ARTICLE IN PRESS

Energy Policy 35 (2007) 4772–4778

www.elsevier.com/locate/enpol

CO2 emissions, energy consumption, and output in France

James B. Ang
Department of Economics, Monash University, 900 Dandenong Road, Caulfield East VIC 3145, Australia
Received 23 January 2007; accepted 23 March 2007
Available online 29 May 2007

Abstract

This paper examines the dynamic causal relationships between pollutant emissions, energy consumption, and output for France using
cointegration and vector error-correction modelling techniques. We argue that these variables are strongly inter-related and therefore
their relationship must be examined using an integrated framework. The results provide evidence for the existence of a fairly robust long-
run relationship between these variables for the period 1960–2000. The causality results support the argument that economic growth
exerts a causal influence on growth of energy use and growth of pollution in the long run. The results also point to a uni-directional
causality running from growth of energy use to output growth in the short run.
r 2007 Elsevier Ltd. All rights reserved.

Keywords: Energy use; Pollutant emissions; Multivariate causality; France

1. Introduction between pollutant emissions, energy use and aggregate

The economy of France was severely affected by the oil
shocks in the early 1970s. In the aftermath of the oil
shocks, the French government took several important
steps to restructure the country’s energy policy, aiming to
reduce its overwhelming reliance on imported petroleum
supplies and to achieve energy independence. This has led
to the development of nuclear programs for electricity
generation. Per capita CO2 emissions in France have been
declining since 1979. Between 1980 and 2000, France’s per
capita CO2 emissions declined at an average annual rate of
1.5%. The decline was mainly due to more extensive use of
natural gas and nuclear power. France contributed to
about 1.6% of the world’s total CO2 emissions in 2000.
However, its CO2 emissions are the lowest among the
major Western European countries. Under the 1997 Kyoto
Protocol, France is committed to reduce its CO2 emissions
back to the level in 1990 (i.e., 102 million metric tonnes).
An increase in carbon tax has been proposed to help
achieve this target. However, there has been no systematic
time series investigation so far to analyse the relationship
Tel.: +61 3 99034516; fax: +61 3 99031128.
E-mail address: james.ang@buseco.monash.edu.au.
output for France. This paper is an attempt to fill the gap.
The relationships between output and energy consump-
tion, as well as output and environmental pollution, have
been the subject of intense research over the past few
decades. An assessment on the existing literature reveals
that most studies focus on testing the nexus of either
output-energy or output-pollution separately while no
investigation has so far been made to examine these two
links under the same framework. The main contribution of
this paper is that for the first time an attempt is made to
examine the dynamic relationship between pollutant
emissions, energy consumption, and economic develop-
ment under an integrated framework. Given that these
three variables are strongly inter-related, the use of a naı̈ve
bivariate framework may be subject to the problems of
omitted variables bias.
We investigate the case of France, one of the European
economies with a huge increase in energy consumption, for
the period 1960–2000. We prefer a country-specific case
study to a cross-sectional study since empirical analyses
conducted at the aggregate level are unable to capture and
account for the complexity of the economic environments
and histories of each individual country. Hence, any
inference drawn from these studies provides only a general
understanding of how the variables are broadly related,

