This document summarizes a study on the energy, environment, and economic growth nexus in South Asia. It finds that while energy consumption positively impacts economic growth, carbon dioxide emissions negatively affect growth. Specifically: - Energy consumption in Bangladesh, India, Nepal, Pakistan, and Sri Lanka is dominated by fossil fuels. India and Bangladesh rely over 70% on fossil fuels. - The study uses panel unit root and cointegration tests to examine the long-run and short-run relationships between GDP, energy consumption, and CO2 emissions from 1980-2010. - In the long-run, a 1% increase in energy consumption increases GDP by 0.8% while a 1% increase in CO2 emissions

1. Energy, Environment and Growth
Nexus in South Asia
Muhammad Zeshan
Sustainable Development Policy Institute
Presented at IBA Sukkar
February 26, 2014

2. Motivation for the Study:
A Blanket Around the Earth
Source: http://climate.nasa.gov/scientific-consensus

3. Global Greenhouse Gas Emissions by Gas
57%
14%
17%
8%
3%
1%
CO2 from Fossil
Fuel Consumption
F-gases
Nitrous Oxide
Source: United States Environmental Protection Agency
Methane
CO2 from
deforestation
CO2 from other
sources

4. Global Carbon Dioxide (CO2) Emissions
from Fossil-fuels
Source: United States Environmental Protection Agency

5. Consensus: 97% of Climate Scientists Agree
Temperature data from four international science institutions.
The last decade has been the warmest on record.

6. Outline
1. Introduction
2. Situation Analysis
3. Methodology
4. Data & Variables
5. Results
6. Policy Implications

7. 1. Introduction
1.1 Gross Domestic Product
7
6.5
Ban
6
5.5
5
4.5
4
3.5
Ind
Nep
Pak
Sri

8. 1.2 Average growth rate:
Gross Domestic Product
7.00%
6.20%
6.00%
4.80%
4.60%
5.00%
5%
4.90%
4.00%
3.00%
2.00%
1.00%
0.00%
Bangladesh
India
Nepal
Pakistan
Sri Lanka

9. 1.3 Energy Consumption
6
Ban
5.5
Ind
5
4.5
Nep
Pak
Sri
4
3.5

10. 1.4 Average Growth Rate:
Energy Consumption
4.50%
4.50%
4.30%
4.30%
4.00%
3.50%
2.80%
3.00%
2.60%
2.50%
2.00%
1.50%
1.00%
0.50%
0.00%
Bangladesh
India
Nepal
Pakistan
Sri Lanka

11. 1.5 CO2 Emissions
13
12.5
12
Ban
11.5
Ind
11
Nep
10.5
Pak
10
Sri
9.5
9
8.5

12. 2. Situation Analysis:
2.1 Fossil fuel energy consumption (% of total)
Sri Lanka
43.68%
Pakistan
61.50%
Nepal
12.65%
Year 2010
India
72.47%
Bangladesh
71.41%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%

13. 2.3 Share in South Asia's CO2 Emissions
Sri Lanka
0.6%
Pakistan
Nepal
7.2%
0.2%
India
Bangladesh
89.6%
2.5%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%

14. 2.2 Share in World CO2 Emissions
Sri Lanka
Pakistan
Nepal
0.04%
0.48%
0.01%
India
Bangladesh
5.98%
0.17%
0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00%

15. 3. Methodology
3.1 Levin and Lin (2002) panel unit root test:
Operates under the null of a collective panel unit root against a
collective panel stationary.
3.2 Im , et al., (2003) Panel unit root test:
The null presumes all the variables are non- stationary against the
alternative that a part of variables are stationary.
3.3 Kao (1999) Panel cointegration test:
Identifies a unique cointegrating vector among variables if all the
variable are I (1).
If all the integrated variables are cointegrated, dynamic error
correction mechanism can discover the direction of causality.

16. 4. Data and Variables
Annual data covering the period 1980–2010.
South Asian countries: Bangladesh, India, Nepal, Pakistan, and
Sri Lanka.
Variables include:
1. GDP (real GDP, constant 2005 international $).
2. EC (energy consumption, constant 2005 kt of oil equivalent).
3. CO2 (CO2 Emissions, kg per 2005 PPP $ of GDP).
All the variables are in natural logarithm.
Data source: World Development Indicators (WDI)

17. 5.1 Long-run Results:
Impact on GDP
1.00%
0.81%
0.80%
0.60%
0.40%
0.20%
0.00%
-0.20%
CO2 Emissions
-0.17%
Energy Consumption
-0.40%
• CO2 emissions adversely affect South Asia’s economic growth.
• Energy consumption positively affects regional economic growth.

18. 5.2 Short-run Results:
Transmission Channel
Energy consumption
•
CO2 emissions
GDP
In most of episodes, the CO2 emissions affect GDP through environmental & climate
changes. Such as;
Bangladesh: North-western regions are suffering from the Extreme Temperature problem.
• South and South-eastern Parts of the country were hit by Tropical Cyclones during the last
few years.
India: Changing landscape.
• Over the last four decades, a few parts of the country have witnessed more rainfalls than
before.
Nepal: Dry winter
Pakistan: Hit by repeated floods, lower agriculture produce.
Sri Lanka: Unexpected and intense rainfall.

19. 6. Policy Implications
• The CO2 emissions are adversely affecting the economic
growth, there is a need to invest more in environment
friendly technologies.
• The South Asian countries should set regional environment
protection targets to overcome the increasing pollution in the
region.
• The South Asian countries should meet at least once a year to
discuss the devastating impact of rising CO2 emissions in the
region and also to devise strategies to cope with these
environmental challenges.
• Regional trade in energy, especially in renewable energy can
secure energy supplies in South Asia.

20. Thank you
www.sdpi.org, www.sdpi.tv
E.mail: zeshan@sdpi.org, Twitter: @muhzeshan