Proceedings of 29th International Business Research Conference
24 - 25 November 2014, Novotel Hotel Sydney Central, Sydney, Australia, ISBN: 978-1-922069-64-1
The Effect of Gasoline Consumption, Urbanization and
Economic Growth on CO2 Emissions in MENA Countries
Ahmad Assadzadeh1, Parviz Mohammadzadeh2, Akram Akbari3 and Javad
Pourqoly4
Growth in urban populations causes extension of economic activity and
increases energy consumption that lead to increases in the types of
greenhouse gas emissions (especially CO 2). Thus, Carbon dioxide
emissions may create significant social harm because of global warming
and risks of climate change. This paper investigates the impact of
economic growth, energy consumption, urbanization on carbon dioxide
(CO2) emissions from transport by using the General Method of Moments
in 18 Middle East and North African Countries (MENA) from 1980 to
2012.The result shows that Gasoline consumption, GDP and Urbanization
have significant positive impact on CO2 emissions from transport.
JEL Classification: Q56, C32, F18
1. Introduction
Energy accounts for one of the crucial and current issues of the world. It plays a significant
role in all political, economic and international contexts. This is because it constitutes the
driving force for economic development and the wheels of industry do not turn without it. In
fact, ongoing necessity of world community to energy resources specifically in the
developing countries on one hand and limitations of its resources on the other hand have
coupled its importance.
Non-renewable resources specifically fusil fuels are not limitless and with the excessive
consumption their end is foreseeable. Therefore, it is inevitable to make a right and prompt
decision in relation to energy resources and their consumption. Though, this is just one
side of story.
Other aspect of non-renewable resources has to do with the environmental pollutions
resulting from excessive consumption of energy which in turn has put the world in serious
danger. Consumption of various types of fusil fuels produce toxic pollutants. Accumulation
of these pollutants in atmosphere over decades has now turned out to be a serious
problem. The most important of these materials are greenhouse gasses that have
engendered climate change and global warming in the past century.
This brought up considerable debate about the probable detriments of global warming and
scientific consensuses are of the opinion that greenhouse gasses emission can give rise
to serious dangers in relation to climate changes. Therefore, many research have
1
. Dr. Ahmad Assadzadeh, Associate Professor in Economics, University of Tabriz,
Email: assadzadeh@gmail.com
2
. Dr. Parviz Mohammadzadeh, Associate Professor in Economics, University of Tabriz,
Email: pmohamadzadeh@yahoo.com.
3
. PhD student in Economics, University of Tabriz, Email: akramakbari98@yahoo.com
4
Javad Pourqoly, Lecutere at Tabriz Business Training Center & consultant at East Azerbaijan Industry,
Mine and Trade Organization, Email: splashingly@yahoo.com
Proceedings of 29th International Business Research Conference
24 - 25 November 2014, Novotel Hotel Sydney Central, Sydney, Australia, ISBN: 978-1-922069-64-1
accentuated the the need to reduce the amount of carbon emission inorder to diminish the
dangers emanating from the radical change in the environment (Stern, 2008).
According to the latest estimation of international energy agency (IEA), 23 per cent of total
carbon dioxide emission in the world is attributed to transportation sector. In road
transportation, automobiles and trucks cause more that 60% of carbon dioxide emission.
This is while in the developing countries with average and low income, cargo trucks and in
some cases, even buses burn a lot of fuel and then causes more CO2 in comparison to
light vehicles. Many experts predict that if one does not change the strategy, make the
investment or adopt required policies, in 2030 CO2 pollutions from transportation sector in
the world will reach 3 to 5 time more than 2000 level (Schipper, et al, 2009).
Nonetheless, transportation sector as a prerequisite infrastructure of development plays a
pivotal role in providing facilities and potential capabilities for the societies. This fact create
vital link between different factors of growth and development through the relocation of
load and passenger and leads to the rapid and extensive enhancement of countries in
different sectors from the economic, social and cultural points of view. For this reason,
paying attention to the effective use of energy in the transportation sector and adopting
policies to increase its efficiency play a crucial part.
