Exploring the Dynamic Relationship Between Energy Efficiency, Trade, Economic Growth, and CO2 Emissions: Evidence From Novel Fourier ARDL Approach

Climate change, energy security, and volatile energy prices have been emerging as eminent threats worldwide. To overcome these concerns, energy efficiency could play a positive role. Hence, this study probes whether energy efficiency curbs CO2 emissions in the US, while controlling for trade, economic growth, and population. We use the Fourier-ADF and Fourier-LM tests to discern the unit-roots. Moreover, to render reliable findings, we rely on the novel Fourier ARDL model. The study divulges that energy efficiency plunges emissions in the long- and short-run. In particular, a 1% upsurge in energy efficiency impedes emissions by about 0.37% and 1.07% during the long- and short-term, respectively. Moreover, population and economic growth escalate emissions whether it is long- or short-run. Next, we document that trade upsurges emissions in the long-run. Also, we perform two types of sensitivity analysis to test whether our key results remain the same across different models/methods. Finally, we suggest escalating energy efficiency through investment and technological advancement. Moreover, import tariffs on renewables should be plunged while there should be relatively high tariffs on non-renewables.

Automated summary

This study investigates whether improving energy efficiency can reduce carbon dioxide emissions in the US, while considering factors such as trade, economic growth, and population. The findings suggest that energy efficiency improvements lead to reductions in emissions in the long-term and short-term. Population and economic growth, on the other hand, increase emissions, and trade has a positive impact on emissions in the long-term.