CO2 emissions, non-renewable and renewable electricity production, economic growth, and international trade in Italy

This paper applies the autoregressive distributed lag (ARDL) bounds testing approach to cointegration to investigate the dynamic causal relationships between CO2 emissions per capita, real GDP per capita, per capita non-renewable electricity production and per-capita renewable electricity production, and international trade in the case of Italy from 1960 to 2011. We find cointegration among these variables in the presence of possible structural breaks and we overcome the problem of multicollinearity in the research design. The environmental Kuznets curve (EKC) hypothesis is validated analytically because the estimated pollution model indicates that economic growth leads to less pollution over time. Per capita renewable electricity production reduces the level of CO2 emissions per capita in the short-run and in the long-run, whereas international trade only impacts positively upon carbon dioxide emissions per capita in the long-run. International trade Granger causes CO2 emissions per capita and non-renewable electricity production per capita. Moreover the results depict the existence of the long-run unidirectional Granger causality relation running from output per capita to renewable electricity production per capita, and from non-renewable electricity production per capita to renewable electricity production per capita. The findings indicate that renewable electricity production is a key solution in reducing pollutant emissions over time. This result should be of concern to policy makers.