Urbanization, Energy Consumption and CO2 Emissions in Sub-Saharan Countries: A Panel Cointegration and Causality Analysis

Abstract

Carbon dioxide (CO2) emissions as a main determinant of environmental pollution have been frequently dealed with by research scholars and policy-makers. This study investigates the cointegration and dynamic causal relationship between urbanization, energy consumption and carbon dioxide (CO2) emissions in Sub-Saharan countries for the period between 1985 and 2010. Pedroni and Kao cointegration methods and Granger causality test based on vector error correction model (VECM) are employed to conduct this empirical analysis. The results show that there exists a cointegration relationship between the variables over the period. It is also found that there exists bi-directional Granger causality between some variables in the the long-run as well as in the short-run such as, between energy consumption and CO2 emissions. The results imply that energy consumption and urbanization are the main determinants of environmental pollution in these countries. and a series of policy measures related to urbanization and energy should be taken to decrease the environmental degradation.