There are a large number of empirical studies that stress the relationship between the
environmental pollution and economic growth based on time series, unit root and
cointegration approaches. In contrast with common studies, this paper applies a GMM5
estimator to examines the dynamic relationship between CO2 emissions from transport,
GDP, quadratic form of GDP, Urban population and Gasoline consumption.
The paper is organized as follow. Following the introduction, the second section presents
the literature review and empirical studies. The third section outlines the methodology and
the forth section presents the empirical results. The final section draws conclusions.
2. Literature Review
Given the role of carbon dioxide in air pollution and global warming, in most empirical
research it is regarded as a factor in environment pollution. Carbon dioxide emission and
the phenomenon of global warming have given rise to climate changes. This, in turn, can
lead to serious dangers in physical infrastructures, social context of cities and
transportation structures (for instance, road, railroad, ports and bridges). Therefore, to
show the influence of different factors of energy consumption by urban households and
transportation on carbon dioxide emission, it is inevitable to give some explanations as to
the impact of city population and city transportation on the environment pollution.
2.1. Urban Pupulation and Environment
There are two different points of view in examining the correlation between urban
population and environment pollution. The first standpoint refers to the positive influence of
urban population due to the utilization of infrastructures, transportation. Furthermore,
transition from agriculture to industry gives rise to an increase in environment pollution.
But, according to second standpoint, urbanization culture increases awareness and leads
to the optimum use of energy in the cities. Therefore, the relationship between an increase
in urban population and environment pollution may be either positive or negative (Alam, et
al, 2007). As the urban dwellers grow, the pollution incident increase either directly or
indirectly. Direct emission result from energy consumption such as electricity, heating
fuels, gasoline, and gas. Indirect emission derives from industrial products such as
5
Generalized Moments Method
Proceedings of 29th International Business Research Conference
24 - 25 November 2014, Novotel Hotel Sydney Central, Sydney, Australia, ISBN: 978-1-922069-64-1
clothing, household appliance as well as services and foods that are used by households
(Munksgaard, et al, 2000).
Generally speaking, economic development along with urbanization affects consumer’s
behavior. Population growth is not merely a stimulus of increase in energy consumption.
By altering people’s behaviors, needs and lifestyle it can increase daily consumption as
well. Therefore, the policy makers have attempted to enhance energy efficiencies in order
to diminish energy consumption by families (Madlener and Sunak, 2011).
As a result, the main source of global warming is greenhouse gasses emission. The main
reason for their emission has to do with the energy consumption. So, a decrease in energy
consumption will result in reduction in the emission. Nonetheless, pursuing the goals of the
Kyoto Protocol is to reduce emission may diminish the economic development. To put it
differently, the economic development and the energy consumption depends on each
other since economic developments coincide with energy consumption (Sari and Soytas,
2008).
To explain the correlation between energy consumption and environment destruction
Maier and Kent are of the opinion that although extensive use of energy in recent decades
has increased average efficiency of production factors. However utilization of energy has
entailed environment destruction through its pollutant effects. This is because of the fact
that preponderant part of greenhouse gasses emission in the world is in the form of carbon
dioxide which results from fusil fuels. Accordingly, energy sector play a significant part in
issues related to conditions of environment changes (shim, 2006).
2.2. Transportation and Environment Pollution
One of the most important consequences of transportation is its impact on the
environment. Such effect can be scrutinized from different perspectives. One aspect of it
has to do with the pollutant emissions which cause a change in the weather quality, an
increase in the amount of greenhouse gases emissions as well as atmosphere warming.
The other aspect relates to the noise pollution which besides creating physical problems
causes mental problems as well. It also affects people’s welfare. Furthermore it affects
ecosystem and biodiversity. Considering ongoing increase of transportation in cities it is
necessary to adopt policy to deal with the detrimental effects of the transportation on the
environment. Of the important strategies for decreasing or eliminating dioxide carbon
emissions in the transportation sector come as follow. To make use of new technologies in
transportation, to develop city and regions, to use public transportation models, to build
walking and cycling culture and transportation cost management system, are among
strategies which increase efficiency of transportation and traffic and also decrease density
and pollution (Schipper, et al, 2009).
