Carbon dioxide intensity of GDP and environmental degradation in an emerging country

Abstract

This paper investigates whether the carbon dioxide (CO2) intensity of GDP matters for environmental degradation in an emerging country, namely, Turkey, over the period of 1990-2018 while controlling economic growth, foreign direct investment, and renewable energy consumption. The present study uses both linear and nonlinear time series estimators, namely, the Gregory and Hansen cointegration test, bounds test, nonlinear autoregressive distributed lag (NARDL) model, fully modified ordinary least squares (FMOLS), dynamic ordinary least squares (DOLS), and canonical cointegrating regressions (CCR), to encapsulate the possible effect of CO2 intensity of GDP, economic growth, foreign direct investment, and renewable energy consumption on environmental degradation in Turkey. The empirical finding of the present study reveals that the CO2 intensity of GDP is an important factor to determine environmental degradation in Turkey and the declining CO2 intensity of GDP reduces environmental degradation. Moreover, economic growth is the primary environmental sustainability factor in Turkey. The result is vital for policymaking and can perhaps be applied to take decisive policy actions to mitigate environmental issues.

Keywords: CO2 intensity of GDP, Environmental degradation; Linear models; Nonlinear models; Turkey.