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THE EFFECTS OF CARBON DIOXIDE EMISSIONS
ON ECONOMIC GROWTH, URBANIZATION, AND
WELFARE: APPLICATION TO COUNTRIES IN THE
MIDDLE EAST AND NORTH AFRICA
Introduction
S ince the 1970s, economic and environmental issues increasingly seem in-
separable making it difficult today to talk about the environment without in-
corporating the economy and vice versa. Indeed, the importance of addressing
Figure 1A
CARBON DIOXIDE EMISSION LEVELS FOR ALGERIA, 1990–2010
(in kilotons-kt)
Source: World Bank, World Bank Indicators (Washington, D.C.: World Bank, 2016).
Figure 1B
CARBON DIOXIDE EMISSION LEVELS FOR BAHRAIN, 1990–2010
(in kilotons-kt)
Source: World Bank, World Bank Indicators (Washington, D.C.: World Bank, 2016).
226 THE JOURNAL OF ENERGY AND DEVELOPMENT
Figure 1C
CARBON DIOXIDE EMISSION LEVELS FOR EGYPT, 1990–2010
(in kilotons-kt)
Source: World Bank, World Bank Indicators (Washington, D.C.: World Bank, 2016).
Figure 1D
CARBON DIOXIDE EMISSION LEVELS FOR JORDAN, 1990–2010
(in kilotons-kt)
Source: World Bank, World Bank Indicators (Washington, D.C.: World Bank, 2016).
EFFECTS OF EMISSIONS IN MENA COUNTRIES 227
Figure 1E
CARBON DIOXIDE EMISSION LEVELS FOR THE KINGDOM OF SAUDI ARABIA, 1990–2010
(in kilotons-kt)
Source: World Bank, World Bank Indicators (Washington, D.C.: World Bank, 2016.)
Figure 1F
CARBON DIOXIDE EMISSION LEVELS FOR MOROCCO, 1990–2010
(in kilotons-kt)
Source: World Bank, World Bank Indicators (Washington, D.C.: World Bank, 2016).
228 THE JOURNAL OF ENERGY AND DEVELOPMENT
Figure 1G
CARBON DIOXIDE EMISSION LEVELS FOR QATAR, 1990–2010
(in kilotons-kt)
Source: World Bank, World Bank Indicators (Washington, D.C.: World Bank, 2016).
Figure 1H
CARBON DIOXIDE EMISSION LEVELS FOR TUNISIA, 1990–2010
(in kilotons-kt)
Source: World Bank, World Bank Indicators (Washington, D.C.: World Bank, 2016).
EFFECTS OF EMISSIONS IN MENA COUNTRIES 229
Figure 1I
CARBON DIOXIDE EMISSION LEVELS FOR THE UNITED ARAB EMIRATES, 1990–2010
(in kilotons-kt)
Source: World Bank, World Bank Indicators (Washington, D.C.: World Bank, 2016).
Figure 1J
CARBON DIOXIDE EMISSION LEVELS FOR YEMEN, 1990–2010
(in kilotons-kt)
Source: World Bank, World Bank Indicators (Washington, D.C.: World Bank, 2016).
230 THE JOURNAL OF ENERGY AND DEVELOPMENT
This paper is divided as follows: we begin with a review of the literature on the
effects of CO2 emissions on growth and welfare and then present our methodo-
logical approach. The subsequent sections will present the econometric estimation
approach and an analysis of the results. The last and final section provides our
conclusions.
Literature Review
Literature Review of the CO2 Effect on Growth: The review of the literature
can be divided into four research categories: (1) testing for the existence of the
environmental Kuznets curve; (2) testing the causal relationship between energy
consumption and economic growth; (3) establishing a dynamic relationship among
carbon emissions, energy consumption, and economic growth; and (4) focusing on
the dynamic relationship among carbon emissions, energy consumption, economic
growth, trade liberalization, and urbanization.
