Measuring the effect of the most Important Economic Factors on Carbon Dioxide Emissions: A Panel Data Analysis

Abstract

This paper is trying to measure the effect of trade openness, economic development, FDI, energy consumption and urbanization on Carbon emissions, using Panel data over the period 1982-2014 in 86 countries, division the panel based on the income level in to 4 income panels; high income, upper middle income, lower middle income and low income. Using Panel Cointegration Analysis. Results showed that: energy consumption, economic development, trade openness and urbanization are have positive effects on CO2 emissions. while the FDI is have a negative effect on CO2 emissions in the global panel. The results of Granger causality showed that: energy consumption, economic growth, and trade openness are the main causes of carbon emissions in the global panel and both high and middle-income countries, Which required increase the investment in clean energy. For middle-income countries, FDI is not a cause of carbon emissions, requiring set clear criteria to encourage clean investments.