Carbon Emissions, Energy Consumption and Economic Growth in ASEAN: A Dynamic Heterogeneous Panel Approach

Purpose: The study investigates the short run dynamics and long run relationship between carbon emissions, energy consumption and economic growth in five original ASEAN member countries known as the ASEAN 5: Indonesia, Malaysia, the Philippines, Thailand and Vietnam. Design/methodology/approach: This study employs the dynamic heterogeneous panel approach to estimate the short run dynamics and long run effects between carbon emissions, energy consumption and economic growth in the ASEAN 5 for the period from 1984 to 2010. Findings: The empirical results show positive and significant coefficients between energy consumption and economic growth, indicating that an increase in these variables leads to more carbon emissions in this region. Tests of co-integration show the existence of a long run relationship between carbon emissions, energy consumption and economic growth. Research implications: Traditional panel techniques assume that slope parameters are homogenous across groups. Estimates from the dynamic heterogeneous panel model solves the heterogeneity bias problem in traditional panel techniques and generates unbiased results. Practical implications: The findings have important policy implications for the ASEAN 5 countries in implementing efficient energy consumption plans to reduce carbon emissions. Originality/value: This study is the first attempt at using the dynamic heterogeneous panel model to study the relationship between carbon emissions, energy consumption and economic growth in ASEAN countries.