This paper investigates the short- and long-run causality issues among energy consumption, CO2 emission and economic growth in Chile by applying time-series techniques. It employs annual data covering the period 1965-2010. Tests for unit roots, co-int...
This paper investigates the short- and long-run causality issues among energy consumption, CO2 emission and economic growth in Chile by applying time-series techniques. It employs annual data covering the period 1965-2010. Tests for unit roots, co-integration, and Granger-causality based on error-correction model are presented. The results show that strong uni-directional causality runs from energy consumption and CO2 emission to economic growth. Moreover, uni-directional causality from CO2 emission to economic growth is found.
The short-run dynamics indicate uni-directional causalities run from energy consumption and CO2 emission to economic growth. However, uni-directional causality from energy consumption to CO2 emission is not found in the long-run. No bi-directional causality is identified among energy consumption, CO2 emission and economic growth. This result implies that energy consumption lead to economic growth, while more economic growth did not need more energy consumption in the past. However, recent public report says that power demand is expected to grow significantly in the future. To achieve Chilean 20% carbon emission reduction target by 2020 while minimizing impact on economy by carbon emission reduction policy, Chile has to maintain current industrial structure and enhance renewable energy development policy.