Relationship between energy consumption and environmental sustainability in OECD countries: The role of natural resources rents
Introduction
Environmental pollution has remained an obstacle to the way of sustainable development because it brings numerous environmental challenges including climate change, global warming, deforestation, scarcity of water and pollution, that each one has become a vital threat since the 1950s. Over a half-century, countries have been struggling to combat the environmental issues raised from human activities (Ozcan et al., 2019a). In this respect, the mitigation of climate change has become a critical focus for various policy initiatives. Currently, it emerges as a global phenomenon due to its crucial role in achieving sustainable development that is one alternative for humanity to survive (Ulucak et al., 2019). Therefore, in the 21st century, the climate change issue has become the most crucial on-going concern owing to the detrimental effects of global warming, and calamitous climatic events that retain to destroy the whole planet (Danish et al., 2017). Further, the world has not accomplished an economic growth rate that ensures sustainable resource consumption and waste. Unfortunately, this has raised serious concern regarding the sustainability of such a growth trajectory because a rise in economic growth increases resource usage and energy demand, which causes environmental degradation (Ulucak et al., 2020b). The relationship between energy, economic growth, and the environment has turned out to become a hot issue of debate among academicians and policymakers as a result of sustainability concern (Kang et al., 2019).
The impacts of economic growth on environmental degradation are explained in two ways. First, economic growth accelerates natural resource extraction leading to an increase in the waste generation (Sarkodie and Strezov, 2019). However, technological innovation, strict environmental policy measures, and a structural economic change from pollution-intensive industries to services and the knowledge sector reducing ecological degradation can be achieved through higher income level-through higher economic growth in the long-run (Grossman and Krueger, 1991). On the other hand, initial rises in the economic growth process accelerate material usage, production, and consumption that contribute to pollution (Panayotou, 1993). Also, excessive resource consumption due to industrialization, deforestation, and mining reduce environmental quality (Danish et al., 2019). The integration of practices for sustainable management into the production and consumption processes declines the rate of natural resource depletion, and resources are allowable to redevelop thereafter.
The second strand is that economic growth influences emissions through high energy demand and consumption. Energy, especially from fossil sources, has been recognized as the key source of global emissions while it has been identified as a crucial catalyst for socio-economic activities worldwide (Bhat, 2018), which shows its potential in the improvement of livelihood and well-being (Wang et al., 2018). However, contrary to this vital role of energy, fossil energy sources are finite and unsustainable, and their overuse causes environmental degradation, whereas renewables are abundant and sustainable and might be helpful to clean the environment (Owusu and Asumadu-Sarkodie, 2016). Most industrial countries are dependent on dirty energy fuels (coal, oil, and gas) for production activities, and energy requirements are fulfilled through fossil fuels (Balsalobre-lorente et al., 2018).
Based on the argument above, both renewable and non-renewable energy have separate roles in economic growth and environmental quality, and it is necessary to seek to decouple environmental degradation from the energy consumption-growth trajectory. Therefore, it is of importance to know the causal relationship between renewable energy, non-renewable energy, natural resources and CO2 emissions. Hence, the present study investigates the relationship between renewable energy, non-renewable energy, natural resources rent, per capita income and environmental pollution nexus in the OECD countries.
The study concentrates on the OECD sample because OECD countries currently contribute nearly 63% to the world GDP in US dollars. Also, they are responsible from a considerable share of energy use (4145.046 kg of oil equivalent) and per capita CO2 emissions in the world, that are much more amounts than world average per capita energy use and CO2 emission (Ozcan et al., 2019b). Research has focused on investigating the nexus energy-growth and environmental degradation by using total energy or CO2 emissions, and most of them have ignored the role of disaggregated energy or alternative environmental degradation measurements including carbon footprint and ecological footprint for OECD countries.
