The relationship between CO₂ emissions, energy consumption and economic growth in Italy

Abstract

This study examines the relationship between CO₂ emissions, energy consumption and economic growth in Italy over the period 1970–2006. Results of unit root tests show that all variables are non-stationary in their level form, but stationary in first differences form. The causal relationship between variables is examined using causality test in a vector autoregressive framework. Our empirical results show that CO₂ emissions, energy consumption and economic growth are not cointegrated. Moreover, the Toda and Yamamoto Granger non-causality test shows a bidirectional causality between CO₂ emissions and economic growth, as well as between CO₂ emissions and energy consumption. Forecast error variance decompositions evidence that the errors in real per capita GDP are mainly due to uncertainty in GDP itself, while the errors in predicting the energy consumption and the CO₂ emissions are sensitive to disturbances in the other two equations.

Keywords:

• energy consumption
• economic growth
• CO₂ emissions
• Italy

JEL Classification:

• B22
• C32
• N54
• Q43

Acknowledgements

Comments from Carlo Andrea Bollino (Perugia University) and Gian Cesare Romagnoli (Roma Tre University) as well as the anonymous referees are gratefully acknowledged. However, the usual disclaimer applies.

Notes

1. See, for more details: http://www.econstats.com/wdi/wdic_ITA.htm and http://www.iea.org/.