Energy consumption, CO₂ emissions, and economic growth in Korea: A causality analysis

ABSTRACT

This paper investigates the short- and long-run causality issues among energy consumption, carbon dioxide (CO₂) emissions, and economic growth in Korea by applying time-series techniques. It employs annual data covering the period 1971–2008. Tests for unit roots, co-integration, and Granger-causality based on an error-correction model (ECM) are presented. The results show that bidirectional causality exists between economic growth and energy consumption and between energy consumption and CO₂ emissions. Moreover, unidirectional causality from CO₂ emission to economic growth is detected. These results imply that Korea was dependent on carbon energy consumption for its rapid economic growth in the past, causing considerable CO₂ emissions. Korea needs to make a considerable effort in developing energy-efficiency technologies and renewable energy to accomplish green growth with low carbon emissions, which the government has declared to be part of its national agenda.

KEYWORDS:

• CO₂ emissions
• economic growth
• energy consumption
• error-correction model
• Granger-causality