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Bounds testing approach to analyzing the environment Kuznets curve hypothesis with structural beaks: The role of biomass energy consumption in the United States

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  • Shahbaz, Muhammad
  • Solarin, Sakiru Adebola
  • Hammoudeh, Shawkat
  • Shahzad, Syed Jawad Hussain

Abstract

This paper re-examines the specification of the environmental Kuznets curve (EKC) for the US economy by accounting for the presence of a major renewable energy source and trade openness over the period 1960–2016. Biomass energy consumption and trade openness as well as oil prices are considered as additional determinants of economic growth, and consequentially of CO2 emissions. The bounds testing approach to cointegration is used to examine the long-run relationship between the variables in the presence of structural breaks. The causal relationship between the variables is investigated by applying the VECM Granger causality test and accommodating structural breaks. The results confirm the presence of cointegration between the variables. Moreover, the relationship between economic growth and CO2 emissions is not only inverted-U shaped but also N-shaped in the presence of structural breaks and biomass. Biomass energy consumption lowers CO2 emissions. Exports, imports and trade openness are also environment-friendly. The causality analysis underscores a feedback effect between biomass energy consumption and CO2 emissions. Economic growth still Granger causes CO2 emissions in this new setup.

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  • Shahbaz, Muhammad & Solarin, Sakiru Adebola & Hammoudeh, Shawkat & Shahzad, Syed Jawad Hussain, 2017. "Bounds testing approach to analyzing the environment Kuznets curve hypothesis with structural beaks: The role of biomass energy consumption in the United States," Energy Economics, Elsevier, vol. 68(C), pages 548-565.
    • Handle: RePEc:eee:eneeco:v:68:y:2017:i:c:p:548-565
    DOI: 10.1016/j.eneco.2017.10.004
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    More about this item

    Keywords

    EKC; Biomass energy; Oil prices; Trade openness; Structural breaks;
    All these keywords.

    JEL classification:

    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy

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