimulating polluting emissions.

106
Differences: The focus on the Kuznets environmental curve and the
examination of the Visegrad countries distinguish this study. It highlights
the associations between energy consumption, renewable energy, and
economic growth specific to these countries.
5.2.3. Portugal
Similarities: The study emphasized the negative impact of high non-
renewable energy consumption on carbon emissions. It also identified
economic growth and international trade as contributors to increased
energy consumption.
Differences: The bidirectional association between energy
consumption and economic growth, as well as energy consumption and
international trade, differentiates this study. Additionally, it emphasizes
the importance of the transition to the digital economy.
In terms of policy implications and recommendations, all three
studies emphasize the importance of adopting sustainable energy practices,
promoting renewable energies, and conducting further research to deepen
the understanding oIf the environmental impact of emerging technologies.
They highlight the need for policy interventions and collaboration between
public policies and the private sector to drive innovation for cleaner energy
solutions.
Overall, while there are similarities in terms of the negative impact
of non-renewable energy consumption and the positive association
between renewable energy and economic growth, each study contributes
unique insights based on their specific contexts and research objectives. By
comparing and contrasting these results, a more comprehensive
understanding of the relationship between environmental factors and
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economic development can be obtained, facilitating informed decision-
making and policy formulation for maintainable development.
5.4. Future Studies
Future studies in the field of environmental sustainability and
economic development can build upon the findings of the previous studies
and explore additional dimensions to enhance our understanding of the
topic. Here are some potential areas for future research:
Long-term effects of sustainable practices: Investigate the long-term
effects of adopting sustainable energy practices on economic development.
Analyze the economic benefits and potential challenges associated with
transitioning to renewable energy sources and implementing green
technologies (Ağbulut et al. 2023; Mahmood Ahmad et al. 2023; Kofi Opoku
et al. 2023). This can include assessing the impact on job creation, industry
competitiveness, and overall economic resilience.
Technology advancements and environmental impact: Examine the
environmental impact of emerging technologies, such as artificial
intelligence, blockchain, and Internet of Things, within the context of
economic development (W. Chen et al. 2023; Dou and Gao 2023; J. Li et al.
2023; Maaouane et al. 2021). Assess how these technologies can be
harnessed to promote sustainable practices and reduce carbon emissions in
various sectors, such as transportation, manufacturing, and agriculture as
circular economy and resource efficiency: Explore the potential of circular
economy principles and resource efficiency strategies in minimizing waste
generation, optimizing resource use, and reducing environmental impacts
(Ağbulut et al. 2023; Appolloni, Centi, and Yang 2023; Nayal et al. 2023; Wu
and Tham 2023). Investigate the economic implications of transitioning to a
108
circular economy model and identify effective policy frameworks and
business models to promote its adoption.
Socioeconomic factors and environmental sustainability: Investigate
the role of socioeconomic factors, such as income inequality, education, and
social welfare, in shaping environmental sustainability outcomes. Analyze
how these factors interact with environmental policies and practices and
their impact on both economic development and environmental well-being
(Liao, Du, and Chen 2023; Millennium Ecosystem Assessment (Program)
2005).
Comparative analysis of regional approaches: Conduct comparative
studies across different regions or countries to understand how varying
policy frameworks, cultural factors, and institutional arrangements
influence the relationship between environmental sustainability and
economic development(Dong, Hochman, and Timilsina 2020a; Dong,
Hochman, and Timilsina 2020b; Guang-Wen et al. 2022; Mariotti and
Marzano 2021; Qin et al. 2021). Compare the effectiveness of different
approaches and identify best practices that can be adopted in different
contexts.
The role of finance and investment: Examine the role of financial
mechanisms, such as green bonds, impact investing, and sustainable
financing, in supporting the transition to sustainable energy and promoting
environmentally friendly projects (Lee and Lee 2022; Madaleno, Dogan, and
Taskin 2022; Temmes et al. 2021). Analyze the impact of sustainable finance
on economic growth, job creation, and environmental outcomes.
Policy evaluation and effectiveness: Evaluate the effectiveness of
existing environmental policies and regulatory frameworks in achieving
109
sustainable development goals. Identify the barriers and opportunities for
policy implementation and assess the economic and environmental
outcomes of specific policy interventions (Ağbulut et al. 2023; Kongbuamai,
Bui, and Nimsai 2021; Xin Li and Nam 2022; Zhuo Wang et al. 2022).
By focusing on these areas of research, future studies can contribute
to the development of more comprehensive and targeted strategies for
achieving environmental sustainability alongside economic development.
Such research can provide valuable insights for policymakers, businesses,
and communities to make informed decisions and promote a greener and
more resilient future.
Additionally, the impact of additional variables such as trade, the
human development index (Hossain and Chen 2021), the quality of
democracy (Povitkina and Jagers 2022), or the level of financial
development (Atsu, Adams, and Adjei 2021; Guang-Wen et al. 2022;
Shahbaz, Nasir, and Roubaud 2018b; Usman, Balsalobre-Lorente, et al.
2022)on pollution levels worldwide. Understanding the influence of these
factors can provide insights into the complex relationship between
economic development, environmental sustainability, and various socio-
political dimensions.
The application of intra-industry trade indicators (static)1 to
