THE IMPACT OF CARBON DIOXIDE EMISSION ON GROWTH IN MALAYSIA

Abstract

This paper attempts to establish a short run relationship between economic growth and carbon dioxide (CO2) emissions for Malaysia. To achieve this purpose, annual data were collected from the reports of the World Bank. It was tested by using Augmented Dickey Fuller (ADF) and Kwiatkowski –Phillips–Schmidt–Shin (KPSS) to test for stationarity using yearly data for the years from 1975 to 2016. The empirical results suggest the existence of a short run relationship between per capita CO2 emissions and real per capita Gross Domestic Product (GDP). According to the work of the analysis, unit root tests show that economic growth and carbon emission series become stationary when the first difference is considered. Results show that there is no cointegration exists between economic growth and carbon emission. Still, there exists two way relationship between economic growth and carbon emission during the short run period. These findings may be vital for future climate change policy. Following this development and new evidence, the government will be able to formulate the best method and encourage business sectors using high technology to reduce carbon dioxide emissions.