Revisiting the energy-growth-environment nexus in the OECD countries: An application of the CS-ARDL approach

Abstract

Background: This study revisits the energy-growth-environment nexus in the member countries of the Organization for Economic Cooperation and Development (OECD) by examining the role of trade openness, financial development, and urbanization. The cross-sectional augmented distributed lag (CS-ARDL) approach is employed to address the presence of slope homoskedasticity and cross-sectional dependence in the data set. Results: Our empirical findings fail to confirm the validity of the environmental Kuznets curve (EKC) hypothesis for emissions of carbon dioxide (CO2) during the period researched. CO2 emissions have bidirectional causality with income, the share of renewable energy, and the share of nonrenewable energy. Trade openness, financial development, and urbanization play different roles in the energy-growth-environment nexus. Whereas trade openness increases CO2 emissions, financial development reduces consumption of renewable energy. Urbanization plays a limited role in this nexus. Conclusions: These findings lead to some policy implications. The close relationship between economic growth, CO2 emissions, and energy consumption is highlighted, which suggests that a policy targeting one component needs to consider the impacts on the other components.