Developing countries have not strong incentives to give priority to diminish emissions
since they are often involved in meeting the basic needs of their people like bread,
housing as well as transportation. Yedla, et al (2005) put forward that a decrease in
carbon dioxide emission sources in transportation sector of developing countries may be
regarded as a byproduct of sustainable development which is an overall goal. Cervero
(2001) claims that achieving the goal of sustainable development depends on accurate
integrating of energy consumptions strategies in urban households and transportation. For
instance, transportation system tends to increases its accessibility and transmission which
can lead to growth of dioxide carbon emissions. This, in turn, amount to a potential factor
for environmental, societal economical compatibility of cities and through the reduction in
production, density and air pollution will result in an improvement of health and life quality.
Furthermore Kennedy, et al (2005) came to the conclusion that potential negative factor
Proceedings of 29th International Business Research Conference
24 - 25 November 2014, Novotel Hotel Sydney Central, Sydney, Australia, ISBN: 978-1-922069-64-1
such as inefficiency of transportation system specifically pollution emissions by vehicles,
density and dependence on automobile decrease the life quality of peoples in urban areas.
Many researches have been accomplished in respect to weather pollution and energy
consumption both in Iran and other countries which most of them have made use of simple
and reasonable econometric methods in panel data and time series data.
Sayed and Sek (2013) investigate the EKC hypothesis for developed and developing
countries using a panel data for the period of 1961-2009. The authors concluded that
developed countries have higher turning points of inverted U-shape curve i.e. real GDP
per capita while developing countries have higher turning point of inverted U-shaped curve
is once SO2 emissions is used measure of environmental degradation. Shahbaz et al.
(2012) reported that EKC hypothesis is validated for Pakistan and energy consumption is
major contributor to CO2 emissions. Tiwari et al. (2013) investigate the correlation between
coal consumption, economic growth, trade openness and CO 2 emissions. This research
shows the existence of cointegration for long run between coal consumption, economic
growth, trade openness and CO2 emissions in India.
Glaeser and Kahn (2010) in a research with a subject of greening the city have examined
carbon dioxide emission and city development. According to the results, the lowest
amount of carbon dioxide emission concern to the California and The highest rates relates
to the Oklahoma and Texas. Furthermore, there is negative and meaningful correlation
between emission and land use regulation.
Schipper, Fabian and Leather (2009) have studied the influence of transportation on
carbon dioxide emission. They came to the conclusion that transport-related CO2
emissions in developing countries make a large part of world carbon dioxide emissions.
Heavy vehicles such as trucks burn more fuels and then emit more CO2 than light vehicles.
But this can be controlled by developing transportation system in in cities and villages.
Dapeng and Yan (2008) in an article have scrutinized the exhaust gas emission control
and china’s energy and economic limitations. In this research the situation of exhaust gas
emission and its main factors has been conducted through empirical methods. They
conclude that for controlling exhaust gas emission in china advanced energy technology
plays a key role and to control exhaust gas emission it is pivotal to adjust economic and
investment structure to enhance energy technology.
Alam, et al (2007) have examined the impact of the decisive factors of environment
pollution in Pakistan during 1971-2005. Their study shows that an increase in Gross
domestic product and intensity of energy use have augmented environment pollution ( CO2
emissions).
SHI (2001) in a study examined the impact of population growth on dioxide carbon
emissions in 93 countries with low, average and high per capita income during 1966-1975.
The achieved results showed that population growth has been one of the most important
factor in dioxide carbon emissions in two last decades. Moreover, it has been estimated
that 50 per cent of dioxide carbon emissions until 2025 will be on the grounds of
population growth. Furthermore, rising of income levels in these countries has given rise to
the increase in dioxide carbon emissions steadily.
In a study about decomposition of carbon dioxide emissions from energy consumption in
each of the economic sectors of Iran, (fotros and barati, 2011) have scrutinized four
influencing factors, namely economic activity, structural changes, diffusion coefficient of
carbon dioxide and energy intensity on carbon dioxide emissions. To explain differences in
the effectiveness of each of the four factors on the domestic sector, industry,
transportation, agriculture and others, they examined Laspeyres Index. The results
showed that the economic growth have had the most positive impact on carbon dioxide
emissions changes in all sectors including domestic sector. Energy intensity despite
having considerable effect on carbon dioxide emissions changes in domestic sector have
Proceedings of 29th International Business Research Conference
24 - 25 November 2014, Novotel Hotel Sydney Central, Sydney, Australia, ISBN: 978-1-922069-64-1
had frivolous influence on other remaining factors and even sometimes its effect was
negative.
