Globalization and CO2 emissions nexus: evidence from the EKC hypothesis in South Asian countries

Abstract

In the last few decades, developing countries continued to increase their manufacturing industries' phenomenal growth rate. Due to the emergence of globalization, these developing countries are getting economic growth at the cost of environmental pollution. In this context, the extent of linkages between globalization and carbon dioxide (CO₂) emissions has been investigated over the time period of 1972-2013 in South Asian countries. The econometric and graphical analyses are found U-shape association between globalization and CO₂ emissions in Nepal, Afghanistan, Bangladesh, and Sri Lanka, and an inverted U-shape relationship is observed in Pakistan and Bhutan. Moreover, results have shown that there exists a bi-directional causality between globalization and CO₂ emissions in Pakistan, Bangladesh, and Nepal. This indicates that globalization is increasing CO₂ emissions and CO₂ emissions impact globalization by economic growth. However, after some threshold level, globalization is responsible for decreasing CO₂ emissions in Pakistan and Bhutan. For the first time, globalization is incorporated in the economic analysis, showing the U-shape and inverted U-shape associations between globalization and CO₂ emissions. This study suggests some strong policy recommendations to consider globalization as cost-effective tool to achieve sustainable economic growth in South Asian countries.

Keywords: CO2 emissions; EKC; Globalization; South Asia.