Globalization and carbon emissions: Is there any role of agriculture value-added, financial development, and natural resource rent in the aftermath of COP21?

Abstract

Keeping in view the catastrophic effects of environmental degradation, G7 countries agree to implement the policy recommendations of the famous Paris Climate Agreement (COP21) in 2015; carbon dioxide (CO₂) emissions are increasing in G7 countries, which is a severe threat for the environment of the world. This study examines the effects of economic globalization on environmental degradation (CO₂ emissions) for G7 countries for the period of 1996-2017. We further examine the role of financial development, agriculture value-added, and natural resources in the relationship between economic globalization and CO₂ emissions. This study contributes to the existing literature by providing new empirical evidence on how economic globalization, along with financial development, agriculture value-added, and natural resources affect CO₂ emissions in G7 economies. This study utilizes novel econometric techniques such as CS-ARDL for short-run and long-run results of the empirical analysis. The empirical findings show that economic globalization, financial development, and natural resources increase carbon emissions. In contrast, agriculture value-added decreases carbon emissions. This study suggests that policies designed for controlling carbon emissions should be absorbed in approximately more than one year.

Keywords: Agriculture value-added; CO(2) emissions; COP21; Financial development; Globalization; Natural resources.