The Causality Between CO2 Emissions and Electricity Generations: Evidence from Environmental Quality

This study aims to analyze the causality relationship between CO2 emissions and electricity generations in the 10 most populous countries. This study uses secondary data from the British Petroleum (BP) annual report from 2000-2021. The data analysis method uses Pairwise Dumitrescu-Hurlin Panel causality analysis, carried out by stationarity and cointegration tests. The results of the analysis state that there is a bidirectional relationship that influences each other between CO2 emissions and electricity generations. The implication of this research is the need for countries to prepare for renewable sources of electrical energy to be able to reduce CO2 emissions, especially those sourced from fossil energy.


Introduction
Global warming and climate change are two environmental problems commonly addressed in scientific research [1]- [5].The Intergovernmental Panel on Climate Change (IPCC), the Sustainable Development Goals, the Paris Agreement, and the G20 are just a few of the international conferences dealing with macroeconomic impacts that primarily focus on these two issues.Annually increasing CO2 emissions are one of the main causes of global warming and climate change [6].The use of energy from fossil fuels, which emit large amounts of CO2, is one of the reasons for the increase in global CO2 emissions [7]- [9].Previous studies have argued that economic activity, international trade, and fossil fuel use are the main causes of global warming [10]- [12].However, the general public continues to use fossil fuels, and it takes a while for fossil fuels to be transformed into fuels that are comparatively environmentally favorable.Because they are still relatively inexpensive and can lower production costs to increase the 1248 (2023) 012016 IOP Publishing doi:10.1088/1755-1315/1248/1/012016 2 economy, people continue to use fossil fuels extensively.Policymakers are focusing on this issue because environmental pollution lowers health standards and endangers the environment.This issue warrants attention since economic development not based on the environment and sustainability is unintentionally causing the increasing global warming and extreme climate change.The green economy framework offers a way out of this impasse by promoting responsible economic expansion while upholding environmental sustainability and quality.

FIGURE 1. Electricity Generation (terawatt/hour) and CO2 Emissions (million tons of carbon
dioxide) 2000-2021 from British Petroleum [6] People's quality of life is anticipated to improve as a result of economic development [13]- [17].On the other hand, economic growth causes unavoidable environmental externalities like a decline in environmental quality.According to the IPCC, since 1995, human activities and the consumption of energy that increases greenhouse gas (GHG) concentrations have contributed to an increase in global temperature.The World Bank [18] supports the idea that CO2 emissions are what produce GHG and climate change.The community's standard of living is anticipated to rise as a result of economic development.Several studies focus on the factors that cause CO2 emissions [16], [19]- [21].Environmental degradation, such as a major rise in greenhouse gases (GHG), particularly CO2, is directly correlated with an increase in economic activity.The connection between environmental quality and the production of electricity from fossil fuels [22]- [25].The idea is that CO2 emissions and electricity production are related in some way.In order to reduce rising CO2 emissions, it is necessary for all countries to solve the issue of power generation, which is generally more environmentally friendly.
Numerous research on the variables that influence emissions have been conducted.But only countries and regions with comparable economic, social, and cultural traits are included in its purview.Literature on demography is necessary, particularly in light of the connection between population growth and rising emissions.This essay focuses on the 10 countries with the largest populations in terms of CO2 emissions.Demand for energy rises with increasing population density.As a result, this study looks at the variables affecting CO2 emission levels between 2000 and 2021.The causal connection between CO2 emissions and power generation will be confirmed by this investigation.The following describes the structure of this essay: Section 1 provides introduction, while Section 2 outlines the research method.The results and discussion are presented in Section 3, and Section 4 presents the conclusion.

Methods
The study included the 10 most populous countries: China, India, the United States, Indonesia, Brazil, Pakistan, Egypt, Bangladesh, Russia, and Mexico, and measured their carbon emissions and energy production from 2000 to 2021.Panel data and cross-sectional data are also included.2021 This group includes the most populous countries in the world.Statistics from the British Petroleum (BP) Annual Report 2000-2021.The sources and actual definitions of the variables are summarized in Table 1.This research is based on Hurlin dan Venet [26], which analyzes causality using panel data.In a twovariable framework, in Granger's sense, one of the variables can trigger the second variable if the second variable's forecast improves When the first variable's lag is taken into account [27], [28].However, for research data in panel data, the researcher used the pairwise Dumitrescu-Hurlin panel causality test [29]- [31].The variables above are examined using two regression models below.Where: EMIS is CO2 Emissions; EGEN is Electricity Generations; α, β, λ, δ are coefficients; t is time; I and j is lag 1,2,3…k; and u is an error.The regression model tests the hypothesis of the relationship between CO2 emissions and electricity generations where the errors in u_1t and u_2t are not correlated.Causality analysis is carried out with several things that must be met, including data between CO2 emissions and electricity generations that pass the stationarity and cointegration tests.

Results and Discussion
Table 2 shows that the hypothesis for all variables examined contains one root, which is accepted at the 5% significance level.The panel root test in Table 1 unit tests the first difference.A panel roots test is performed before the cointegration test to examine the integral of each variable.
Table 3 is the Pedroni residual cointegration test showing that 7 out of 7 statistical tests support cointegration between variables in the model.Pedroni's cointegration test (31) tests for spurious regression that occurs in the presence of nonstationary variables.Therefore, in this study, we use the residual Pedroni cointegration test to find the terms of the relationship for each variable.
Table 4 is the Kao cointegration test [32] and confirms that the result of the Kao test rejects H0.H0 indicates that the variable has a strong long-term relationship between variables in the survey panel data.
Finally, this study aims to test causality using the Dumitrescu-Hurlin pairwise causality test to determine causality between variables.Based on the results in Table 5, we can see that the 10 most densely populated countries in the world have a two-way relationship between CO2 emissions and power generation.It has been recognized by many previous researchers that there is a correlation between CO2 emission factors and energy production [9], [33]- [36].Changes in GDP per capita, population, and end-use fuel mix all contribute to increased CO2 emissions, while adjustments in energy intensity and energy efficiency can lead to reductions [37].As stated by Wang et al., was also shown the powertrain construction affects CO2 emissions [38].According to Mendonza, [39], using renewable energy is a strategy to reduce his carbon footprint.

Conclusion
Panel data from the 10 most populous countries in the globe from 2000 to 2021 is used in this analysis.CO2 emissions and electricity production from the 10 countries are the variables used.The findings indicate a long-term, positive, and significant correlation between the variable of CO2 emission and the generation of power.This outcome indicates that increased CO2 emissions will be produced as a result of the large electricity use.These findings support the idea that CO2 emissions and electricity production are causally related.The conclusion of this study is that in order to reduce CO2 emissions that have a harmful impact on the environment, countries must get ready to switch from fossil fuels to renewable energy.Therefore, policy makers and the government need to apply special rules to industry and society to be wise in the use of electricity.This also needs to be encouraged from the world of education and research to conduct in-depth research in converting the use of fossil-based fuels to fuels that are environmentally friendly and sustainable.