0301-4215/$ - see front matter r 2007 Elsevier Ltd. All rights reserved.
doi:10.1016/j.enpol.2007.03.032
 ARTICLE IN PRESS
J.B. Ang / Energy Policy 35 (2007) 4772–4778
and the results cannot be generalized. This consideration
highlights the importance of adopting an in-depth case
study approach in order to inform appropriate analytical
as well as policy debates in this subject.
We formulate and estimate a vector error-correction
model (VECM) using the full-information maximum like-
lihood method by treating all the underlying variables as
endogenous variables. Unlike structural models, the
proposed reduced-form model in this study does not
require a priori information on parameters. The short-run
dynamics are modelled appropriately in order to capture
the long-run cointegrating relationship of these variables.
Finally, to supplement the findings of the long-run
cointegrated relationship, we also perform causality
tests to shed light on the causal relationships between
output and energy use, as well as output and pollutant
emissions.
The rest of the paper is organized in the following
manner. An analytical framework is set out in Section 2.
Section 3 describes the model, data and estimation
methodology. Section 4 discusses the empirical findings,
and the last section summarizes and concludes the paper.
2. Analytical framework
Economic development is closely related to energy
consumption since more energy consumption leads to
higher economic development through the enhancement of
productivity. However, it is also equally likely that more
efficient use of energy, which could result in a reduction in
energy consumption, may require a higher level of
economic development. That is, better economic perfor-
mance may be a catalyst for energy efficiency. As such,
energy consumption and economic development may be
jointly determined, and the direction of causality cannot be
determined a priori.
The importance of this nexus has been rigorously tested
in the literature. In an influential study, Kraft and Kraft
(1978) found a uni-directional causality running from
output to energy consumption for the United States during
the period 1947–1974. Following their seminal work, the
subsequent studies of Akarca and Long (1980), Yu and
Choi (1985), Erol and Yu (1987), Abosedra and Baghestani
(1989) and Hwang and Gum (1991), which differ in terms
of the time period covered, country chosen, econometric
techniques employed, and the control variables used in the
estimation, have either confirmed or contradicted the
results of Kraft and Kraft (1978). With the development
of time series techniques, the recent studies of Masih and
Masih (1996, 1997), Cheng and Lai (1997), Glasure and
Lee (1998), Asafu-Adjaye (2000), Stern (2000), Yang (2000)
Jumbe (2004), and Paul and Bhattacharya (2004) have
tended to focus on the cointegrating relationship between
income and energy consumption.
The relationship between output and pollution level has
also been well documented in the literature of Environ-
mental Kuznets Curve (EKC). The EKC hypothesis
4773
postulates that the relationship between economic deve-
lopment and the environment resembles an inverted
U-curve. That is, environmental damage first increases
with income, then stabilizes and eventually declines.
Antweiler et al. (2001) and Coxhead (2003) postulate that
this non-linear relationship between environmental pollu-
tion and income levels can be explained by three factors:
scale, composition, and technique effects. The scale effect
occurs as pollution increases with the size of the economy.
The composition effect refers to the change in the
production structure of an economy from agriculture
based to industry and service based that results in the
reallocation of resources. Finally, the pollution–income
relationship also depends on techniques of production. An
improvement in techniques of production, i.e., the tech-
nique effect, may reduce the amount of pollutant emissions
per unit of production.
Whether continued increase in national income brings
greater harm to the environment is critical for the design of
development strategies for an economy. Hence, a number
of studies have attempted to assess the relationship
between environmental pollution and income. The empiri-
cal results of Hettige et al. (1992), Cropper and Griffiths
(1994), Selden and Song (1994), Grossman and Krueger
(1995) and Martinez-Zarzoso and Bengochea-Morancho
(2004) are consistent with the EKC hypothesis. However,
higher national income does not necessarily warrant
greater efforts to contain the emissions of pollutants. The
empirical results of Holtz-Eakin and Selden (1995) and
Shafik (1994) show that pollutant emissions are mono-
tonically increasing with income levels.
Given that energy consumption has a direct impact on
the level of environmental pollution, the above discussion
clearly highlights the importance of linking these two
strands of literatures together. Hence, to avoid problems of
misspecification, these two hypotheses must be tested under
the same framework.
3. Model, data and methodology
3.1. Model and data
In the above discussions, we have seen that energy
consumption is a key determinant of CO2 emissions. On
the other hand, output and CO2 emissions have a non-
linear quadratic relationship according to the EKC
hypothesis. Hence, the long-run steady-state relationship
between CO2 emissions, energy use, and output can be
specified as follows:
C t ¼ b0 þ b1 E t þ b2 G t þ b3 G 2t þ t , (1)
where Ct is the CO2 emission (measured in metric tonnes
per capita); Et the commercial energy use (measured in kg
of oil equivalent per capita); Gt the per capita real GDP
(measured in local currency); and Gt2, the square of per
capita real GDP (measured in local currency).
 ARTICLE IN PRESS
4774 J.B. Ang / Energy Policy 35 (2007) 4772–4778

The parameters b1, b2 and b3 are the long-run elasticities 3.2. Econometric methodology
of CO2 emissions with respect to energy use, per capita
real GDP and squared per capita real GDP, respectively. Our empirical estimation has two objectives. The first is
The sign of b1 is expected to be positive. Under the EKC to examine how the variables are related in the long run.
hypothesis, b2 is expected to be positive whereas a negative The second is to examine the dynamic causal relationships
sign is expected for b3. The statistical insignificance of b3 between the variables. We begin our analysis by maintain-
suggests a monotonic increase in the relationship between ing the assumption that the model in Eq. (1) can be
pollutant emissions and per capita income. approximated by a levels VAR model, which can be aug-
CO2 emissions are those pollutants stemming from the mented with intercepts. A VAR approach serves our
burning of fossil fuels and the manufacture of cement. estimation purpose well since it avoids the endogeneity
They include contributions to the CO2 produced during problems by treating all variables to be endogenous.
consumption of solid, liquid, and gas fuels and gas Accordingly, the levels VAR is given by
flaring. Commercial energy use equals the indigenous
production plus imports and stock changes, minus exports X
p
yt ¼ a0 þ Aj ytj þ t , (2)
and fuels supplied to ships and aircraft engaged in j¼1
international transport (World Development Indicator,
2005). Annual data covering the period 1960–2000 are used where yt ¼ ½C t E t G t G 2t 0 . The series Ct, Et, Gt and G2t can be
in the study. All series are converted into natural either I(0) or I(1). a0 is a vector of constant terms or
logarithms for the usual statistical reasons. Thus, the series a0 ¼ ½aC aE aG aG2 0 , and Aj is a matrix of VAR
can be interpreted in growth terms after taking the first parameters for lag j. The vector of error terms
difference. t ¼ ½C E G G2 0 INð0; OÞ.
It is evident from Fig. 1 that the levels of per capita real The testing procedure involves three steps. We begin by
GDP and per capita energy consumption have significantly performing an integration analysis using three unit root
increased over time. Per capita CO2 emissions increased tests—augmented Dickey–Fuller (ADF) test, Phillips–
initially but declined dramatically after the early 1980s. In Perron (PP) test, and Elliott–Rothenberg–Stock (ERS)
panel (d) we observe a quadratic relationship between per test. The choice of the ERS test to complement the widely
capita real GDP and per capita CO2 emissions. This is employed ADF and PP tests is motivated by the argument
consistent with the prediction of the EKC hypothesis. that when a linear trend is present in the series, the use
Hence, the use of a quadratic specification is necessary to of ERS can substantially improve the power of the unit
capture the long-run relationship of these variables. root test over the conventional tests (Elliott et al., 1996).

