Abstract
Introduction: One of the most important topics in environmental economics -a subject of ongoing discussion over the past few decades- is determining how economic growth affects environmental quality. This is because the nature of the relationship between these two variables is complex and various methodological frameworks exist for its assessment. Accordingly, the main purpose of this research is to use a more flexible and novel framework to answer the question of whether long-term economic growth serves as a solution to controling carbon emissions in Iran?
Materials and Methods: The present descriptive-analytical study, using time series data from Iran, examined the long-term equilibrium relationship between carbon footprint, GDP at three scales: small (quantiles below the τ30 threshold), medium (quantiles between the τ30 and τ70 thresholds), and large (quantiles above the τ70 threshold), trade, and urbanization during the period 1961-2024. To examine unit root and cointegration tests, RALS-FADF and RALS-FEG tests were employed; this test allow for the consideration of smooth and unknown structural breaks -without the need to determine the number and location of breaks- and utilize information related to non-normal errors. The final model estimation was also performed using the multi-threshold nonlinear autoregressive distributed lag (MTNARDL) approach.
Results: The results of the unit root and cointegration tests with Fourier approximation and residual least squares method indicate the existence of a strong long-run equilibrium relationship between the model variables. The results of the MTNRDL estimator indicate that in the long run, increase in GDP at both small (when economic growth is less than 1.1 percent) and medium (when economic growth is between 1.1 and 6.9 percent) scales has a positive (negative) and significant effect on the carbon footprint; while an increase in GDP at large (when economic growth is greater than 6.9 percent) scales increases the carbon footprint. A one percent increase in GDP at small, medium, and large scales increases, increases, and decreases the carbon footprint per capita by about 2.24, 1.27, and -1.73 percent, respectively, in the long run. According to other results, the effect of trade, urbanization, and economic uncertainty on carbon footprint is significant and negative, positive, and positive, respectively.
Discussion: The results indicate that the long-term effect of GDP on carbon emissions depends on the its scale and increases carbon emissions at both small and medium scales and reduces carbon emissions at large scales. This result may serve to confirm the claim that economic growth is both a cause of and a solution to environmental degradation. In fact, as long as the economic growth rate remains below 6.9 percent, increasing GDP by prioritizing economic achievements and activities over environmental issues leads to increased environmental sustainability and carbon emissions; but when the rate of economic growth exceeds 6.9 percent, an increase in GDP can increase environmental quality and improve environmental quality and carbon emission control driven by investment in cleaner and green production technologies, the establishment of regulations and control laws, the use of renewable energy sources and environmentally friendly products, and heightened environmental awareness. Accordingly, an analysis of Iran's economic growth in recent years shows that the country has been mostly in medium and small-scale economic growth zones, and therefore an increase (decrease) in GDP has led to an increase (decrease) in carbon emissions. However, it is reasonable to expect that by providing the necessary conditions for achieving substantial economic growth, which requires careful planning and fundamental structural changes, development could serve as a solution for reducing the country's carbon emissions.