Regarding the first category, which addresses the Kuznets curve, we can refer
to the seminal work of G. Grossman and A. Krueger,4 who concluded that there
was an absence of evidence showing the existence of a causality relation between
gradual environmental degradation and country growth. A contrary conclusion
was offered by N. Shafik, whose results implied that CO2 emissions were in-
creasing in parallel with economic growth.5
D. Stern et al.’s research showed that CO2 emissions began to decrease
when the economy reached a well-defined income threshold.6 The results of
E. Akbostanci et al. do not comply with the principles of the environmental
Kuznets curve hypothesis, which asserts that environmental degradation tends
to get worse as modern economic growth occurs until an average threshold
income is reached.7 I. Martinez-Zarzo and A. Bengochea-Morancho showed
that CO2 emissions and income level are negatively related in low-income
countries, but they are positively related in high-income countries.8 We find
that the results of the research on the environmental Kuznets curve are di-
vergent and often contradictory. Moreover, in the majority of cases, researchers
have failed to confirm the existence of a typical Kuznets curve, which should be
an inverted U-shape.
Regarding the second research category, there have been numerous stud-
ies analyzing the causality between growth and energy consumption. Indeed,
according to the works of A. Akarca and T. Long, E. Yu and B. Hwang, E. Yu and
J. Choi, U. Erol and E. Yu, D. Stern, and B. Cheng, no causal relationship was
found between energy consumption and GDP.9 Nevertheless, the works of J. Asafu
Adjaye, H. Yang, U. Soytas and R. Sari, R. Morimoto and C. Hope, G. Altinay and
E. Karagol, and P. Narayan and R. Smyth supported the existence of a causal
relationship between the two variables—energy consumption and growth.10 Other
research has found a unidirectional causal relationship as shown by Y. Glasure and
EFFECTS OF EMISSIONS IN MENA COUNTRIES 231
A. Lee, B. Cheng, J. Chang and J. Wong, U. Soytas and R. Sari, and P. Narayan
and R. Smyth.11 Still other academics, including A. Masih and R. Masih, J. Asafu
Adjaye, Y. Glasure, and W. Oh and K. Lee, found energy consumption and growth
to have a bidirectional relationship.12
With regard to the research on the relationship between carbon emissions,
energy consumption, and economic growth, we can refer to the work of U. Soytas
et al., which demonstrates the absence of a causal relationship between growth and
carbon emissions, on the one hand, and income and energy consumption, on the
other.13 Contrary to this, a causal relationship among these variables was suggested
in the research of E. Neumayer and M. Cole, M. Shahbaz et al., F. Halicioglu, and
G. Akpan and U. Akpan.14 The publications of U. Soytas et al., H. E. Chebbi and
Y. Boujelbene, J. Ang, U. Soytas and R. Sari, and X. Zhang and X. Cheng provided
varied results.15
Concerning the final category of our literature review, which focuses on
the dynamic relationship between carbon emissions, energy consumption, and
economic growth, we can refer to the study of S. Hossain who has shown
the absence of a long-term causality relation between these variables.16
However, in the short term, the author confirms the existence of a set of uni-
directional causality relations among economic growth, trade openness, and CO2
emissions.
life expectancy in the long run but, in the short run, it has a negative and significant
relationship with life expectancy.23
A. Assadzadeh et al. examined the impact of CO2 emissions on life expectancy
in eight oil-exporting countries from 2000 to 2010. The short-run elasticities
revealed that per-capita GDP and CO2 emissions have negative and insignificant
effects on life expectancy.24
M. Mehrara and M. R. Masoumi have studied the relationship between life
expectancy, CO2 emissions, and GDP growth rate for 108 developing countries for
the time span of 1995–2012.25 They concluded that the environmental Kuznets
curve hypothesis has not been confirmed in developing countries and, if they in-
clude CO2 emissions as an endogenous variable in their model, their effect on health
will increase, and, if the GDP increases, it will result in longer life expectancies.
In summation, the deterioration of the environment is a negative externality for
economic growth and decreases the benefits of health improvements. Moreover,
a labor force with poor health conditions does not increase productivity; therefore,
economic growth will decline.
where a0 = A0; the index (i) and (t) represent the country and time period, re-
spectively; and a1, a2, a3, and a4 represent the long-term elasticities.
Table 1 provides the overall descriptive statistics of all variables included in the
model for the ten MENA countries in our study.
