Causal correlation between energy use and carbon emissions in selected emerging economies-panel model approach

Fossil fuels used in energy mix continues to dictate world heat usage. Demand for heat is considered as substantial contributor to carbon emissions and energy-related emissions equivalent to 12.5 Gt of carbon emissions. Data on heat is limited and therefore, a study on the causal correlation between energy use and emissions would provide policy guidance on how to decarbonize the heat sector to achieve Paris's Greenhouse Effect Treaty. Most empirical works aggregated energy consumption and ignore spatial dependence and heterogeneity in a panel dataset. Our study, however, disaggregated energy into renewable and non-renewable to find their distinct influence on emissions, which were tested for spatial dependence and heterogeneity and applied potential emissions as environmental impact. Using FGLS and PCSE estimators for the period 1971-2013, our findings revealed that the increase in renewable energy use and industrialization improves the ecological structure of emerging economies while the increase in population, economic expansion, and non-renewable energy use increases the carbon stock. We accordingly, investigated causation direction with pooled mean group estimator. Rising economic power states therefore encourage to ensure energy efficiency and replace fuel use with renewable source for heating to reduce carbon stock.