Carbon Dioxide Emissions and the Macroeconomy: Evidence from the ASEAN Region

This paper examined the effects of income, trade, and foreign direct investments (FDI) on carbon dioxide (CO2) emissions in the Association of Southeast Asian Nations (ASEAN) member countries for the period of 1970–2011 using the panel corrected standard errors (PCSE) estimation method. The results of the study were consistent with the environmental Kuznet’s curve (EKC) hypothesis – CO2 emissions increase as per capita GDP increases up to a certain income threshold, beyond which further increase in income is accompanied by lower emissions. However, the threshold per capita GDP (estimated to be USD 20,017) is way above the income levels of the ASEAN countries (with the exception of Brunei and Singapore). This suggests that most of the ASEAN region will still be in the upward-sloping portion of the EKC for several more years, and this necessitates an economic growth strategy that includes a stringent program to curb CO2 emissions. Nonetheless, both trade and FDIs do not significantly contribute to CO2 emissions in the ASEAN region, auguring well for the trade- and FDI-oriented development strategies adopted by most ASEAN member countries. Since low-carbon technologies and production methods are owned by high-income investing countries, trade and FDI can also be encouraged to facilitate and hasten the transfer of low-carbon technologies to the fast-developing countries of the ASEAN region