Is trade, energy consumption and economic growth threat to environmental quality in Bahrain–evidence from VECM and ARDL bound test approach

Abstract

Purpose The Kingdom of Bahrain has had tremendous development in various areas in the last decade. As a result of this, increasing energy consumption in Bahrain puts a strain on the country's energy supplies and increased CO2 emissions. This study investigates the determinants of carbon emissions in Bahrain. Design/methodology/approach This study employs the autoregressive distributed lag (ARDL) bounds test and vector error correction model (VECM) Granger causality cointegration methods for empirical analysis during 1980-2020. The unit root test and residual diagnosis have been applied to see the stationarity and normality of the model. Findings The analysis suggests no short run causality amid carbon emission, international trade, capital formation, economic development and energy consumption, but a long-run association jointly exist from the exogenous variables toward endogenous variables. The results of the study also revealed that trade and economic growth in Bahrain react negatively to environmental deterioration. Practical implications This research study’s outcome will help the policymakers to build sound external and environmental policies to sustain economic growth and suggested policymakers to emphasize on sustainable usage of energy, alternatives of energy supply, and creation of renewable energy to mitigate the impact of CO2 emission. Social implications The alternatives of energy supply and creation of renewable energy can positively influence the socio-economic state of the nation, like new job opportunities, revenue generation. Originality/value This study is unique as no other study till now has covered this period. The findings are also different as the past studies found short-run causality with the control variables, but the study found a long-run causality jointly.

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