Short run and Long run Relationship among CO2 Emissions, Energy Consumption and Economic Growth: New Evidence from Iran

This paper examines the short run, long run and causal relationship among economic growth, carbon emissions, energy consumption and employment ratio in Iran over the period 1977–2010. Using autoregressive distributed lag bounds testing approach of cointegration; the results support a long-run relationship among the variables. Also, the estimated income elasticity of carbon emissions per capita in short- and long- run are 0.03 and 0.07, respectively; and the income elasticity of employment ratio in short run and long run are 0.85 and 3.25, respectively. Regarding the causality test, our findings indicate that, there is a unidirectional causality from GDP per capita to both energy consumption and carbon emissions per capita; also, employment ratio causes economic growth in both short run and long run. The overall results show that energy conservation policies, such as rationing energy consumption and controlling carbon dioxide emissions, have not likely adverse impacts on economic growth in Iran. In addition, the paper shows that establishment of labor-intensive industries is of considerable positive impact on the long run economic growth in Iran.