Dynamic Relationships among Energy Consumption, Gross Capital Formation, Carbon Emissions, and Economic Growth in Bangladesh

Abstract

Purpose: This paper aims to examine the dynamic relationship among energy consumption, gross capital formation, carbon emissions, and economic growth in Bangladesh over the period from 1972 to 2022.
Methodology: The study utilizes the autoregressive distributed lag (ARDL)
method and Granger causality tests to find out dynamic interrelationships among the study variables.
Findings: The co-integration test implies that in the long-run all the variables are co-integrated. In the long-run, the results reveal that energy consumption and gross capital formation (GCF) have a positive effect on economic growth, while carbon emissions (CO2) have an inverse impact on it. The results of short-run dynamic coefficients of the ARDL model show that CO2 is negatively related to GDP, while GCF has a positive impact on GDP. The pairwise Granger causality implies that there exists unidirectional causality from economic growth to energy consumption. There also exists a unidirectional causality from economic growth to CO2 and a bidirectional causality from GCF to GDP.
Practical Implication: This study offers a suitable environment that would allow us to identify the current policy gaps, and a substantial shift in low-carbon technology, such as energy efficiency and renewable energy, may help reduce emissions and maintain the long-term viability of the economy.
Originality/Value: Earlier research in this field has abandoned the environmental synthesis of the relationship between energy use and economic growth. Using the most recent data set, this study contributes to the small body of literature already available on the nexus among energy consumption, gross capital formation, carbon emissions, and economic growth in Bangladesh.
Limitation: The current study employs a specific country; however, further
studies may be conducted using South Asian countries.