Energy Consumption, Economic Growth & Emissions Level: A Comparative Study of QUAD Countries

Abstract

Nations worldwide aspire for higher economic growth and development to improve living conditions and secure the welfare of their citizens. The trajectory of economic progress is intricately connected to the energy resources a nation depends upon, which frequently reflect its level of development. This study explored the relationship between CO2 emissions and key macroeconomic and socio-economic variables in the QUAD (Australia, India, Japan, and the USA) nations from 1970 to 2021 using annual data. The QUAD nations include three developed and one developing nation, representing a unique and influential group in the global energy-emission-growth nexus due to their substantial contribution in global energy consumption, GHG emissions, and economic growth. The objective of the study is to identify the key macroeconomic parameters impacting the CO2 emission level of these nations, to test the presence of Environmental Kuznets Curve (EKC) hypothesis, and to assess the influence of socio-economic variables on the CO2 emissions. The research aims to fill a significant gap in the literature by focusing on this underexplored group of nations, given their high share in the total global emissions. The data used in the study is sourced from World Development Indicators (WDI) and Our World in Data (OWID). By employing HP filter on annual dataset, the result indicates that emissions are procyclical in nature i.e., emissions move in line with economic growth, fossil fuel use, and trade, making them sensitive to economic cycles. A key finding of the analysis is the validation of the Environmental Kuznets Curve (EKC) hypothesis in three of the four countries studied, using a Quadratic Regression technique. For India, the USA, and Australia, the results confirmed an inverted U-shaped relationship between economic growth and emissions, suggesting that emissions initially increase with economic growth but eventually decline once a certain level of income is reached. On the contrary, Japan displayed a more linear relationship between CO2 emissions and economic growth. Additionally, evidence from the Two Stage Least Square regression (2SLS) analysis confirmed that GDP, energy use, urban population, population density, and rural population are significant determinants of emissions. Overall, the findings contribute to understanding the complex interplay between economic development and environmental sustainability in advanced and emerging economies, providing a comprehensive empirical basis for further research on growth–energy–emission nexus. The study provides both theoretical and practical implications. It suggests that policy interventions should prioritize the adoption of renewable energy, promote sustainable urban development, and implement country-specific strategies to address emissions.