CO2 emissions, economic growth, energy consumption, trade and urbanization in new EU member and candidate countries: A panel data analysis

- Investigates the causal nexus between energy consumption, CO2 emissions, economic growth, openness and urbanization.
- Main results provide evidence supporting the Environmental Kuznets Curve hypothesis.
- Short-run unidirectional panel causality from energy consumption, trade openness and urbanization to carbon emissions.
- Unidirectional causality from GDP to energy consumption, from GDP, energy consumption and urbanization to openness.
- Short-run unidirectional panel causality from urbanization to GDP, and from urbanization to trade openness.

This paper investigates the causal relationship between energy consumption, carbon dioxide emissions, economic growth, trade openness and urbanization for a panel of new EU member and candidate countries over the period 1992-2010. Panel unit root tests, panel cointegration methods and panel causality tests are used to investigate this relationship. The main results provide evidence supporting the Environmental Kuznets Curve hypothesis. Hence, there is an inverted U-shaped relationship between environment and income for the sampled countries. The results also indicate that there is a short-run unidirectional panel causality running from energy consumption, trade openness and urbanization to carbon emissions, from GDP to energy consumption, from GDP, energy consumption and urbanization to trade openness, from urbanization to GDP, and from urbanization to trade openness. As for the long-run causal relationship, the results indicate that estimated coefficients of lagged error correction term in the carbon dioxide emissions, energy consumption, GDP, and trade openness equations are statistically significant, implying that these four variables could play an important role in adjustment process as the system departs from the long-run equilibrium.