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Long And Short-Run Linkages Between Economic Growth, Energy Consumption And Co2 Emissions In Tunisia

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  • Houssem Eddine Chebbi

    () (Faculty of Economic Sciences and Management of Nabeul)

Abstract

The aim of this country specific study is to understand long and short-run linkages between economic growth, energy consumption and carbon emission using Tunisian data. These linkages were largely under considered and unanswered for policy makers in Tunisia and this empirical research attempts to present some findings to better integrate the environment into economic development decisions. Cointegration procedure is used to analyze time series relationships and error-correction terms are considered to estimate generalized impulse response functions and to test for the direction of Granger causality. Statistical findings of Johansen's cointegration analysis detect the presence of two cointegrating vectors. The first reveals a positive linkage between output and energy use and the second indicates that carbon emission and energy consumption are positively related in the long-run. In addition, results of the long-run relationships provide some evidence of “inefficient use” of energy in Tunisia, since environmental degradation tends to rise more rapidly than economic growth. Moreover, empirical results provide support for causality running from CO2 emissions growth to output growth, both in the short-run and the long-run. The results also provide some support of mutual causal and feedback relationship in the long-run. This pattern of development is consistent with the experiences of many developing countries. The results have important implications for policy makers in Tunisia who should be mindful that a persistent decline in environmental quality may exert negative externalities to the economy. Since statistical results confirm that an increase in pollution level induces economic expansion and in order not to adversely affect economic growth, more efforts must be made to encourage Tunisian industry to adopt technology that minimizes pollution, as a serious environmental policy. In Tunisia, the potential exists for the development of renewable energies and further efforts would require additional financing by policy makers and environmental awareness. In addition, the combined results of causality analysis and impulse response functions do not support the view that energy and output are neutral with respect to each other in Tunisia and the finding of a bi-directional causality between output growth and growth in energy consumption in the long-run implies that Tunisia is an energy dependent economy. The Tunisian economy may be vulnerable to energy shocks in which an energy shortage may adversely affect output growth. For this reason, it seems possible that energy conservation policies could be achieved through the rationalization of consumer and household demand and the reduction of Tunisian government consumption.

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Bibliographic Info

Paper provided by Economic Research Forum in its series Working Papers with number 485.

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Length: 22 pages
Date of creation: Apr 2009
Date of revision: Apr 2009
Publication status: Published by The Economic Research Forum (ERF)
Handle: RePEc:erg:wpaper:485

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Cited by:
  1. Muhammad, Shahbaz & Qazi Muhammad, Adnan Hye & Aviral Kumar, Tiwari, 2012. "Economic Growth, Energy Consumption, Financial Development, International Trade and CO2 Emissions in Indonesia," MPRA Paper 43294, University Library of Munich, Germany, revised 15 Dec 2012.
  2. Muhammad, Shahbaz, 2012. "Multivariate granger causality between CO2 Emissions, energy intensity, financial development and economic growth: evidence from Portugal," MPRA Paper 37774, University Library of Munich, Germany, revised 31 Mar 2012.

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