A Study on the Relationship between Economic Growth and CO2 Emission: A Comparative Study on Selective Countries

Abstract

The relationship between economic growth and CO2 emission has been a widely researched topic in
the global context. This paper intends to shed light on the relationship between economic growth and
CO2 emission in selected group of countries with special comparison between Sri Lanka and each
country since it is the research gap identified by the researchers. The objective of this paper is to
investigate the relationship between economic growth and CO2 emission in Sri Lanka in comparison
with the reference countries. Examining the impact of the size of urban/rural population, GDP growth
rate and electric power consumption on CO2 emission are specific objectives. The group of countries
selected for this study are Sri Lanka, India, Norway, and the United States of America. This study
uses secondary data for each country collected from the World Bank database for the period of 1994-
2018. A period of 25 years with 20 cross sections draws 500 total observations. The Fixed Effect
Panel Regression (FEPR) method is applied by using SPSS software as the analytical tool of the
study. As expected, the p values of the study showed that there is a high impact of economic growth
on CO2 emission in Sri Lanka and USA. Further, the study found that the economic growth of India
and Norway have less effect on CO2 emission compared to Sri Lanka and USA. The study also found
that the size of urban and rural population has a direct impact on CO2 emission in selected countries
while GDP growth rate and electric power consumption has no impact into CO2 emission. The study
concludes that the overall population of selected countries has significant impact on CO2 emissions
since the increase in both urban and rural population has led to higher CO2 emission. Further, the
research confirms the Environmental Kuznets Curve analysis since the results show that the countries
with higher GDP growth rate and electric power consumption are contributing to lower CO2 emission.
Finally, the research suggests that the Sri Lankan policy makers to implement a suitable program to
lower the environmental degradation within the country. Developing or importing appropriate and
advanced technology can minimize the environmental impact on developing process.

Keywords: Economic growth, CO2 emission, Urban/rural population, GDP growth rate, Electric power consumption