A Revisit of the Energy-Economy-Environment Nexus with Multi-Regression

Economic development leaves its residues on the environment, then it is believed as the cause of environmental damage. Recognizing the real cause of environmental damage during the development process is crucial, as it could prevent the government from using dirty energy sources in developing the economy. This study believes that the real cause of environmental degradation is energy consumption. Considering the importance of the energy-economy-environmental nexus where energy is hypothesized as the driver of the two–the economy and the environment, this study conducts a multi-regression analysis where the economy and environmental degradation are the dependent variables affected by energy consumption as the independent variable. Thus, the study aims to investigate whether energy consumption is the real driver of the economy and environmental degradation by comparing energy consumption impacts on both. The sample was all countries (world and economies group) from 1990-2013. The economy's elements expected to contribute to CO2 emissions (FDI, Trade, Urban population) are also under investigation. The results show that the energy coefficients are always positive and have the largest value in almost all models, indicating that energy drives the economy and environmental quality (represented by CO2 emissions). Following the second hypothesis, the impacts of Urban population, FDI, and Trade on CO2 emissions depend on the development level of the three variables. This study is expected to make the policymakers aware that the energy type they choose could improve the economy and environmental quality or put both as a trade-off.