Estimation Method
In this section we will present the results of our estimation of equation (1) using
different methods such as the fully modified ordinary least squares (FMOLS) and
234 THE JOURNAL OF ENERGY AND DEVELOPMENT
Table 1
a
INDIVIDUAL AND GROUP PANEL DESCRIPTIVE STATISTICS
(continued )
EFFECTS OF EMISSIONS IN MENA COUNTRIES 235
Table 1 (continued)
a
INDIVIDUAL AND GROUP PANEL DESCRIPTIVE STATISTICS
a
CO2 = carbon dioxide emissions measured by per-capita metric tons; LEXP = life expectancy at
birth; GDPC = the gross domestic product per capita measured in U.S. dollars; EC = energy
consumption measured in kilograms of oil equivalent per capita; URB = the percentage of urban
population relative to the overall population; and Std. Dev. = standard deviation.
Unit Root Testing: There are a variety of unit root tests used in panel data
modeling. As an example, we can refer to the works of J. Breitung, K. Hadri,
I. Choi, A. Levin et al. (this panel root test is often referred to as the LLC method
representing all its authors), K. Im et al. (the panel root test is often referred to as
the IPS test representing all of its authors), and J. Carrion-i-Silvestre et al.29 Next,
we consider the following autoregressive specification:
yit = ri yit – 1 + di xit + eit ð3Þ
with i = 1, ..., N for each country in the model panel; t = 1, ..., T denotes the time
period; xit represents the exogenous variables in the model; ri represents the
autoregression coefficients; and eit represents the stationary error terms. If ri > 1,
yit is considered as having a stationary trend, whereas if ri = 1, then yit will have
a unit root. J. Breitung and A. Levin et al. assume a homogeneous autoregressive
unit root under the alternative hypothesis, while K. Im et al. assume the existence
of a heterogeneous autoregressive unit root under the alternative hypothesis.30
According to G. Maddala and S. Wu and I. Choi, the unit root tests can be de-
termined using the nonparametric Fisher statistics.31 K. Hadri and J. Carrion-i-
Silvestre et al. assume that panel unit root tests examine the null hypothesis of
stationarity of the panel data.32
In the case of dynamic models of panel data, the recognition of the hetero-
geneity of parameters is important in order to avoid potential biases that may
236 THE JOURNAL OF ENERGY AND DEVELOPMENT
arise due to poor specification of the model. K. Im et al. assume that the unit root
test in dynamic models of panel data is used for heterogeneous autoregressive
coefficients.33 Such heterogeneity may occur due to the heterogeneity of dif-
ferent economic conditions and stages of economic development of each
country.
Thus, K. Im et al. suggest the average of the augmented Dickey-Fuller (ADF) test,
allowing serial correlations of error terms to the different orders, represented as:
Xpi
eit = j=1
rij eit – j + uit ;
where ri is the number of lags in the ADF regression. The null hypothesis is that
each series in the panel data contains a unit root (H0: ri = 1 "i). The alternative
hypothesis is that at least one of each of the series in the panel data is stationary
(H0 : ri < 1 "i). The statistical T-bar specified by K. Im et al. is the average of
individual statistics ADF as shown in the following:34
XN
tNTðri Þ = 1/ N t ðr Þ
i = 1 iT i
The alternative statistic “t-bar” allows for the testing of the null hypothesis of
the existence of unit root for all individuals, with tiT (ri) representing the estimated
ADF, N the number of individuals, and T as the number of observations. K. Im
et al. propose the use of the following standardized statistic:35
where E(tNT) represents the arithmetic mean and var (tNT) denotes the variances of
the ADF individual statistics.
Table 2 displays the results of the various unit root tests we performed under
four cases utilizing six different tests: LLC (referring to the work of Levin, Lin,
Chu),36 Breiting,37 IPS (referring to the work of K. Im, M. Pesaran, and Y. Shin),38
ADF-Fisher, PP-Fisher, and Hadri39 on the static relationships of LNCO2, LNEC,
LNGDPC, LNURB, and LNLEXP. The results show that the majority of the unit
root tests are lower than the critical value at the 1-percent level; thus, the null
hypothesis is accepted.
EFFECTS OF EMISSIONS IN MENA COUNTRIES 237
Table 2
a
PANL UNIT ROOT TEST RESULTS
Augmented Fisher-
Levin, Lin, Im, Pesaran, Dickey-Fuller Phillips-
and Chu (LLC) Breiting and Shin (IPS) (ADF)-Fisher Perron Test Hadri
Test [Prob.] Test [Prob.] Test [Prob.] Test [Prob.] [Prob.] Test [Prob.]
