Long-term US economic growth and the carbon dioxide emissions nexus : a wavelet-based approach

Abstract

Economic growth has significantly boomed carbon emissions in the global economy. However, there is an ongoing debate about the economic growth–carbon emission nexus for various economies in the literature. This paper investigates the short/long-term causal information flow between fossil-fuel-related carbon dioxide emissions (CO2) and economic growth (GDP) in the US economy spanning from 1800 to 2014. Using wavelet-based-nonparametric Granger causality analysis, the empirical results indicate that (i) the long-run causal information flow running from GDP to CO2 is positive, strong, uninterrupted and concentrated since the 1990s; (ii) the reverse causality is positive but interrupted, short-term and intensifying during the early 1990s. Due to strong and very long-term unidirectional causality findings, economic growth leads to environmental deterioration. Hence, for policymakers, environment-based growth policies and structural reforms can foreshadow energy-efficient policies by limiting carbon emissions. Hence, sustainable economic growth policies are expected to decelerate environmental problems and promote environmental sustainability. The findings can be attractive for other booming economies.