Economic Research and Perspectives

Economic Research and Perspectives

Economy, Energy and Environment (3E) Nexus in Selected Asian Countries An Application of Spatial Panel Simultaneous Equations Model

Authors
Somayeh Azami
Fatemeh Hosseini
Kiomars sohaili
Razi University, Kermanshah, Iran
10.22034/24.2.59
Abstract
Introduction

The emission of greenhouse gases caused by fossil fuels and other human activities is a serious threat to many countries, which is more prevalent due to its nature and is noticeable in most regions of the world. In the last three decades, with the increase of greenhouse gases in the atmosphere, the air temperature is increasing, and it is expected that with the continuation of this trend, unfavorable changes will be made in the environment. According to the report of the Intergovernmental Panel on Climate Change (IPCC), in 2014, 76% of all greenhouse gases are composed of carbon dioxide. Therefore, it can be said that carbon dioxide emissions plays an important role in protecting the environment and sustainable development (Omari, 2013). Many studies have identified the factors affecting carbon dioxide emissions and its relationship with other economic, social and environmental factors in order to achieve sustainable development, among which, energy consumption and economic growth can be mentioned. Energy as a driving force plays an effective role in most production and service activities. On the other hand, energy consumption leads to air pollution due to carbon dioxide emissions. The purpose of this study is to examine economy, energy and environment nexus in Asian countries. It is noteworthy that Asian countries such as China, India, Japan, Iran, Saudi Arabia, and South Korea rank less than 10th in terms of carbon dioxide emissions among the countries of the world. The significance of these effects has an important message for environmental policymakers in solving environmental issues and climate change.

Methodology

This nexus is estimated in the time period of 2002-2018 in the form of Spatial Panel Simultaneous Equations Model (SPSEM) with the Generalized Spatial Panel Two Stage Least Squares (GS2SLS) method. It is tried to analyze this correlation by considering the influence of these countries. Therefore, Spatial Panel Simultaneous Equations Model is used to investigate the three-way communication of economy, energy and environment. The model of simultaneous spatial panel equations makes it possible to analyze the correlation and relationship of economy, energy and environment by considering the influence of countries on each other and spatial spillover effects. In other words, the spatial correlation of countries in terms of economic growth is considered to be the spatial correlation of carbon dioxide emissions.

Findings

The results of this research confirm the spatial correlation of economic growth, energy consumption and environmental quality. In other words, the spatial spillover effects of economic growth, energy consumption, and environmental quality exist significantly, and economic growth, energy consumption, and environmental quality in each country are affected by the economic growth, energy consumption, and environmental quality of another country, respectively. In addition, the quality of the environment spatially has a stronger correlation than the other two series. In other words, selected Asian countries are significantly affected by environmental conditions compared to economic conditions.

On the other hand, economic growth and energy consumption, economic growth and environmental quality, and energy consumption and environmental quality have a significant mutual relationship. The two-way relationship between economic growth and environmental quality indicates that while more production brings more pollution, pollution has direct and indirect harmful effects on economic growth through increasing treatment costs and reducing labor productivity. The two-way relationship between economic growth and energy consumption is also confirmed.

Political stability significantly leads to an increase in environmental quality. The growth of urbanization leads to a decrease in environmental quality due to unfavorable structure of the cities. The share of industrial exports and imports leads to a significant increase and decrease in energy consumption, respectively.

Discussion and Conclusion

According to the results obtained, it can be pointed out that energy consumption and economic growth are incompatible with the environment. It is clear that energy consumption with carbon dioxide emissions leads to an increase in environmental pollution. The reduction of carbon dioxide emissions depends on the modification of the energy consumption pattern and the replacement of renewable energies instead of fossil energies simultaneously in the countries. Policymakers should adopt strategies to reduce energy consumption. There should be an increase in investment in energy infrastructure with the approach of preventing energy waste and looking for alternative energy sources such as solar energy and new and renewable energies to reduce carbon dioxide emissions. In order to adopt effective policies on climate change issues, policy makers must consider the spatial spillover effects of countries. These new empirical results will help policymakers in Asian countries to design appropriate environmental and energy policies to meet the goals for economic development and sustainability.
Keywords
economic growth
CO2 Emission
energy consumption
Simultaneous Equations
Spatial Model

Subjects

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Economic Research and Perspectives
Volume 24, Issue 2
Summer 2024
Pages 59-89