Table 2 shows the statistics of the panel unit root tests. The values in brackets correspond to the
p values. LN = natural logs; CO2 = carbon dioxide emissions measured by per-capita metric tons;
LEXP = life expectancy at birth; GDPC = the gross domestic product per capita measured in U.S.
dollars; EC = energy consumption measured in kilograms of oil equivalent per capita; URB = the
percentage of urban population relative to the overall population; and Prob. = probabilities.
Case 1: Model with constant terms (level form)
LNCO2
-2.1685 -2.0801 -1.9001 33.5720 32.6261 5.4851
[0.0151]** [0.0188]** [0.0287]** [0.0292]** [0.0371]** [0.0000]***
LNEC
0.7055 1.3904 3.3516 6.3828 6.2921 8.2477
[0.7598] [0.9178] [0.9996] [0.9983] [0.9984] [0.0000]***
LNGDP
2.4667 0.4421 5.1147 2.8488 1.7619 8.4485
[0.9932] [0.6708] [1.0000] [1.0000] [1.0000] [0.0000]***
LNURB
-3.7341 0.0324 -2.0126 87.9771 197.0970 9.9938
[0.0001]*** [0.5129] [0.0221]** [0.0000]*** [0.0000]*** [0.0000]***
LNLEXP
-10.7103 4.5749 -3.2057 191.1610 611.4120 9.9264
[0.0000]*** [1.0000]*** [0.0007]*** [0.0000]*** [0.0000]*** [0.0000]***
Augmented Fisher-
Levin, Lin, and Im, Pesaran, Dickey-Fuller Phillips-
Chu (LLC) Test Breiting and Shin (IPS) (ADF)-Fisher Perron Test Hadri
[Prob.] Test [Prob.] Test [Prob.] Test [Prob.] [Prob.] Test [Prob.]
Case 2: Model with individual effects, individual linear trends
LNCO2
-2.3111 - -2.8525 38.8876 45.1752 3.9255
[0.0104]** - [0.0022]** [0.0069]** [0.0010]** [0.0000]***
LNEC
-0.9428 - 0.1784 20.2201 19.9228 6.4584
[0.1729] - [0.5708] [0.4442] [0.4628] [0.0000]***
LNGDP
-2.8928 - -2.7807 39.7857 16.7556 6.2915
[0.0019]** - [0.0027]** [0.0053]** [0.6688] [0.0000]***
LNURB
3.0951 - -4.5838 66.1302 327.9840 6.8418
[0.9990] - [0.0000]*** [0.0000]*** [0.0000]*** [0.0000]***
LNLEXP
1.6734 - -0.2699 59.3903 326.7760 6.9048
[0.9529] - [0.3936] [0.0000]*** [0.0000]*** [0.0000]***
(continued )
238 THE JOURNAL OF ENERGY AND DEVELOPMENT
Table 2 (continued)
a
PANL UNIT ROOT TEST RESULTS
Augmented Fisher-
Levin, Lin, and Im, Pesaran, Dickey-Fuller Phillips-
Chu (LLC) Test Breiting and Shin(IPS) (ADF)-Fisher Perron Test Hadri
[Prob.] Test [Prob.] Test [Prob.] Test [Prob.] [Prob.] Test [Prob.]
Case 3: Model with only constant term (first difference)
LNCO2
-13.8323 -6.4288 -14.8899 188.3490 433.1680 2.5287
[0.0000]*** [0.0000]*** [0.0000]*** [0.0000]*** [0.0000]*** [0.0057]**
LNEC
-12.3592 -3.4999 -11.2735 140.5540 149.0630 2.8348
[0.0000]*** [0.0002]*** [0.0000]*** [0.0000]*** [0.0000]*** [0.0023]**
LNGDP
-10.6037 -4.3815 -9.3092 111.1760 109.9110 2.6352
[0.0000]*** [0.0000]*** [0.0000]*** [0.0000]*** [0.0000]*** [0.0042]**
LNURB
-0.0252 3.1210 -4.4076 62.7401 145.8320 5.7800
[0.4900] [0.9991] [0.0000]*** [0.0000]*** [0.0000]*** [0.0000]***
LNLEXP
-9.2050 0.6484 -6.8267 173.4750 268.6810 5.9880
[0.0000]*** [0.7416]*** [0.0000]*** [0.0000]*** [0.0000]*** [0.0000]***
Augmented Fisher-
Levin, Lin, and Im, Pesaran, Dickey-Fuller Phillips-
Chu (LLC) Test Breiting and Shin(IPS) (ADF)-Fisher Perron Test Hadri
[Prob.] Test [Prob.] Test [Prob.] Test [Prob.] [Prob.] Test [Prob.]
