Examining the Impact of Financial Development and Energy Consumption on the Environmental Degradation in Iran in the Framework of the Environmental Kuznets Curve Hypothesis (EKC)

Abstract

Today, environmental issues, especially water and air pollution problems have become a major global concern. Air pollution, affects the health of living organisms and natural ecosystems. According to various studies, financial development in a country may attract Foreign Direct Investment (FDI) and higher degrees of research and development (R&D). This, in turn can, increase the environmental performance and thereby reduce environmental pollution. This investigation aims to examine the role of financial development and energy consumption in Iran during 1971-2007, in the framework of the environmental Kuznets curve, using ARDL approach. According to results further financial development in Iran lead to decrease of CO2 emissions. In addition, an increase in energy consumption in Iran is likely to increase CO2 emissions. Also, the results reject the Environmental Kuznets Curve hypothesis in Iran in the long-term.

Keywords

• Environmental Kuznets Curve (EKC); Financial Development; Energy Consumption; Carbon dioxide emission; ARDL model