Authors: Reza Sherafatian-Jahromi and Mohd-Shahwahid Haji Othman
Year: 2020, Volume 20 Number 4
This paper examines the macroeconomic determinants of CO2 emissions in Australia by applying the autoregressive distributed lag bound testing approach to cointegration. Findings reveal that CO2 emissions, energy consumption, financial development, and trade openness are cointegrated only when CO2 emissions are considered as the dependent variable. Under this situation, energy consumption and economic development lead to environmental degradation, whereas financial development improves the environment quality in Australia in the long run. The impact of trade openness on CO2 emissions is positive. However, this impact is lower than that of economic development and energy consumption. Moreover, bidirectional causality is found between CO2 emissions and economic development in the short run.
Keywords: CO2 emissions, economic activities, financial development, trade openness, ARDL Bound Testing