Case 4: Model with only constant term (first difference) with trends
LNCO2
-12.5762 - -13.0353 134.7350 150.1050 5.9128
[0.0000]*** - [0.0000]*** [0.0000]*** [0.0000]*** [0.0000]***
LNEC
0.1729 - -10.4481 108.7650 134.1920 3.5202
[0.0000]*** - [0.0000]*** [0.0000]*** [0.0000]*** [0.0002]***
LNGDP
-10.5190 - -8.3636 92.8672 91.7768 4.9748
[0.0000]*** - [0.0000]*** [0.0000]*** [0.0000]*** [0.0000]***
LNURB
-18.0141 - -9.2828 50.4115 51.9622 5.8452
[0.0000]*** - [0.0000]*** [0.0002]*** [0.0001]*** [0.0000]***
LNLEXP
-4.5410 - -10.0883 96.5730 67.4709 12.1012
[0.0000]*** - [0.0000]*** [0.0000]*** [0.0000]*** [0.0000]***
a
*** = significance at the 1-percent level; ** = significance at the 5-percent level; and * =
significance at the 10-percent level.
EFFECTS OF EMISSIONS IN MENA COUNTRIES 239
We deduce that the residuals of the static relationship among LNCO2, LNEC,
LNGDP, LNURB, and LNLEXP have a unit root; therefore, they are non-stationary.
The series of different variables are non-stationary in level but are stationary in the
first difference. Therefore, the series are cointegrated I(1). Thus, we can deduce
the existence of a long-run relationship between CO2 emissions in the MENA
countries and LNEC, LNGDPC, LNURB, and LNLEXP. It is possible to estimate
the error-correction model (ECM) because the error-correction term is stationary
at level. Table 3 provides the unit root test results for the ECM.
Cointegration: To study the existence of a cointegration relationship, we have
referred to the work of P. Pedroni,40 where the null hypothesis is to test for the
absence of cointegration based on the unit roots tests applied to estimated re-
siduals. P. Pedroni suggests two types of residual-based tests for the test of the null
of no cointegration in heterogeneous panels. The first category of tests is referred
to as the within-dimension panel tests and consist of four tests based on pooling the
residuals of the regression along the within-dimension of the panel. These are the
panel v-statistic, the panel rho-statistic (also denoted as the panel r-statistic using
the Greek letter), the panel PP-statistic, and the panel ADF-statistic. The second
category of tests is referred to as the between-dimension panel tests and consists
of three tests based on pooling the residuals of the regression along the between-
dimension of the panel. The group tests include the group rho-statistic (also denoted
as the group r-statistic), group PP-statistic, and group ADF-statistic. Each of the
seven statistics follows a standard normal distribution for sufficiently large N and T:
pffiffiffiffi
zNT – m N
pffiffiffi ! N ð0; 1Þ
d
with ZNT one of the seven statistics; m and d are the values tabulated by Pedroni’s
method.
The Pedroni cointegration test results, as displayed in table 4, show that all panel
statistics (v, rho, ADF, and PP) and group statistics (rho, ADF, and PP) are less than
Table 3
a
UNIT ROOT TEST RESULTS OF THE ERROR-CORRECTION MODEL (ECM)
Statistic Probability
a
*** = coefficients are significant at the 1-percent level; ** = coefficients are significant at the
5-percent level; and * = coefficients are significant at the 10-percent level.
