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.