Determinants of CO₂ emissions in BRICs

This paper attempts to analyze the important determinants of emissions and to examines dynamic causal relationships between CO₂ emissions, energy consumption, foreign direct investment (FDI) and economic growth within a panel vector error correction model for BRIC countries (Brazil, Russian Federation, India, and China) over the period 1978 - 2005, except for Russia (1992 - 2005). The energy consumption, real output and FDI variables affect emissions reaching 99.6%, 98.1 % and 97.0%, respectively. The causality results indicate that there is bidirectional strong causality between emissions and FDI. In the long-run, there are both emissionsenergy consumption and energy consumption-FDI bidirectional causalities, along with unidirectional causality from output to emissions, energy consumption and FDI, respectively. The short-run dynamics suggest unidirectional causality from energy consumption and emissions, respectively to real output. Therefore, in order to reduce emissions and not to adversely affect economic growth, the BRIC developing countries should increase their investment in infrastructure for energy efficiency and strengthen their energy conservation policies to reduce both energy demand and unnecessary waste.