Oil consumption, CO₂ emission, and economic growth: Evidence from the Philippines

This paper attempts to investigate the short- and long-run causality issues among oil consumption, CO₂ emissions, and economic growth in the Philippines by using time series techniques and annual data for the period 1965-2012. Tests for unit root, co-integration, and Granger-causality tests based on an error-correction model are presented. Three important findings emerge from the investigation. First, there is bi-directional causality between oil consumption and economic growth, which suggests that the Philippines should endeavor to overcome the constraints on oil consumption to achieve economic growth. Second, bi-directional causality between oil consumption and CO₂ emissions is found, which implies that the Philippines needs to improve efficiency in oil consumption in order not to increase CO₂ emissions. Third, uni-directional causality running from CO₂ emissions to economic growth is detected, which means that growth can continue without increasing CO₂ emissions.