Impact of Energy Efficiency on CO2 Emissions: Empirical Evidence from Developing Countries

Attaining higher level of the energy efficiency is being considered as a preferred and cost-effective policy option to achieve economic propensity, environmental sustainability and improved energy security in recent years. This drive to achieve higher energy efficiency levels is mainly motivated by higher international oil prices during last two decades, the concerns regarding energy supply security and rising CO2 emissions globally. In this background, this study decomposes energy intensity into structural and activity effects, and empirically examines their impact on CO2 emissions in environmental Kuznets curve framework for the developing economies. Second generation methodological approach is adopted. The decomposed indices reflect that energy efficiency has played a key role in decreasing energy intensity, while structural shifts have caused only a minor reduction in energy intensity. The findings suggest that energy efficiency improvements have largest influence on CO2 emissions mitigation. In developing countries as a whole, energy efficiency has positive while structural shifts have negative relation with CO2 emissions in long run. The findings presented that energy efficiency is major contributor of CO2 emissions reduction. While structural shifts in developing countries tend to increase CO2 emissions because these countries are moving towards the sectors that are producing more pollution. However, the income is one of the major contributors of CO2 emissions. While renewable energy consumption has negative and industrialization has positive impact on CO2 emissions in developing countries. The study outcomes are utilized to develop a policy framework for attaining the SDG 7 and SDG 13 in the chosen countries.