Energy consumption, CO₂ emission, and economic growth: Evidence from Mexico

ABSTRACT

Energy policy-makers in Mexico are interested in the causal relationship among energy consumption, carbon dioxide (CO₂) emissions, and economic growth. Therefore, this paper attempts to analyze the short- and long-run causality issues among energy consumption, CO₂ emissions, and economic growth in Mexico using time-series techniques. To this end, annual data covering the period 1971–2007 are employed and tests for unit root, co-integration, and Granger-causality based on the error-correction model (ECM) are applied. The results show that there exits unidirectional causality running from economic growth to energy consumption and CO₂ emissions to economic growth without any feedback effects. Thus, energy conservation policies can be initiated without the consequent deteriorating economic side effects. Moreover, there exists bidirectional causality between energy consumption and CO₂ emissions. This means that an increase in energy consumption directly affects CO₂ emissions and that CO₂ emissions also stimulate further energy consumption.

KEYWORDS:

• Causality
• CO₂ emissions
• economic growth
• energy consumption
• Mexico