Carbon Emissions, Energy Consumption and Income in SAARC Countries

With global warming and the extreme climate changes in the world, controlling emissions has now become an area of focus for most countries. Although the Kyoto protocol (ratified by over 170 countries) does not require the reduction of emissions by the major SAARC countries, they intend to benefit from technology transfers and proceeds from sale of their carbon credits earned due to reduced emissions so long as there is no impact on their growth objectives. We evaluate the causal relationships between income, energy consumption and carbon emissions in the four major SAARC countries and conclude that emissions are caused (in the Granger sense) by income and energy consumption together. Our analysis suggests that these countries should step up their efforts on reducing emissions and consider reducing energy consumption as a serious environmental policy without having to negatively impact their income growth.