The effect of energy consumption on the environment in the OECD countries: economic policy uncertainty perspectives

Abstract

In this paper, we investigate the impact of energy use and economic policy uncertainties on the environment. To achieve this objective, we use the pooled mean group-autoregressive distributed lag methodology (PMG-ARDL) and Dumitrescu and Hurlin causality test on 22 Organisation for Economic Co-operation and Development (OECD) countries between 1985 and 2017. The PMG-ARDL estimation shows that energy use and economic policy uncertainties have a positive relationship with carbon dioxide emission (CO2) emission, while a negative relationship is confirmed between renewable and CO2 emissions in the long run. The short-run estimation shows a positive relationship between energy use, real gross domestic product, and per capita on CO2 emissions. The Dumitrescu and Hurlin causality results highlight a unidirectional running from real GDP and GDP per capita square to CO2 emissions. Furthermore, one-way causality exists between CO2 emissions to economic policy uncertainties. These results have policy implications on the macroeconomy which are discussed in detail in the concluding section.