The environmental Kuznets curve and the role of coal consumption in India: Cointegration and causality analysis in an open economy

This study investigates the dynamic relationship between coal consumption, economic growth, trade openness and CO2 emissions in case of India. In doing so, Narayan and Popp, Journal of Applied Statistics 2010; 37:1425-1438, structural break unit test is applied to test the order of integration of the variables. Long run relationship between the variables is tested by applying the ARDL bounds testing approach to cointegration developed by Pesaran et al. Journal of Applied Econometrics 2001; 16:289-326. The results confirm the existence of cointegration for long run between coal consumption, economic growth, trade openness and CO2 emissions. Our empirical exercise indicates the presence of environmental Kuznets curve (EKC) in long run as well as in short run. Coal consumption as well as trade openness contributes to CO2 emissions. The causality analysis reports the feedback hypothesis between economic growth and CO2 emissions and same inference is drawn between coal consumption and CO2 emissions. Moreover, trade openness Granger causes economic growth, coal consumption and CO2 emissions. (C) 2012 Elsevier Ltd. All rights reserved.