A Survey of Causality Relationship between CO2 Emissions, FDI, Per Capita Energy Consumption and GDP in Iran: Application of Toda-Yamamoto Test

Abstract

A large portion of the world energy consumption is provided by fossil fuels, which cause massive emissions of dangerous pollutants into the environment leading to global warming and climate change. What is certain is the world's energy consumption in order to increase economic growth and the resulting greenhouse gas emissions, especially carbon dioxide, the consumption of fossil fuels is a growing trend. Therefore in the present study to examine the causal relationship between CO2 emissions (as an alternative to the destruction of the environment variable) and variables of FDI, per capita energy consumption and GDP in the form of an environmental Kuznets hypothesis in Iran during 1980-2008. To that end, The Toda-Yamamoto method, has been used to examine the causality relationship. The main finding of this study shows that there exists bidirectional causality between CO2 emissions and energy consumption and unidirectional causality running from GDP to CO2 emissions. Given the existence of causal relationships between variables, the hypothesis of environmental Kuznets curve (EKC) in state variables that criterion economic growth CO2 emissions and energy consumption is to be confirmed, but in that case the criterion of economic growth, GDP is confirmed is not.