240 THE JOURNAL OF ENERGY AND DEVELOPMENT
Table 4
a
PEDRONI COINTEGRATION TEST RESULTS
Within Dimension
Statistic Prob. Statistic Prob.
a
*** = significance at the 1-percent level and ** = significance at the 5-percent level. The total
number of observations is 200. ADF = augmented Dickey-Fuller and PP = Phillips-Perron.
the critical value of the normal distribution for a threshold of 5 percent. Thus, we
can conclude that all of these tests confirm the existence of a long-term coin-
tegration relationship between CO2 emissions and LNEC, LNGDPC, LNURB,
and LNLEXP.
Cointegration Relationships: To estimate systems of cointegrated variables
on panel data and to identify tests on cointegration vectors, it is essential to apply
an effective estimation methodology.
Indeed, there are several estimation techniques one could use such as the fully
modified ordinary least squares (FMOLS) method employed by P. Pedroni, the dy-
namic ordinary least squares (DOLS) method, and the generalized method of moments
(GMM). P. Pedroni,41 P. Phillips and H. Moon,42 and C. Kao and M.-H. Chiang43 have
shown that, in the case of panel data, the FMOLS and DOLS techniques lead to
asymptotically-distributed estimators according to a standard normal distribution.
However, C. Kao and M.-H. Chiang44 assume that the OLS estimation in finite
samples leads to biased estimators relative to the FMOLS method. Moreover, they
highlight the superiority of the DOLS method in comparison to the FMOLS
method. The authors consider FMOLS as the most effective technique in esti-
mating cointegration relationships using panel data, the theorem of the repre-
sentation of Engel and Granger establishes equivalence between the existence of
a long-term relationship and the error-correction model of CO2 emissions (see
table 5 for the cointegration test results using the Kao and Chiang methodology).
Thus, we examine the direction of causality between variables in a group setting.
The two-step method of Engle and Granger45 shows that if two non-stationary
EFFECTS OF EMISSIONS IN MENA COUNTRIES 241
Table 5
a
COINTEGRATION TEST OF KAO AND CHIANG
t-Statistic Prob.
a
*** = the critical value at the 1-percent significance level for the panel; the ADF statistics is
–5.799502; and the total number of observations is 200. ADF = augmented Dickey-Fuller and HAC
variance = heteroscedasticity and autocorrelation consistent variance estimation.
where D represents the first difference of the variable and p the number of lags.
The importance of the first differentiated variables is that they indicate the short-
term direction of Granger causality, while the t-statistics on a delayed period in
terms of error correction represent the long-term Granger causality. In the CO2
consumption of equation (5), short-run causality from energy consumption, GDP,
urbanization, and the life expectancy are tested, respectively, based on H0: b11ip =
0"ip, H0: b12ip = 0"ip, H0: b13ip = 0"ip, and H0: b14ip = 0"ip. The null hy-
pothesis of no long-run causality for each element of equation (5) is tested by
examining the significance of the p-value for the coefficient on the respective
error-correction term represented by ECT.
of adjustment to the long-run equilibrium. The values of the ECM are negative and
statistically significant. Indeed, the negative values of the ECM indicate the speed
of convergence from the short to the long run. The coefficients of the ECM show
that short-run deviations are corrected by 37.2 percent for the group of countries
constituting the sample.
When looking at our panel causality test results in table 6, we note that when
we take the totality of the panel countries in our sample, CO2 emissions are
explained in the short term by only two variables: energy consumption and eco-
nomic growth per capita. Indeed, the coefficient of the energy consumption
(0.666) is positive and significant at the 1-percent level. This seems logical be-
cause of the high correlation between energy consumption and CO2 emissions.
Indeed, any increase in the energy consumption by one unit generates an increase
in CO2 emissions by 0.66 units. Also, the per-capita economic growth appears to
have, in the short term, a positive and significant effect at the 10-percent level. In
other words, the relative increase in GDP per capita of a unit causes a relative
increase in CO2 emissions of 0.123 units.
However, at the individual level, we notice that the results are relatively het-
erogeneous. With regard to the effect of energy consumption on CO2 emissions,
the results show that the said effect is established for only three countries—Jordan
(coefficient of 0.94 with a significance at the 1-percent level), Saudi Arabia
(coefficient of 1.15 with a significance at the 5-percent level), and Morocco (coef-
ficient of 1.018 with a significant at the 1-percent level). A priori, in these three
nations, it turns out that energy consumption is the main cause of CO2 emissions.
