Environmental Science and Pollution Research

, Volume 25, Issue 31, pp 31283–31296 | Cite as

Financial development, globalization, and CO2 emission in the presence of EKC: evidence from BRICS countries

  • Abdul HaseebEmail author
  • Enjun Xia
  • Danish
  • Muhammad Awais Baloch
  • Kashif Abbas
Research Article


This study examines the impact of energy consumption, financial development, globalization, economic growth, and urbanization on carbon dioxide emissions in the presence of Environmental Kuznets Curve (EKC) model for BRICS economies, by using a family of econometric techniques robust to heterogeneity and cross-sectional dependence. Results from LM test, CIPS and CADF unit root test, Westerlund Cointegration test, the Dynamic seemingly unrelated regression (DSUR), and Dumitrescu-Hurlin Granger causality test show that (i) the data is cross sectionally dependent and heterogeneous; (ii) carbon dioxide emissions, energy consumption, financial development, globalization, economic growth, square of GDP and urbanization have integration of order one; (iii) the examined variables are co-integrated; (iv) energy consumption and financial development contribute to the carbon dioxide emissions whereas globalization and urbanization have negative but insignificant relationship with carbon dioxide emissions; (v) supports the EKC hypothesis in BRICS economies; (vi) bidirectional causality exists among energy consumption, financial development, economic growth and square of GDP with carbon dioxide emissions whereas globalization and urbanization have unidirectional relationship with carbon dioxide emissions. Since these panel techniques account for heterogeneity and cross-sectional dependence in their estimation procedure, the empirical results are robust and reliable for policy recommendations. Furthermore, this study also uses time series tests (ADF, P-P, and FMOLS) to find the empirical results for each of the country and finds mixed results. Empirical findings directed towards some important policy implications.