determine whether the pollution levels in BRICS nations are driven by
monopolistic competition structures associated with innovation factors or
explained by the theory of comparative advantages. This analysis can shed
1
Static Intra-Industry Trade Indicators: Grubel-Lloyd Index; Balassa Index and Vollrath
Index.
110
light on the underlying mechanisms that shape pollution patterns in these
countries.
Further exploration of the environmental impact of emerging
technologies associated with Industry 4.0 and more recently Industry 5.0
(Barata and Kayser 2023; Ghobakhloo et al. 2023; Madhavan et al. 2022). It
is crucial to understand how these technologies, such as artificial
intelligence, automation, and data-driven systems, contribute to or mitigate
environmental challenges. Access to comprehensive and up-to-date
databases from international organizations would facilitate comparisons of
countries' efforts to achieve emissions neutrality in adopting these
technologies.
By delving into these research directions, scholars can gain a deeper
understanding of the complexities involved in addressing environmental
challenges on a global scale. This knowledge can inform policy decisions,
guide sustainable development strategies, and contribute to the creation of
a more environmentally conscious and resilient future.
Introduce sustainability practices and promote the use and
development of renewable energies to reduce greenhouse gas emissions
and achieve sustainable economic growth.
Associate international investment inflows with innovation and
product differentiation practices that utilize cleaner energies to preserve
and improve the environment.
Assess the impact of tourism and globalization on the environment
and green logistics and extend econometric models to test their effects on
economic growth in terms of climate change and green logistics in Visegrad
countries.
111
5.4.1. Limitations
The studies mentioned do not explicitly address the potential trade-
offs or challenges associated with transitioning to renewable energies or
implementing sustainability practices. Future research should consider the
economic costs and feasibility of these measures.
The impact of specific policy interventions or regulatory frameworks
on achieving sustainable development goals is not fully explored. Future
studies should evaluate the effectiveness of existing policies and identify
barriers and opportunities for implementation.
5.4.2. Future Directions
Assess the impact of trade intensity on environmental issues in
Visegrad countries and its association with economic growth. Evaluate the
effect of using clean energy in production through the endowments factor
(capital and labor) and its influence on carbon dioxide emissions and
economic growth. Investigate the role of the globalization index (Dreher,
2006a; Mao & An, 2021) and structural adjustment issues in the
environmental Kuznets curve and economic growth in Visegrad countries.
Analyze the interaction between energy intensity (Sarwar, 2022; Wurlod &
Noailly, 2018; Yu et al., 2022), political policies (Deseatnicov & Akiba, 2013;
L. M. Marques et al., 2017; Z. W. Su et al., 2021), and the smooth adjustment
or asymmetric shocks they create.
Introduce new variables such as public and private capital stock
(Janda et al., 2022; Jorgenson et al., 2022) and public policies (Aleluia et al.,
2022; Barradale, 2010) on energy intensity to better understand their impact
on economic growth and climate change in Visegrad countries. Consider
the effects of economic freedom and its interaction with globalization on
112
economic growth and climate change. These future directions aim to
address the gaps and expand the understanding of the complex relationship
between economic development, environmental sustainability, and various
factors in Visegrad countries. By exploring these areas, policymakers can
make informed decisions and implement effective strategies to promote
sustainable economic growth while addressing climate change and
environmental challenges.
Introducing additional independent variables such as globalization
(Dreher, 2006b; Gygli et al., 2019; M. K. Khan et al., 2019; Pata & Yurtkuran,
2023), energy intensity (Sarwar, 2022; Wurlod & Noailly, 2018; Yu et al.,
2022), and the human development index (Assa, 2021; Hossain & Chen,
2021; Zheng & Wang, 2022) into the model can provide a deeper
understanding of how these factors influence energy demand and carbon
dioxide emissions. Exploring the relationship between international trade,
energy demand, and environmental impacts can shed light on the complex
dynamics of globalization and sustainability.
Investigating the transition to the digital economy (X. Li et al., 2021)
and its connection to decarbonization is another important area of
exploration. With the acceleration of digitalization due to the COVID-19
pandemic, understanding the interplay between digital transformation,
sustainable finance, and environmental outcomes becomes crucial.
Examining the impact of digital technologies and the adoption of
sustainable practices in various sectors can inform policies and strategies
for achieving decarbonization goals.
Considering the European economy's recent focus on the digital
transition, examining the implications of the Digital Program and its
113
relationship with decarbonization can provide valuable insights. Assessing
the progress made and identifying potential challenges and opportunities
in this context can contribute to the development of effective policies and
strategies for sustainable economic growth.
In terms of economic policy recommendations, it is crucial to
prioritize the use of less polluting energy resources and cleaner practices
while phasing out more polluting sources. The transition to a digital
economy can facilitate sustainable development, but it requires
collaboration between public policies and the business sector to drive
innovation and ensure the adoption of cleaner energy solutions.
Overall, future research should aim to deepen our understanding of
the interactions between globalization, digitalization, energy policies, and
sustainability. By exploring these areas, policymakers can make informed
decisions and implement effective strategies to promote cleaner and more
sustainable economic development.
114
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CASTILLA LA MANCHA UNIVERSITY - CUENCA