However, for the remaining countries of Algeria, Bahrain, Egypt, the United Arab
Emirates, Qatar, Tunisia, and Yemen the estimated coefficients were not signif-
icant. This allows us to say, without much risk, that there is not a causality re-
lationship between energy consumption and CO2 emissions.
As for the effect of life expectancy on CO2 emissions, we find that it is gen-
erally not significant (both at the group and individual level) except in the case of
Jordan. Indeed, in this country, the life expectancy has a negative and significant
effect at the 10-percent level on CO2 emissions. This means that the increase in life
expectancy cannot be achieved solely at the expense of lowering CO2 emissions.
Regarding the effect of GDP per capita, we find that it is positive and signif-
icant at the 10-percent level for the group of MENA countries. At the individual
level, said effect is positive and significant at the 10-percent level only for the
cases of Qatar and Yemen. Concerning the urbanization effect, we see that it is not
significant for the group as a whole, while it is positive and significant at the
5-percent level for Jordan and Qatar.
Long-Run Effects: Following P. Pedroni, the fully modified OLS (FMOLS)
and the dynamic OLS (DOLS) technique for heterogeneous cointegrated panels
are estimated.46 Table 7 displays the FMOLS long-run estimation results and table
8 displays the DOLS long-run estimation results.
Table 6
a
PANEL CAUSALITY TEST RESULTS FOR THE MIDDLE EAST AND NORTH AFRICA REGION (INDIVIDUAL AND GROUP), 1990–2010
a
The Probs. are the standard errors with *** = significance at the 1-percent level; ** = significance at the 5-percent level; and * significance at the
10-percent level. D ( ) is the first difference operator. Prob. = probability; ECM = error-correction model; Coeff. = coefficients; LN = natural logs;
EFFECTS OF EMISSIONS IN MENA COUNTRIES
LEXP = life expectancy at birth; GDPC = the gross domestic product per capita measured in U.S. dollars; EC = energy consumption measured in
kilograms of oil equivalent per capita; and URB = the percentage of urban population relative to the overall population.
243
244
Table 7
FULLY MODIFIED ORDINARY LEAST SQUARES (FMOLS) LONG-RUN ESTIMATION RESULTS FOR THE MIDDLE EAST AND NORTH
a
AFRICA REGION (INDIVIDUAL AND GROUP), 1990–2010
a
The Probs. are the standard errors with *** = significance at the 1-percent level; ** = significance at the 5-percent level; and * significance at
the 10-percent level. LN = natural logs; CO2 = carbon dioxide emissions measured by per-capita metric tons; LEXP = life expectancy at birth; GDPC = the
THE JOURNAL OF ENERGY AND DEVELOPMENT
gross domestic product per capita measured in U.S. dollars; EC = energy consumption measured in kilograms of oil equivalent per capita; URB = the
percentage of urban population relative to the overall population; Coeff. = coefficients, and Prob. = probabilities.
Table 8
DYNAMIC ORDINARY LEAST SQUARES (DOLS) LONG-RUN ESTIMATION RESULTS FOR THE MIDDLE EAST AND NORTH AFRICA
a
REGION (INDIVIDUAL AND GROUP), 1990–2010
a
The Probs. are the standard errors with *** = significance at the 1-percent level; ** = significance at the 5-percent level; and * significance at
the 10-percent level. LN = natural logs; CO2 = carbon dioxide emissions measured by per-capita metric tons; LEXP = life expectancy at birth; GDPC = the
EFFECTS OF EMISSIONS IN MENA COUNTRIES
gross domestic product per capita measured in U.S. dollars; EC = energy consumption measured in kilograms of oil equivalent per capita; URB = the
percentage of urban population relative to the overall population; Coeff. = coefficients, and Prob. = probabilities.
245
246 THE JOURNAL OF ENERGY AND DEVELOPMENT
At the whole group level, we notice that the coefficient associated with the
consumption of energy is positive and significant at the 1-percent level, while the
coefficients associated with life expectancy and per-capita income are negative
and significant at the 1-percent level (table 8). The positive and significant effect
of energy consumption on CO2 emissions is explained, in the long run, by the fact
that the countries constituting the MENA group will maintain an energy strategy
with the consumption of higher polluting energy products. Indeed, the estimation
shows that a relative increase of 1 percent in energy consumption will lead to an
increase of 2.787 percent of CO2 emission units. This allows us to assume that the
energy basket of goods that are currently being consumed by these countries will
have, in the long term, a multiplier effect on pollution.
