The linear and nonlinear effects of energy productivity on environmental degradation in Cyprus

Abstract

This study fills a gap in the relevant literature by exploring the linear and nonlinear effect of energy productivity on environmental degradation based on economic growth, trade openness, and energy consumption variables for the case of Cyprus, over the period from 1990Q1 to 2018Q4. To the best of our knowledge, this is the first study attempt to conduct this nexus for Cyprus, so the empirical findings are likely to shed light on and open a new debate on the subject of environmental sustainability. The empirical findings of the nonlinear autoregressive distributed lag approach revealed that the outcomes of energy productivity instigated a positive (negative) impact on the atmosphere, where a 1% upsurge in positive shock of energy productivity decreased CO₂ emissions (CO₂E) by 0.265%, and a 1% rise in negative shock caused a 0.837% increase in pollution in the long run. GDP is positively related to pollution in both shocks. Trade results disclosed that trade openness stimulated a positive (negative) influence on the atmosphere. A 1% increase in positive shock of trade openness decreased CO₂E by 0.268%, and a 1% growth in negative shock instigated a 0.423% rise in pollution in Cyprus. These results are consistent and supported by both linear and nonlinear techniques. As a part of its long-term climate policy goals, policymakers in Cyprus should invest in energy productivity and R&D that embraces cleaner technology innovations and prioritize cross-cutting environmental technology policies to combat climate challenges.

Keywords: Cyprus; Economic growth; Energy consumption; Energy productivity; Environmental sustainability; Trade openness.