The Causality Between Energy Consumption, Urban Population, Carbon Dioxide Emissions, and Economic Growth

Abstract

This study evaluates the relationship between electric power consumption and urbanization comparing the econometric results of autoregressive distributed lag (ARDL) and vector autoregressive (VAR) for the period 1960–2015. Granger causality is also applied to the Portuguese economy. In this study, we use some hypotheses that describe the link between electric power consumption, urban population, carbon dioxide emissions, and economic growth. The motivation of this research focuses on the relationship between electric power consumption (energy consumption) and urban population, supported by the theoretical and empirical contributions of energy and urban economics. The empirical results show that electric power consumption presents a causality with economic growth, urban population, carbon dioxide emissions, and international trade. This research also proves that there is cointegration between all variables in the long run. This paper presents significant contributions to economic policy, showing that there exists an association between energy consumption and economic growth.