Greenhouse gas emissions–crude oil prices: an empirical investigation in a nonlinear framework

The present study examines the relationship between crude oil prices, one of the major inputs, of economic activity and environmental degradation as reflected in the volume of carbon emissions. The nonlinear autoregressive distributed lag cointegration approach was employed to study the intertemporal causal crude oil prices–carbon emissions relationship. Our findings confirm long-run asymmetry in both directions of the relationship studied. In the short run, asymmetric effects are confirmed running only from carbon emissions to the crude oil prices. Furthermore, it is validated that the climate change mitigation policies are effective in the long run, though this is not the case in the short run. The quantification of this relationship outlines the key role of crude oil prices to sustainable economic growth conditional to environmental policies in global terms.