Impact of hydropower consumption, foreign direct investment and manufacturing performance on CO₂ emissions in the ASEAN-4 countries

Abstract

Purpose

The continuous increase in the discharges of carbon emissions (CO₂) in the global atmosphere and the likely negative consequences of this practice on the atmosphere draw the attention of researchers and policymakers to argue on the causes and perpetrators of CO₂ emissions. This paper aims to examine the impacts of hydropower consumption, FDI and manufacturing performance on CO₂ emissions in the Association of southeast Asian nations (ASEAN)-4 countries.

Design/methodology/approach

The study uses the data on variables, such as hydro-power consumption, FDI, manufacturing value added and CO₂ emissions spanning the period 1980–2015. Autoregressive Distributive Lag Bound test approach was used to assess the relationships among the variables.

Findings

The long run estimation of elasticities for all the countries indicates that the coefficient of hydro power consumption was found to be significantly related to CO₂ emissions only in Malaysia. Additionally, the coefficients manufacturing performance were found to be significant in influence the amount of CO₂ emission in all the ASEAN-4 countries. Furthermore, the coefficients of FDI inflows were found to be significant in explaining CO₂ emissions in Malaysia and the Philippines, respectively. In the short run, the estimated results show that all the variables were found to be significant in explaining CO₂ emissions in the countries under study.

Research limitations/implications

Singapore is excluded from the ASEAN-4 due to insufficient data on hydro energy consumption.

Practical implications

The study recommends that as Hydro power energy is a clean source of renewable electricity. Its consumption indicates a negative relationship with CO₂ emissions. The countries should emphasize more on the use of hydro source of energy than the other sources which increase the rate of CO₂ emissions in the atmosphere.

Originality/value

As most of the relevant previous studies did not consider the simultaneous impact of hydro energy consumption, FDI and manufacturing value added on CO₂ emissions in the ASEAN-4, this study is an important contribution to the existing relevant literature.

Citation

Danmaraya, I.A. and Danlami, A.H. (2022), "Impact of hydropower consumption, foreign direct investment and manufacturing performance on CO₂ emissions in the ASEAN-4 countries", International Journal of Energy Sector Management, Vol. 16 No. 5, pp. 856-875. https://doi.org/10.1108/IJESM-06-2021-0019