The impact of economic growth on co2 emissions in developing countries from 1999 to 2021

Abstract

This study analyzes the impact of economic expansion and energy-related factors on CO2 emissions in 45 developing nations between 1999 and 2021. Using panel data with the FE model and the Driscoll-Kraay method to address issues such as heteroskedasticity, autocorrelation, and cross-sectional dependence, the results indicate that GDP and primary energy consumption (PEC) are the two main factors driving CO2 emissions. Conversely, forest area (FA) and renewable energy consumption (REC) help reduce emissions, although REC has yet to show strong effectiveness due to its relatively low share in the overall amount of energy used. FDI does not exhibit a clear impact. 90% of the fluctuation in CO2 emissions can be explained by the model, emphasizing the importance of adopting clean technology, increasing renewable energy use, preserving forest areas, and directing FDI flows into environmentally friendly industries to achieve sustainable development goals. However, the study finds no evidence supporting the EKC, suggesting that the correlation between CO2 emissions and economic growth in developing nations has not reached the "turning point" where emissions decline as income rises. Additionally, limitations exist in controlling for endogeneity and capturing recent policy changes, highlighting future research directions. The findings provide crucial insights for formulating strategies in developing nations that strike a balance between environmental preservation and growth in economy.