3. Methodology and Data
The sample is consisting of 18 countries namely: Algeria, Bahrain, Egypt, Iran, Jordan,
Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Saudi Arabia, Sudan, Syrian Arab
Republic, Tunisia, Turkey, UAE and Yemen for the time period 1980-2012. We collect data
from World Bank Development Indicators (WDI, 2013).
The dynamic panel data model is valid if the estimator is consistent and the instruments
are valid. To examine the existing of EKS, we specify following model:
∑
(1)
Where
denotes carbon dioxide emissions metric tons per capita.
is vector of
explanatory variables.
is time specific intercepts and
is country’s specific effect.
Explanatory variables are comprised of: GDP per capita (GDP), square of GDP per capita
(GDP2), gasoline consumption per capita (GC), urban population (UP) and CO2 emission
from transport. Then Eq. (1) is writhen as follows:
(2)
Eq. (2) is dynamic because the lag of dependent variable involves as independent variable
at right-hand side of equation. Therefore, it is inappropriate to use classic panel data
estimator such as fixed effect and random effect. To estimate Eq. (2) we use Arellano and
Bond’s GMM estimator. Error! Reference source not found. shows estimation result for
Eq. (2).
One of consistent estimator to estimate moderate dynamic panel model is Arellano and
Bond’s estimator which is based on GMM method.
4. Empirical Results
According to the results, the coefficient of square of GDP per capita which is significant at
10 percent level has negative value. Thus, Kuznets type relationship between countries
environmental and income per capita does not reject in selected countries. According to
the literature, there is a positive correlation between of gasoline consumption (GC) and
urban population (UP) with CO2 emissions. However, such an increase can cause
environmental problems because of the higher production. Trade policies such as tariffs or
setting standards on export and import also impact production, consumption and
consequently change the levels of CO2 emissions. The model presents all significant
variables. The results show that growth increases with the emissions of energy at initial
stage economic development and however, in a mature stage the energy emission tends
to decrease.
Table 1: Results of the Dynamic Model
Independent varaible
LCO2,t-1
LGDP
LGDP2
LGC
LUP
AR(2)
Prob
Sargan test
Prob
Coefficient
0.44 (2.11)**
1.03 (1.85)*
-0.05 (-1.66)*
0.41 (4.62)***
2.15 (1.95)**
0.84
(0.40)
8.08
(1.00)
Proceedings of 29th International Business Research Conference
24 - 25 November 2014, Novotel Hotel Sydney Central, Sydney, Australia, ISBN: 978-1-922069-64-1
T-statistics are in parentheses, *** p<0.01, ** p<0.05, * p<0.1
The results from Sargan test of overidentifying restrictions which examines the validity of
the moment conditions used in the GMM estimation procedure, no longer reject the null
hypothesis that the overidentifying restrictions are valid. Ar(2) is tests for second–order
serial correlation in the first-differenced residuals, asymptotically distributed as N(0,1)
under the null hypothesis of no serial correlation (based on the efficient two-step GMM
estimator).
5. Conclusions
The energy is viewed as an engine economic and social developments as well as the
quality of human beings. However, stable developments and protection of the environment
is subject to appropriate use of energy resources specifically renewable energies.
Consequently, by making use of renewable energies, emphasizing on energy efficiency,
giving appropriate economic and financial considerations, protecting energy resources and
preventing environmental pollutions we need to pursue energy policy in massive scale.
The principal aim of this paper was to seek for the linkages among carbon emissions,
economic growth, energy consumption, urbanization and globalization in 18 MENA
countries during the annual period 1980-2012. The result showed a positive correlation of
income per capita with carbon emissions i.e. inverted U-shaped relationship between
income per capita and carbon emissions from transport. The impacts of urbanization and
gasoline consumption on CO2 emissions were positive.
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