CO2 Emissions, GDP and Energy Consumption: a Multivariate Co integration and Causality Analysis for Iran

This paper studied the relationship between energy consumption, GDP and CO2 emission (as an indicator of air pollution). The extent of the emission of CO2 and its relation to shocks and variation in economic variables in Iran was calculated. A model based on Kuznets hypothesis was built and econometric method of error correction was used for estimating the model and analyzing the long-term relation between the variables. The results indicate that there is a meaningful long-term relationship between the analyzed variable i.e. energy consumption, where GDP has a positive effect on CO2 emission. In addition the causal relation between the variables was studied and the following results were obtained: a two way causal relation between CO2 emission and energy consumption and a one way relation from GDP to CO2 emission in the short-term was found. Also the impact of an economic shock in GDP on the CO2 emission indicated an increase for 3 years and then a decline over 6 years