Investigating Factors Affecting Environmental Pollution in Iran

Regarding the importance of environmental issues, identification of the factors affecting environmental pollution has been considered more than ever. The present study examines the effects of electricity consumption, financial development, foreign direct investment and economic growth on carbon emissions in Iran over the years 1970-2016.

For this purpose, the Autoregressive Distributed Lag method was used. To verify the Stationary, Augmented Dickey Fuller, Zivot – Andrews and Lee, Strazicich tests were used. Also, to investigate co-integration, Gregory-Hansen test were used.

The results of the ARDL model estimation with presence of Structural Break show, electricity consumption and economic growth has a positive effect on carbon emissions. And with a one percent increase, carbon emissions increased by 0.58% and 0.05%, respectively. The relationship between financial development and carbon emissions is negative, with a one-percent increase in financial development, carbon emissions will fall by 0.09 percent. The relation between foreign direct investment and carbon emissions is positive, which shows that the Pollution haven hypothesis has been approved in Iran and with a one percent increase in foreign direct investment, carbon emissions will increase by 0.01 percent.

Based on the results, and given that Iran is considered as a renewable resource, except for the rich countries, it is essential that, with a streamlined plan, both the release of budget and GDP from the trap of oil revenues, towards the replacement of renewables In order to maintain energy resources, environmental pollution will also decrease. It is also imperative that the government and legislators in Iran seek to raise funds for the reconstruction of the country's manufacturing sector, especially the industry and the use of environmentally friendly technologies.