Per capita income, trade openness, urbanization, energy consumption, and CO2 emissions: an empirical study on the SAARC Region

The developing world in general is facing so many crucial problems including global warming in recent years. Global warming has multiple consequences on each segment of the society and therefore, its root causes are important to identify. The present study examines the impact of per capita income, trade openness, urbanization, and energy consumption on CO2 emissions. Countries located in South Asian Association for Regional Cooperation (SAARC) are considered in the study. The selection of the SAARC region is motivated by the diverse nature of its members and further lack of available empirical literature on the same relationship. Annual data from 1980 to 2016 are analyzed using appropriate panel data techniques. The results revealed the presence of environmental Kuznets curve (EKC) in the SAARC region. Further, the introduction of cubic function into the model indicated that the shape of the EKC is N shaped. Besides, trade openness has negative while urbanization and energy consumption have impacted CO2 emissions positively. Moreover, the causality exercise explored a bidirectional causality between urbanization, energy consumption, per capita income, and CO2 emissions. Similarly, energy consumption, per capita GDP, and urbanization are also bidirectionally related. Further, a unidirectional causality running from CO2 emissions, urbanization, and energy consumption to trade openness is detected. Lastly, a unidirectional causality is witnessed from per capita income to energy consumption.