Relationship between Energy Consumption, Carbon Dioxide Emissions and Economic Growth: Evidence from Selected Top Oil Energy-Consuming Countries

With rising climate change concerns and increasing energy demand, many of the developed countries are pursuing sustainable and low carbon economic development plans. The dramatic use of fossil-fuel energy in the economy increases the level of carbon dioxide emissions. Carbon dioxide (CO2) is the dominant greenhouse gas that intensifies the global warming phenomena as a rising challenge over the last two decades. As developed nations around the world are taking immediate steps to address this issue, it is vital to use energy efficiently and minimize environmental pollution effects. Thus, this research examined the relationship between energy consumption, CO2 emissions, and economic growth for the top oil energy-consuming countries, including the U.S., Japan, Canada, and Australia. It also estimated the impact of other macroeconomic parameters comprising inflation rate, investment rate, and trade openness on economic growth. Multiple regression analysis was employed for the time series data covering the timespan from 1990-2018. The empirical findings indicated that energy consumption has a positive and significant impact on economic growth in the selected countries. Unsurprisingly, CO2 emissions, a proxy for fuel-based energy use, had a destructive influence on the environment. Moreover, the results showed that a positive association existed between investment rate, trade openness, and economic growth. Conversely, the inflation rate in all of the selected countries had an insignificant impact on growth output. Policies such as efficient use of energy, increasing the rate of tax, replacing bio-diesel fuel, or implementing renewable energy instead of fossil-fuels were suggested to curb carbon emissions.