Financial development CO2 emission Globalization BRICS 


  1. Ali S, Waqas H, Najid A (2015) Analyzing the dynamics of energy consumption, liberalization, financial development, poverty and carbon emissions in Pakistan. J Appl Environ Biol Sci. 5:166–183Google Scholar
  2. Arrow K, Bolin B, Costanza R, Dasgupta P, Folke C, Holling CS, Jansson BO, Levin S, Mäler KG, Perrings C, Pimentel D (1995) Economic growth, carrying capacity, and the environment 1. Ecol Econ 268:520–521. CrossRefGoogle Scholar
  3. Baek J (2015) Environmental Kuznets curve for CO<inf>2</inf> emissions: the case of Arctic countries. Energy Econ 50:13–17. CrossRefGoogle Scholar
  4. Bekhet HA, Matar A, Yasmin T (2017) CO2 emissions, energy consumption, economic growth, and financial development in GCC countries: dynamic simultaneous equation models. Renew Sust Energ Rev 70:117–132. CrossRefGoogle Scholar
  5. Bonga-Bonga L (2016) Uncovering equity market contagion among BRICS countries: an application of the multivariate GARCH model. Q Rev Econ Finance 67:36–44. CrossRefGoogle Scholar
  6. Boutabba MA (2014) The impact of financial development, income, energy and trade on carbon emissions: evidence from the Indian economy. Econ Model 40:33–41. CrossRefGoogle Scholar
  7. Breusch TS, Pagan AR (1980) The Lagrange multiplier test and its applications to model specification in econometrics. Rev Econ Stud 47:239. CrossRefGoogle Scholar
  8. Chen L, De Lombaerde P (2014) Testing the relationships between globalization, regionalization and the regional hubness of the BRICs. J Policy Model 36:S111–S131. CrossRefGoogle Scholar
  9. Delhi N (2012) The BRICS report. Oxford University Press, OxfordGoogle Scholar
  10. Dickey DA, Fuller WA (1981) Likelihood ratio statistics for autoregressive time series with a unit root. Econometrica 49:1057–1072CrossRefGoogle Scholar
  11. Dickey DA, Fuller WA, Dickey DA, Fuller WA (1979) Distribution of the estimators for autoregressive time series with a unit root distribution of the estimators for autoregressive time series with a unit root. J Am Stat Assoc 74:427–431Google Scholar
  12. Dinda S (2004) Environmental Kuznets curve hypothesis: a survey. Ecol Econ 49:431–455. CrossRefGoogle Scholar
  13. Dogan E, Seker F (2016) An investigation on the determinants of carbon emissions for OECD countries: empirical evidence from panel models robust to heterogeneity and cross-sectional dependence. Environ Sci Pollut Res 23:14646–14655. CrossRefGoogle Scholar
  14. Dogan E, Turkekul B (2016) CO2emissions, real output, energy consumption, trade, urbanization and financial development: testing the EKC hypothesis for the USA. Environ Sci Pollut Res 23:1203–1213. CrossRefGoogle Scholar
  15. Dreher A (2006) Does globalization affect growth? Evidence from a new index of globalization. Appl Econ 38:1091–1110. CrossRefGoogle Scholar
  16. Dumitrescu EI, Hurlin C (2012) Testing for Granger non-causality in heterogeneous panels. Econ Model 29:1450–1460. CrossRefGoogle Scholar
  17. Farhani S, Ozturk I (2015) Causal relationship between CO2 emissions, real GDP, energy consumption, financial development, trade openness, and urbanization in Tunisia. Environ Sci Pollut Res 22:15663–15676. CrossRefGoogle Scholar
  18. Furuoka F (2015a) Financial development and energy consumption: evidence from a heterogeneous panel of Asian countries. Renew Sust Energ Rev 52:430–444. CrossRefGoogle Scholar
  19. Furuoka F (2015b) The CO2 emissions—development nexus revisited. Renew Sust Energ Rev 51:1256–1275. CrossRefGoogle Scholar
  20. Gengenbach C, Palm FC, Urbain JP (2010) Panel unit root tests in the presence of cross-sectional dependencies: comparison and implications for modelling. Econ Rev 29:111–145. CrossRefGoogle Scholar
  21. Grossman GM, Krueger AB (1991) Environmental impacts of a north American free trade agreement. Natl Bur Econ Res Work Pap Ser No. 3914:1–57.
  22. Grossman GM, Krueger AB (1995) Economic growth and the environment. The Quarterly Journal of Economics 110:353–377. CrossRefGoogle Scholar
  23. Harris RDF, Tzavalis E (1999) Inference for unit roots in dynamic panels where the time dimension is fixed. J Econ 91:201–226. CrossRefGoogle Scholar
