Renewable and Non-renewable Energy Consumption, Economic Growth and Carbon Dioxide Emissions in Canada: A Cointegration Approach

1. Renewable and Non-renewable Energy
Consumption, Economic Growth and Carbon
Dioxide Emissions in Canada: A Cointegration
Approach
By
Dr. Bodrun Nahar & Dr. Md. Nur Hussain

2.  The increasing threat of global warming due to fossil fuel is
raising world wide concern.
 Countries are trying to develop renewable energy component
and thus reducing the dependent on fossil fuels.
 Canada is one of the World’s largest per capita GHG emitters .In
2010, Canada’s GHG emissions were 20.3 tonnes per capita,
significantly higher than the G7 country average of 12.5 tonnes
per capita.
 Canada has set a target of reducing economy-wide emissions by
30% below 2005 levels by 2030.
Introduction

3. World Scenario of Carbon Emissions
Source: International Energy agency, 2012

4. Canadian GHG Emissions Trend (2005–2015)
Source: Environment and climate change Canada (2016)
Canada’s total Greenhouse gas emissions in 2104 were 732 megatonnes (Mt) of
carbon dioxide equivalent (C02 eq), or 20% above the 1990 emissions of 613 Mt c02
eq. mostly driven by increased emissions from mining and oil and gas production as
well as transport (Environment and Climate change Canada, 2016)

5. GHG emissions by economic sectors (Mt C02 ) in Canada (1990-2011)
Emissions from transportation are the largest contributor to
Canada’s GHG emissions, resulting about 24% of overall GHG
(Environment Canada, 2013)

6. Canadian per Capita GHG Emissions (2005-2015)
Source: National Inventory Report 1990-2014: Greenhouse Gas Sources and sinks in Canada
(Environment and Climate change Canada, 2016)

7. Global Renewable Energy Composition
Source: REN21 Renewables 2014 Global Status Report

8. Renewable Energy in Canada
Canada is the world leader in the production and use of
renewable energy.
Hydroelectricity accounts for approximately 60% of
Canada’s electricity generation.
Source: Canadian Council on Renewable Electricity, 2016

9. Literature Review
A large body of literature has emerged since late 1970s with
mixed results.
*The Environmental Kuznets curve hypothesis
*Energy-CO2 emissions and economic growth hypothesis
*Renewable energy consumption and economic growth
hypothesis
Literature on Canada is relatively limited and contradictory. So
far there is no single country research on Canada regarding
investigations of the renewable and non-renewable energy
consumption, CO2 emissions and economic growth in Canada.

10. Data and Methodology
The variables used are:
LPCO = Per capita carbon dioxide, LPRGDP= per capita
real gross domestic product, LEEEC= Fossil Fuel Energy
Consumption, LCRW= Combustible renewable and
waste
Annual data basis covering the period of 1971-2013 are
used in this study
Vector Autoregressive (VAR) model:
The Augmented Dickey–Fuller (ADF) and Phillips–Perron
(PP) unit-root tests
Johansen co-integration test

11. Empirical Model
LPCO = a + bLPRGDP +c LPRGDP2
+dLEEEC+ eLCRW+Є
Where,
LPCO = Per capita carbon dioxide
LPRGDP= per capita real gross domestic product
LPRGDP2
=square of per capita real gross domestic product
LEEEC= Fossil Fuel Energy Consumption
LCRW= Combustible renewable and waste

12. ADF and PP Unit root test for stationary in levels
and first difference
Level First Difference
Variables ADF PP Conclusi
on
ADF PP Conclusion
LPCO -0.9394 -0.6344 NS -5.04 -5.59 S
LPRGDP -1.21 -1.60 NS -4.53 -4.71 S
LPRGDP
^2
-1.15 -1.51 NS -4.51 -4.72 S
LFFEC -1.68 -1.57 NS -4.15 -6.01 S
LCRW -1.55 -1.94 NS -4.47 -6.95 S
Note: All variables are in logarithmic form, LPCO = Per capita carbon dioxide, LPRGDP= per capita real gross
domestic product, LPRGDP^2=square of per capita real gross domestic product, LEEEC= Fossil Fuel Energy
Consumption, LCRW= Combustible renewable and waste, NS= Non-stationary, S= Stationary, Critical Values at
5% =-2.94, All of the tests used constant

13. Results of the Unit Root Tests
• The ADF and PP results show the existence of unit-roots and
therefore non-stationarity, i.e. I(1), in the levels of all the
selected variables.
• The first differences of these variables reject the null
hypothesis of a unit root at the five per cent level. Therefore,
all series are non-stationary i.e. , I(1).

14. Johansen tests for cointegration (Trace
Statistics)
Hypothesized Eigenvalue Trace
Statistics
0.05 Critical
Value
Prob.**
None* 0.6124 86.03 76.97 0.00
At most 1 0.4224 48.12 54.08 0.15
At most 2 0.2837 26.16 35.19 0.33
At most 3 0.2226 12.81 20.26 0.37
At most 4 0.0662 2.73 9.16 0.63
Note: Trace test indicates 1 cointegrating equation at the 0.05 level.
*Denotes rejection of the hypothesis at the 0.05 level.
** MacKinnon-Haug-Michelis (1999) p-values

15. Johansen cointegration tests
( Maximum Eigenvalue)
Hypothesized Eigenvalue Trace
Statistics
0.05 Critical
Value
Probability**
None* 0.6124 37.92 34.81 0.02
At most 1 0.4224 21.96 28.59 0.27
At most 2 0.2837 13.35 22.30 0.52
At most 3 0.2226 10.07 15.89 0.33
At most 4 0.0662 2.73 9.16 0.63
Note: Max-eigenvalue test indicates 1 cointegrating equation at the 0.05 level.
*Denotes rejection of the hypothesis at the 0.05 level.
** MacKinnon-Haug-Michelis (1999) p-values

16. Results of Cointegration
• Only one cointegration has been found among variables
using the Johansen and Juselius (1990) methodology.
• There is a long-run relationship among variables
Cointegrating Vector
LPCO LPRGDP LPRGDP^2 LFFEC LCRW C
-1.00 39.06*
(17.18)
[2.27]
-1.87*
(0.81)
[2.30]
2.28*
(0.53)
[4.27]
0.93*
(0.19)
[4.73]
212.09*
(92.81)
[2.28]
All variables are significant.
This model is supported by Kuznet hypothesis

17. Conclusions
The findings supports the EKC hypothesis
Both renewable and non-renewable energy consumption have
negative and significant effects on CO2 emissions in the long
run.
Further investigation is needed.