Does Economic Policy Uncertainty Affect CO2 Emissions? Empirical Evidence from the United States

Abstract

This paper aims to examine the effects of economic policy uncertainty (measured by the World Uncertainty Index—WUI) on the level of CO2 emissions in the United States for the period from 1960 to 2016. For this purpose, we consider the unit root test with structural breaks and the autoregressive-distributed lag (ARDL) model. We find that the per capita income promotes CO2 emissions in the long run. Similarly, the WUI measures are positively associated with CO2 emissions in the long run. Energy prices negatively affect CO2 emissions both in the short run and the long run. Possible implications of climate change are also discussed.

Do Economic Policy Uncertainty and Geopolitical Risk Lead to Environmental Degradation? Evidence from Emerging Economies

“…Further, it is also concluded that EPU upsurges energy consumption, which increases CO 2 emissions in both short-and long-run [57]. Additionally, it is also noted that EPU escalates carbon emissions in both developed and developing countries [6,8]. Regarding the impact of provincial level carbon emissions, it is highlighted that EPU of China at provincial level increases the provincial level carbon emissions [58].…”

“…Recently, one of the studies on the relationship between EPU and environmental quality proposes two channels that relate EPU with environmental degradation: (1) consumption effect; and (2) investment effect [6]. According to consumption effect, EPU mitigates the use of energy consumption and pollution-intensive commodities.…”

“…There exist a few research outlets that explore the impact of EPU on environmental degradation. Regarding the relationship between EPU and environment, one strand of literature notes that EPU upsurges the environmental degradation [6][7][8][9], whereas second strand of literature reports that EPU plunges environmental degradation [10][11][12]. Besides, there exists a study which highlights that EPU does not affect environment [13].…”

Corporate Default Risk and Environmental Deterioration (International Evidence)

“…For instance, Danish & Khan (2020) find that the positive association between EPU and energy consumption increases CO2 emission level. Adams et al (2020) and Wang et al (2020) also find that increased uncertainty over economic policy escalates CO2 emission magnitude. The positive association between EPU and CO2 emission is more pronounced in the long run (Anser et al, 2021).…”

“…This section report the determinant of CO2 emission from the prior literature. Previous studies show that CO2 emission is positively associated with economic growth (Apergis & Payne, 2010); economic policy uncertainty (Adams et al, 2020;Danish & Khan, 2020;Wang et al, 2020); urbanization (Sadorsky, 2014); trade openness, per capita GDP, energy consumption (Sharma, 2011). Furthermore, there is extensive literature on the adverse impact of CO2 emission on macroeconomic development indicators (Abbasi & Adedoyin, 2021).…”