  24. Heidari H, Turan Katircioǧlu S, Saeidpour L (2015) Economic growth, CO2emissions, and energy consumption in the five ASEAN countries. Int J Electr Power Energy Syst 64:785–791. CrossRefGoogle Scholar
  25. Im KS, Pesaran MH, Shin Y (2003) Testing for unit roots in heterogeneous panels. J Econ 115:53–74. CrossRefGoogle Scholar
  26. Jalil A, Feridun M (2011) The impact of growth, energy and financial development on the environment in China: a cointegration analysis. Energy Econ 33:284–291. CrossRefGoogle Scholar
  27. Jaunky VC (2011) The CO2emissions-income nexus: evidence from rich countries. Energy Policy 39:1228–1240. CrossRefGoogle Scholar
  28. Javid M, Sharif F (2016) Environmental Kuznets curve and financial development in Pakistan. Renew Sust Energ Rev 54:406–414. CrossRefGoogle Scholar
  29. Kasman A, Duman YS (2015) CO2 emissions, economic growth, energy consumption, trade and urbanization in new EU member and candidate countries: a panel data analysis. Econ Model 44:97–103. CrossRefGoogle Scholar
  30. Kraft J, Kraft A (1978) On the relationship between energy and GNP author ( s ): John Kraft and Arthur Kraft stable URL : on the relationship between energy and GNP. J Energy Dev 3:401–403Google Scholar
  31. Levin A, Lin CF, Chu CSJ (2002) Unit root tests in panel data: asymptotic and finite-sample properties. J Econ 108:1–24. CrossRefGoogle Scholar
  32. Li T, Wang Y, Zhao D (2016) Environmental Kuznets curve in China: new evidence from dynamic panel analysis. Energy Policy 91:138–147. CrossRefGoogle Scholar
  33. Mark NC, Ogaki M, Sul D (2005) Dynamic seemingly unrelated cointegrating regressions. 72:797–820Google Scholar
  34. Nassani AA, Aldakhil AM, Qazi Abro MM, Zaman K (2017) Environmental Kuznets curve among BRICS countries: spot lightening finance, transport, energy and growth factors. J Clean Prod 154:474–487. CrossRefGoogle Scholar
  35. Ozturk I, Acaravci A (2013) The long-run and causal analysis of energy , growth , openness and fi nancial development on carbon emissions in Turkey. Energy Econ 36:262–267. CrossRefGoogle Scholar
  36. Pao HT, Tsai CM (2010) CO2emissions, energy consumption and economic growth in BRIC countries. Energy Policy 38:7850–7860. CrossRefGoogle Scholar
  37. Pao HT, Tsai CM (2011) Multivariate granger causality between CO2emissions, energy consumption, FDI (foreign direct investment) and GDP (gross domestic product): evidence from a panel of BRIC (Brazil, Russian Federation, India, and China) countries. Energy 36:685–693. CrossRefGoogle Scholar
  38. Pesaran MH (2007) A simple panel unit root test in the presence of cross-section dependence. J Appl Econ 47:36–37. CrossRefGoogle Scholar
  39. Pesaran MH, Ullah A, Yamagata T (2006) A bias-adjusted test of error cross section dependenceGoogle Scholar
  40. Phillips PC, Hansen BE (1990) Statistical inference in instrumental variables regression with I (1) processes. Rev Econ Stud 57:99–125. CrossRefGoogle Scholar
  41. Phillips PC, Perron P (1988) Testing for a unit root in time series regression. Biometrika 75:335–346. CrossRefGoogle Scholar
  42. Radulescu IG, Panait M, Voica C (2014) BRICS countries challenge to the world economy new trends. Procedia Econ Financ 8:605–613. CrossRefGoogle Scholar
  43. Riti JS, Yang S, Song D, Kamah M (2017) The contribution of energy use and financial development by source in climate change mitigation process: a global empirical perspective. J Clean Prod 148:882–894. CrossRefGoogle Scholar
  44. Saboori B, Sulaiman J (2013a) Environmental degradation, economic growth and energy consumption: evidence of the environmental Kuznets curve in Malaysia. Energy Policy 60:892–905. CrossRefGoogle Scholar
  45. Saboori B, Sulaiman J (2013b) CO2emissions, energy consumption and economic growth in association of southeast Asian nations (ASEAN) countries: a cointegration approach. Energy 55:813–822. CrossRefGoogle Scholar
  46. Sadorsky P (2011) Financial development and energy consumption in central and eastern European frontier economies. Energy Policy 39:999–1006. CrossRefGoogle Scholar
  47. Salahuddin M, Alam K, Ozturk I, Sohag K (2017) The effects of electricity consumption, economic growth, financial development and foreign direct investment on CO2 emissions in Kuwait. Renew Sust Energ Rev 81:1–9. CrossRefGoogle Scholar
