The Effects of Industrial Value Addition and Energy Consumption on Environmental Deterioration: New Evidence from Islamic Countries

Abstract

The current research is aimed at finding out the effects of energy consumption and industrial value addition on environmental deterioration. Panel data for the years 2000-2017 was employed to explore the long- and short-term association of variables for the selected Islamic countries. Panel Unit Root Test was used to check the stationarity of the data. Moreover, Fisher panel Co-integration tests, PMG, Fully Modified Ordinary Least Square (FMOLS) and Dynamic Ordinary Least Square method (DOLS) were also applied to find out relationship between the variables. The study suggested that economic growth, industrial value addition and energy consumption positively affect the CO2 emission. Moreover, high-energy consumption to meet the demands of energy in transportation and production sectors leads to increased environmental pollution. The coefficient of industrial value addition shows significant effect on environmental deterioration in long term. Our study suggests the use of cleaner technology in production system and replacing renewable energy by non-renewable energy sources.