Exploring the macroeconomic determinants of carbon emissions in transitional economies: A panel data analysis approach

Abstract

The study’s main objective was to investigate the macroeconomic determinants of carbon emissions in transitional economies using panel methods with data ranging from 1996 to 2014. The main data analysis was done using econometric estimation methods such as fixed effects, random effects, pooled ordinary least squares (OLS) and the dynamic generalized methods of moments (GMM) approach whilst robustness tests were done under the umbrella term, the lagged independent variable approach. To a larger extent, infrastructural development, economic growth, trade openness, financial development and natural resources were found to have had a significant positive effect on carbon emissions, in line with major theoretical predictions. On the other hand, renewable energy consumption, foreign direct investment, information and communication technology and human capital development were mainly found to have reduced carbon emissions in transitional economies. The results are firmly supported by literature. Transitional economies are therefore urged to increase their use of renewable energy and information and communication technology (ICT) infrastructure, attract more foreign direct investment (FDI) and implement policies aimed at enhancing human capital development to reduce carbon emissions. Given data availability, future studies must investigate whether other macroeconomic variables mentioned in the empirical literature that they determine carbon emissions are relevant in transitional economies.