  48. Samargandi N, Kutan AM (2016) Private credit spillovers and economic growth: evidence from BRICS countries. J Int Financ Mark Inst Money 44:56–84. CrossRefGoogle Scholar
  49. Shahbaz M, Kumar Tiwari A, Nasir M (2013a) The effects of financial development, economic growth, coal consumption and trade openness on CO2 emissions in South Africa. Energy Policy 61:1452–1459. CrossRefGoogle Scholar
  50. Shahbaz M, Ozturk I, Afza T, Ali A (2013b) Revisiting the environmental Kuznets curve in a global economy. Renew Sust Energ Rev 25:494–502. CrossRefGoogle Scholar
  51. Shahbaz M, Solarin SA, Mahmood H, Arouri M (2013c) Does financial development reduce CO2 emissions in Malaysian economy? A time series analysis. Econ Model 35:145–152. CrossRefGoogle Scholar
  52. Shahbaz M, Khraief N, Uddin GS, Ozturk I (2014) Environmental Kuznets curve in an open economy: a bounds testing and causality analysis for Tunisia. Renew Sust Energ Rev 34:325–336. CrossRefGoogle Scholar
  53. Shahbaz M, Mallick H, Mahalik MK, Loganathan N (2015) Does globalization impede environmental quality in India? Ecol Indic 52:379–393. CrossRefGoogle Scholar
  54. Shahbaz M, Mahalik MK, Shah SH, Sato JR (2016a) Time-varying analysis of CO2 emissions, energy consumption, and economic growth nexus: statistical experience in next 11 countries. Energy Policy 98:33–48. CrossRefGoogle Scholar
  55. Shahbaz M, Shahzad SJH, Ahmad N, Alam S (2016b) Financial development and environmental quality: the way forward. Energy Policy 98:353–364. CrossRefGoogle Scholar
  56. Shahbaz M, Solarin SA, Ozturk I (2016c) Environmental Kuznets curve hypothesis and the role of globalization in selected African countries. Ecol Indic 67:623–636. CrossRefGoogle Scholar
  57. Shahbaz M, Khan S, Ali A, Bhattacharya M (2017a) The impact of globalization on co 2 emissions in China. Singap Econ Rev 62. CrossRefGoogle Scholar
  58. Shahbaz M, Nasreen S, Ahmed K, Hammoudeh S (2017b) Trade openness–carbon emissions nexus: the importance of turning points of trade openness for country panels. Energy Econ 61:221–232. CrossRefGoogle Scholar
  59. Shahbaz M, Shahzad SJH, Kumar M (2017c) Is globalization detrimental to CO2 emissions in Japan? New Threshold AnalysisGoogle Scholar
  60. Shahbaz M, Shahzad SJH, Mahalik MK, Hammoudeh S (2017d) Does globalisation worsen environmental quality in developed economies? Environ Model Assess 1–16. CrossRefGoogle Scholar
  61. Shahzad SJH, Kumar RR, Zakaria M, Hurr M (2017) Carbon emission, energy consumption, trade openness and financial development in Pakistan: a revisit. Renew Sust Energ Rev 70:185–192. CrossRefGoogle Scholar
  62. Solarin SA, Al-Mulali U, Musah I, Ozturk I (2017) Investigating the pollution haven hypothesis in Ghana: an empirical investigation. Energy 124:706–719. CrossRefGoogle Scholar
  63. Stern DI (2004) The rise and fall of the environmental Kuznets curve. World Dev 32:1419–1439. CrossRefGoogle Scholar
  64. Stern DI (2010) Between Estimates of the Environmental Kuznets Curve. CAMA Working Paper No.4/2010. 
  65. Tamazian A, Chousa JP, Vadlamannati KC (2009) Does higher economic and financial development lead to environmental degradation: evidence from BRIC countries. Energy Policy 37:246–253. CrossRefGoogle Scholar
  66. Tang CF, Tan BW (2015) The impact of energy consumption, income and foreign direct investment on carbon dioxide emissions in Vietnam. Energy 79:447–454. CrossRefGoogle Scholar
  67. Westerlund J (2007) Testing for error correction in panel data. Oxf Bull Econ Stat 69:709–748. CrossRefGoogle Scholar
  68. Xiong L, Tu Z, Ju L (2016) Reconciling regional differences in financial development and carbon emissions : a dynamic panel data approach. Energy Procedia. CrossRefGoogle Scholar

Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2018

Authors and Affiliations

  • Abdul Haseeb
    • 1
    Email author
  • Enjun Xia
    • 1
  • Danish
    • 1
    • 2
  • Muhammad Awais Baloch
    • 1
  • Kashif Abbas
    • 1
  1. 1.School of Management and EconomicsBeijing Institute of TechnologyBeijingChina
  2. 2.Center for Energy and Environmental Policy ResearchBeijing Institute of TechnologyBeijingChina

Personalised recommendations