The effect of life expectancy on CO2 emissions is negative and significant at
the 1-percent level. The relative increase in life expectancy by a unit decreases the
CO2 emission units by 2.4882 percent. This result seems logical and is consistent
with theoretical expectations, which converge on the hypothesis that an increase in
life expectancy requires fewer greenhouse gas emissions, including CO2. The
latter is often accused of being either the primary cause or the stimulus of several
respiratory diseases and other illnesses.
Additionally, the effect of per-capita income on CO2 emissions is negative and
significant at the 1-percent level. This implies that when per-capita income in-
creases by 1 percent, CO2 emission units will decrease by 0.7474 percent. This
allows us to say that, in the long term, the MENA group should attempt to generate
economic growth from economic activity sectors that are less polluting and
cleaner. This finding seems to be logical since the European Union—the primary
economic partner for almost the majority of MENA countries—has become in-
creasingly rigorous with regard to environmental regulations and imposes envi-
ronmental standards on its commercial partners with respect to meeting CO2
emission reduction goals.
At the individual level, we find that the positive relationship between energy
consumption and CO2 emissions is strongly verified in the majority of countries in
our sample (Bahrain, Egypt, Jordan, Tunisia, Morocco, and the United Arab
Emirates). In the longer term, this can be explained by the governments continuing
their current strategies that maintain the existing energy consumption patterns or,
alternatively stated, the absence of a willingness to substitute the current con-
sumption of energy goods with those that are less polluting.
Regarding the effect of life expectancy on CO2 emissions, the results are
negative and significant, respectively, at the levels of 1 percent (Jordan), 5 percent
(Morocco, Qatar, and Yemen), and 10 percent (Saudi Arabia), and positive and
significant at the 1-percent level only in the case of Egypt. As already mentioned,
as the majority of MENA countries work toward developing new strategies and
policies to improve living conditions and protect the environment, this will ne-
cessitate efforts to reduce CO2 emissions.
EFFECTS OF EMISSIONS IN MENA COUNTRIES 247
Conclusion
The main objective of this article is to explain the relationship between CO2
emissions and a set of economic and socio-economic variables within a select
number of MENA countries. The empirical results have covered two time hori-
zons: the short and long term.
In the short term, our results found that for all countries in our sample, CO2
emissions can be explained by energy consumption and economic growth per
capita, which exert positive and significant effects. Indeed, it seems that in the
short term there is a causal relationship between energy consumption (which
generates more CO2 emissions) and economic growth. So this leads us to note that
this group of countries is continuing, in the short run, to use the same energy
trajectory for end-use consumption by households and the intermediate stages of
consumption. Therefore, this energy consumption vector increases per-capita in-
come and CO2 emissions.
However, in the longer term, there will be a structural change in the economic
course of all selected MENA countries in our sample. Thus, we noticed that CO2
248 THE JOURNAL OF ENERGY AND DEVELOPMENT
emissions are still positively influenced by energy consumption. This means that
this group of nations will retain, in the long run, the same current energy trajectory
(in terms of consumption). The effect of life expectancy is negative and significant
on CO2 emissions, which means that improving living conditions in the long run
cannot continue without the lowering of CO2 emissions. In addition, the per-capita
income effect is negative and significant, which means that the long-term economic
strategy of these countries is based on more activity in non-polluting sectors. In
other words, the growth-generating economic potential is located in non-polluting
sectors and not in sectors that are generators of greenhouse gases.
In terms of recommendations and suggestions, we can say, based upon the esti-
mation results, if in the short term the strategy of MENA countries is based on
a trajectory of consumption and production of polluting energy products, there will be
in the longer term a strategic change within this group as they look toward promoting
lower polluting activities and sectors. This is no longer a choice but a constraint
(imposed by the European Union requiring exporting countries to comply with en-
vironmental standards for CO2 and other emissions). So long as life expectancy is
negatively correlated to CO2 emissions, then it would be logical that these countries
would invest in improving living conditions and reducing CO2 emissions.
NOTES
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