Possible contributions of the study to the related literature lie on three points. First, unlike earlier studies on the nexus between energy consumption-growth-pollution nexus, this study uses two environmental quality indexes, ecological footprint, and carbon footprint, in addition to CO2 emissions. All three indexes of environmental performance reflect various dimensions of pollution. Second, this study includes the natural resource rents into the pre-determined pollution equation, which is a function of disaggregated energy consumption, since the natural resources and their possible environmental consequences have become a hot issue of debate. The inclusion of natural resources rents to the model would be beneficial to learn about the current energy scenario in OECD countries. Because resource-rich countries are less dependent on energy imports and thus help control environmental degradation by generating renewable energy from their resources (Balsalobre-lorente et al., 2018). Resource curse or the failure of countries with less natural resources mostly rely on energy imports (fossil fuels), which contribute to environmental degradation. Despite the combative nature of natural resources, studies on disaggregated energy and environmental pollution have ignored it so far. Third, a more robust long-run panel data estimation tool called augmented mean group (AMG) estimator is used, which allows cross-correlation across panel sections and heterogeneity in the slope parameter. Hence, it is probable the study would contribute to the current literature by consideration of new variables and robust results of the study.
Section snippets
Literature review
Most studies in the literature have agreed that renewable energy improves the quality of the environment, whereas non-renewable energy degrades the environmental condition. This expectation is supported by also empirical findings, e.g. Inglesi-Lotz and Dogan (2018) for Sub-Saharan Africa's Βig 10 electricity generators; Cerdeira Bento and Moutinho (2016) for Italy; Danish et al. (2017) for Pakistan, and Dogan and Ozturk (2017) for the USA. Additionally, Bélaïd and Youssef (2017) provide
Data, model, and methodology
The present study relies on a balanced panel data covering from 1980 to 2016 for 26 OECD countries (Australia, Austria, Belgium, Canada, Chile, Denmark, Finland, France, Greece, Hungary, Ireland, Italy, Japan, Luxembourg, Mexico, Netherlands, New Zealand, Norway, Portugal, South Korea, Spain, Sweden, Switzerland, Turkey, United Kingdom, United States). The other OECD countries are excluded from the sample due to data unavailability. The variables employed in the study are carbon dioxide
Results and discussion
The empirical analysis begins with the investigation of a cross-sectional dependence across 26-OECD countries and stationary behaviors of data for each variable. Then, the cointegration relationship is the following step of the empirical investigation. The study performs firstly cross-sectional dependence, unit root and cointegration checks and verifies that each variable employed in the study has strongly cross-sectionally correlated and has unit root. Results for cross-sectional dependence
Conclusion
This study aims at investigating the relationship between disaggregate energy consumption, natural resources, per capita income, and environmental degradation in 26 OECD countries for the period 1980–2016 by constructing three models in which CO2 emissions, ecological footprint, and carbon footprint are used to represent environmental deterioration. To this end, the study conducts panel data methodologies that allow panel sections to be cross-sectionally correlated. Having confirmed a
CRediT authorship contribution statement
Recep Ulucak: Conceptualization, Methodology, Formal analysis, Software, Supervision, Writing - review & editing. Danish: Resources, Investigation, Data curation, Writing - original draft, Writing - review & editing. Burcu Ozcan: Resources, Writing - original draft, Writing - review & editing.
References (76)
- et al.
Moving towards a sustainable environment : The dynamic linkage between natural resources , human capital , urbanization , economic growth , and ecological footprint in China
Resour. Pol.
(2020) - et al.
Economic growth and environmental impacts: an analysis based on a composite index of environmental damage
Ecol. Indicat.
(2017) - et al.
How does environmental regulation affect production location of non-carbon ecological footprint?
J. Clean. Prod.
(2018) - et al.
Is the ecological footprint related to the Kuznets curve a real process or rationalizing the ecological consequences of the affluence? Evidence from PSTR approach
Ecol. Indicat.
(2019) - et al.
How economic growth, renewable electricity and natural resources contribute to CO2emissions?
Energy Pol.
(2018) - et al.
The role of renewable energy to validate dynamic interaction between CO2 emissions and GDP toward sustainable development in Malaysia
Energy Econ.
(2018) - et al.
Toward a sustainable environment: nexus between CO2 emissions, resource rent, renewable and nonrenewable energy in 16-EU countries
Sci. Total Environ.
(2019) - et al.
Environmental degradation , renewable and non-renewable electricity consumption , and economic growth : assessing the evidence from Algeria
Energy Pol.
(2017) - et al.
Fossil & renewable energy consumption, GHGs (greenhouse gases) and economic growth: Evidence from a panel of EU (European Union) countries
Energy
(2014) - et al.
CO2 emissions, non-renewable and renewable electricity production, economic growth, and international trade in Italy
Renew. Sustain. Energy Rev.
(2016)