Environmental Kuznets Curve for CO2 Emission in Mongolia : An Empirical Analysis

Purpose – The paper aims to fill the gap on energy and growth literature for Mongolia. The high growth rate over last decade has substantially increased the energy demand and as a result has increased the carbon-dioxide (CO2) emission. This observed emission trend has possible negative implications over environmental quality of the country. Therefore, this paper empirically examines the relationship between CO2 emission and four major explanatory variables (economic growth, energy consumption (EC) and trade openness) in Mongolia. Design/methodology/approach – This study uses environmental Kuznets curve (EKC) hypothesis and employs Johansen method of cointegration and granger causality test for empirical investigation. In the end, the stability of model is also checked. Findings – The results confirm the existence of EKC hypothesis among the variables both in long-run and short-run except trade openness, which surprisingly found insignificant. This means increased EC due to growth in economy is imparting environmental degradation but positive sign for trade in long-run shows that country is not adequately open to trade. The model found stable and unidirectional causality is detected from growth to carbon emission. Practical implications – In the light of empirical results, this paper provides basic policy structure in order to keep both growth and environmental quality intact. The findings further imply that drastic measures are to be taken for country's trade liberalization. In nutshell, this research extends pragmatic policy tools for environmental degradation and growth nexus to assist government in the nick of time. Originality/value – This study is first of its kind for country Mongolia and it applies causality test besides model stability test, which does not only authenticate the results but also provide unique way to conduct similar future research