Energy consumption, emissions and economic growth in an oil producing country

This study is aimed to examine the causal relationship between economic growth, energy consumption and emissions in Bahrain. As required by the Kyoto Protocol where Bahrain has ratified in 2006, it is to reduce greenhouse gas (GHG) emissions. This study uses Toda and Yamamoto’s (1995) approach to investigate the relationship. The finding regarding the relationship is crucial as it will justify appropriate steps should be taken by Bahrain to reduce emissions without affecting her national output. Using annual data for a period from 1980 to 2007, this study finds that there are unidirectional relationship between output, capital, energy use, labor and emissions. It also finds that there is causality running from output to capital, energy use and emissions, but not vice versa. Therefore, this study suggests emissions cut cannot be simply taken without sacrificing the economy. On the other hand, replacing capitals with greener capitals is the best choice as it reduces emissions through energy efficiency and less GHG emissions.