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CO2 emissions, real output, energy consumption, trade, urbanization and financial development: testing the EKC hypothesis for the USA

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Abstract

This study aims to investigate the relationship between carbon dioxide (CO2) emissions, energy consumption, real output (GDP), the square of real output (GDP2), trade openness, urbanization, and financial development in the USA for the period 1960–2010. The bounds testing for cointegration indicates that the analyzed variables are cointegrated. In the long run, energy consumption and urbanization increase environmental degradation while financial development has no effect on it, and trade leads to environmental improvements. In addition, this study does not support the validity of the environmental Kuznets curve (EKC) hypothesis for the USA because real output leads to environmental improvements while GDP2 increases the levels of gas emissions. The results from the Granger causality test show that there is bidirectional causality between CO2 and GDP, CO2 and energy consumption, CO2 and urbanization, GDP and urbanization, and GDP and trade openness while no causality is determined between CO2 and trade openness, and gas emissions and financial development. In addition, we have enough evidence to support one-way causality running from GDP to energy consumption, from financial development to output, and from urbanization to financial development. In light of the long-run estimates and the Granger causality analysis, the US government should take into account the importance of trade openness, urbanization, and financial development in controlling for the levels of GDP and pollution. Moreover, it should be noted that the development of efficient energy policies likely contributes to lower CO2 emissions without harming real output.

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Authors and Affiliations

  1. Department of Economics, Abdullah Gul University, Sumer Campus, Office #B206, Kayseri, Turkey

    Eyup Dogan

  2. Department of Agricultural Economics, Ege University, Bornova, Turkey

    Berna Turkekul

Authors
  1. Eyup Dogan
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  2. Berna Turkekul
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Correspondence to Eyup Dogan.

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Responsible editor: Marcus Schulz

We hereby declare that the manuscript has not been published before nor submitted to another journal for the consideration of publication.

We would like to thank the editor and two anonymous referees for their comments and suggestions. Any remaining errors are solely ours.

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Dogan, E., Turkekul, B. CO2 emissions, real output, energy consumption, trade, urbanization and financial development: testing the EKC hypothesis for the USA. Environ Sci Pollut Res 23, 1203–1213 (2016). https://doi.org/10.1007/s11356-015-5323-8

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