Relating Carbon Dioxide Emissions with Macroeconomic Variables in the Philippine Setting

Abstract

Using cointegration and error correction modeling techniques, this paper examines the dynamics of carbon dioxide (CO 2 ) emissions in relation to economic growth, energy consumption, trade openness, urbanization and foreign direct investments in the case of the Philippines. The study finds that 1) economic growth and CO 2 emissions have a significant positive linear relationship, suggesting that income growth policies must be subject to reasonably stringent environmental constraints related to CO 2 emissions; 2) CO 2 emissions are inelastic with respect to energy use in the short run, but its response becomes elastic in the long-run; and 3) CO 2 emissions have a positive elasticity with respect to FDI which conforms with the Pollution Haven hypothesis.