Fossil fuel consumption, economic growth and CO2 emissions. Causality evinced from the BRICS world

The present study looks at the long term relationship among fossil fuel consumption, economic growth and CO2 emissions in the BRICS economy. The data runs from the period 1990- 2014. The unit root tests prove that the data contain unit root following which Pedroni’s and Kao’s cointegration test is applied. The results of cointegration prove that there is a long term relationship that exists. The long run estimates from DOLS and FMOLS show that increase in fossil fuel consumption will increase growth but at the same time with more carbon emissions the level of growth will decrease. Additionally increase in economic growth will reduce the amount of CO2 emissions thus favouring Kuznets inverted U hypothesis. Finally causality results are arrived at by using Dumitrescu-Hurlin panel causality technique. The results from causality tests show that unidirectional causality from energy to GDP; bidirectional relationship between emissions and GDP and unidirectional causality from fuel consumption to environmental degradation. The causality directions serve important policy implications for the government of the emerging economies to focus more on non-conventional sources of energy so as to keep the environment in the best of its health and at the same time make growth sustainable in the long run.