The impacts of economic growth, foreign direct investments, and gas consumption on the environmental Kuznets curve hypothesis CO2 emission in Iran

Abstract

Economic development is associated with higher energy consumption, which has a direct impact on climate change. As a result, today’s growth policies should also align with environmental sustainability goals. Although socioeconomic variables related to air pollution have been extensively studied in previous studies, little research has examined their long- and short-term effects. This study aimed to investigate the long-run and short-run relationship between carbon dioxide (CO2) emissions, energy consumption, especially gas as a clean fuel, foreign direct investments (FDI), and gross domestic product (GDP) using autoregressive distributed lag (ARDL) model in Iran during the period of 40 years. The estimation results indicated the validity of the environmental Kuznets curve (EKC) hypothesis for Iran. Moreover, empirical findings illustrate that the impact of financial growth on CO2 emissions, in the long run, is U-shaped in Iran. The reliance on gas as a fuel for the country led to a reduction of the carbon and ecological footprints in a short time compared to other polluting fuels. Further, our empirical results indicate that economic growth and foreign direct investment contribute to reducing pollutant and carbon emissions in Iran over long and short periods. According to the empirical findings, important energy policy recommendations are offered.