THE CHAIN CAUSALITIES BETWEEN ENERGY CONSUMPTION AND ENVIRONMENTAL DEGRADATION ON THE INDIAN SUBCONTINENT

Abstract

This study investigates a chain of causalities among energy consumption and socioeconomic development in the Indian subcontinent with an annual dataset of 43 years from 1972-2014. By applying Dynamic Ordinary Least Squares (DOLS), Fully Modified Ordinary Least Squares (FMOLS) and Vector Error Correction Model (VECM), it documents that the household final consumption expenditure positively determines the electricity consumption. The chain of causalities is reported in the order that energy consumption causes economic development which causes household final consumption expenditure and household final consumption expenditure causes electricity consumption. The main findings document that economic development led higher living standard positively drives carbon emissions through electricity consumption.