DEPARTAMENT OF ECONOMICS AND MANAGEMENT

Interplay of Energy, Economy, and Environment: Insights from

Brics, Visegrad, and Portugal.

Maria Clara Contente dos Santos Parente

Profesor Doctor D. José Maria Cantos

Profesor Doctor D. Daniel Balsalobre Lorente

Profesor Doctor D. Nuno Carlos Leitão

3.1. Introduction ......................................................................................... 44

Table 1a Variables Description………………………………………….. 30

Table 1b Variables used to represent Industry 4.0 in BRICS countries… 30

Table 2 Descriptive statistics. ............................................................................ 34

Table 3 Correlation matrix................................................................................. 35

Table 4 Unit root tests. ....................................................................................... 36

Table 5 Cross-section dependence: Pesaran (CD test)................................... 37

Table 7 VIF test on multicollinearity. ............................................................... 37

Table 10 Impact of Industry 4.0 on CO2 emissions (lcopc) in BRICS

Table 11 Descriptive Statistics model 1 ........................................................... 60

Table 12 Correlations between variables model 1 ......................................... 60

Table 13 Descriptive Statitics model 2 ............................................................. 60

Table 14 Correlations between variables model 2 ......................................... 61

Table 15 Panel unit root test .............................................................................. 61

Table 16 VIF test for model 1 ............................................................................ 61

Table 17 VIF test for model 2 ............................................................................ 62

Table 18 Diagnostic tests model 1 .................................................................... 62

Table 19 Diagnostic tests model 2 .................................................................... 62

Table 20 Hausman test model 1 ........................................................................ 62

Table 21 Hausman test model 2 ........................................................................ 63

Table 22 Model 1: dependent variable LogCO2 with PMG-ARDL model . 63

Table 23 Model 1: dependent variable LogCO2 with PMG-ARDL in short

run Czech Republic ............................................................................................ 65

Table 24 Model 1: dependent variable LogCO2 with PMG-ARDL in short

run Hungary ........................................................................................................ 66

Table 25 Model 1: dependent variable LogCO2 with PMG-ARDL in short

run Poland ........................................................................................................... 66

Table 26 Model 1: dependent variable LogCO2 with PMG-ARDL in short

run Slovakia ......................................................................................................... 66

Table 27 Model 2: dependent variable LogGDP with PMG-ARDL model 67

Table 28 Model 2: Depedent Variable LogGDP with FMOLS ..................... 69

Table 29 Descriptive Statistics ........................................................................... 89

Table 30 Correlations between the Variables Used in This Research ......... 89

Table 31 Unit Root Test: ADF Criteria ............................................................. 91

Table 32 Lag Length Criteria Emissions on Portuguese Energy Use with

Cointegration Regression .................................................................................. 91

Table 33 The Impact of Economic Growth, Iinternational Tade, Ccarbon

Dioxide Emissions on Portuguese Eenergy Use with Cointegration

Table 34 The Impact of Economic Growth, International Trade, and Carbon

Dioxide Emissions on Portuguese Energy Use with ARDL Model ............ 92

Table 35 The Impact of Economic Growth, International Trade, Carbon

Table 36 The Diagnostic ARDL: The Durbin-Watson ................................... 94

Table 37 The Diagnostic ARDL: Autocorrelation Test .................................. 94

Table 38 The Diagnostic ARDL: Homoskedasticity Versus

Table 39 Granger Causality Wald Test ........................................................... 95

Figure 1 - Climate Change Factors (Own Production) .................................. 16

Figure 2 Linear Trend on Per capita Carbon emissions in BRICS ............... 26

Figure 3 CO2 & Industry 4.0 in BRICS ............................................................. 31

Figure 4 U-inverted economic Complexity-EKC. .......................................... 33

Figure 5 Graph absract. ...................................................................................... 40

Figure 6 Model 1 ................................................................................................ 64

Figure 7 Model 2 ................................................................................................. 70

reaching irreversible tipping points show the potential for catastrophic

changes if policy efforts are unsuccessful. Emphasizing the need to swiftly

accelerate actions to peak and significantly reduce global emissions, aiming

for net-zero emissions, starting at once.