Exploring the role of conventional energy consumption on environmental quality in Brazil: Evidence from cointegration and conditional causality

Abstract

The study explores the nexus between energy, export, import, population and economic growth on environmental quality in Brazil. Hence the long-run equilibrium association and dynamic causality amongst environmental quality—proxy with CO2 emission—energy consumption, trade policy, and population growth in Brazil is empirically estimated. Annual frequency time-series data from 1971 to 2016 is employed within the ARDL bounds testing methodological framework. The conditional Granger causality procedure within the VECM is followed to examine dynamic short-term and long-run causations in the estimated model. Thus, a stable long-run relationship is empirically established in the estimated model. Hence, within the CO2 emission energy-augmented model—via the channel of real GDP per capita, real per capita exports/imports, and population growth—CO2 emissions converge to its long-run equilibrium by an average speed of 37.47% on an annually basis. Additionally, a 1% increase in energy consumption increases CO2 emissions by 1.259%. Similarly, an increase in GDP growth and export worsens environmental quality by increasing CO2 emissions by 0.033% and 2.202% respectively. The result of the impulse responses and variance decomposition in response to exogenous shocks in the model collaborate the findings of the ARDL model. Shock to energy use, real GDP per capita, real exports per capita, real imports per capita, and population growth causes changes in environmental quality—both in the short-run and long-run period—with significant implication for environmental conservation in Brazil. The short-run causality supports the imperative of energy for economic growth. Thus, suggests caution in following conservation policy so as not to jeopardize real economic growth, whilst contemplating environmental sustainability in Brazil.