2.3 8.4

2.2 8.2
2.1
8.0
2.0
7.8
1.9
7.6
1.8
1.7 7.4
60 65 70 75 80 85 90 95 00 60 65 70 75 80 85 90 95 00

10.2 2.3
ln (per capita CO2 emissions)

10.0 2.2
9.8
2.1
9.6
2.0
9.4
1.9
9.2
9.0 1.8

8.8 1.7
60 65 70 75 80 85 90 95 00 8.8 9.0 9.2 9.4 9.6 9.8 10.0 10.2
ln(per capita real GDP)

Fig. 1. Time series plots of the variables. (a) ln (per capita CO2 emissions), (b) ln (per capita energy consumption), (c) ln (per capita real GDP), and (d) the
relationship between ln (per capita CO2 emissions) and ln (per capita real GDP).
 ARTICLE IN PRESS
J.B. Ang / Energy Policy 35 (2007) 4772–4778 4775

The second step is to test for cointegration using the have an error correction representation in which an error
Johansen’s (1988) approach for each of the VARs correction term (ECT) must be incorporated into the
constructed in levels. model. Accordingly, a VECM is formulated to reintroduce
However, it is possible that given the small sample size the information lost in the differencing process, thereby
used in this study (41 annual observations), the Johansen allowing for long-run equilibrium as well as short-run
test statistics may be biased (Cheung and Lai, 1993). dynamics. For the 4-variable case with one cointegrated
Hence, we follow the approach of Reinsel and Ahn (1992), relationship, the VECM can be expressed as follows:
who suggest multiplying the Johansen statistics with the
X
p1 X
p1
scale factor (Npk)/N, where N is the number of DC t ¼ a1 þ a11 ECT t1 þ f1j DC tj þ y1j DE tj
observation, and p and k are the order of the VAR and j¼1 j¼1
the dimensions, respectively. This procedure corrects for X
p1 X
p1
small sample bias so that proper inference can be made. þ c1j DGtj þ d1j DG 2tj þ 1t , ð4:1Þ
The Johansen’s maximum likelihood test is complemen- j¼1 j¼1
ted by the ARDL bounds test of Pesaran et al. (2001) to
provide a sensitivity check on the results. This approach X
p1 X
p1

has been widely adopted in the energy literature (see, e.g., DE t ¼ a2 þ a21 ECT t1 þ f2j DC tj þ y2j DE tj
j¼1 j¼1
Fatai et al., 2003; Narayan and Smyth, 2005; Wolde-
Rufael, 2006; Narayan and Singh, 2007).1 The ARDL X
p1 X
p1

bounds test developed by Pesaran et al. (2001) can be þ c2j DGtj þ d2j DG 2tj þ 2t , ð4:2Þ
j¼1 j¼1
estimated by OLS. Pesaran and Shin (1998) show that the
OLS estimators of the short-run parameters are consistent
X
p1 X
p1
and the ARDL based estimators of the long-run coeffi- DG t ¼ a3 þ a31 ECT t1 þ f3j DC tj þ y3j DE tj
cients are super-consistent in small sample sizes. Hence, j¼1 j¼1
valid inferences on the long-run parameters can be made X
p1 X
p1
using standard normal asymptotic theory. The procedure þ c3j DG tj þ d3j DG 2tj þ 3t , ð4:3Þ
involves estimating the following single-equation condi- j¼1 j¼1
tional error-correction model:
X
p1 X
p1
X
k
DG 2t ¼ a4 þ a41 ECT t1 þ f4j DC tj þ y4j DE tj
DC t ¼ a0 þ b0 C t1 þ bj DET j;t1 j¼1 j¼1
j¼1
X
p1 X
p1
X
p p X
X k
þ c4j DGtj þ d4j DG 2tj þ 4t , ð4:4Þ
þ g0i DC ti þ gji DDET j;ti þ t , ð3Þ
j¼1 j¼1
i¼1 i¼0 j¼1
where ECT t1 ¼ C t1 þ ðb21 =b11 ÞE t1 þ ðb31 =b11 ÞG t1 þ
where Ct is the per capita CO2 emissions, and DETt is a
ðb41 =b11 ÞG2t1 is the normalized cointegrated equation.
vector of the determinants of Ct, which includes Et, Gt and
There are two sources of causation, i.e., through the
Gt2. An F-test for the joint significance of coefficients on
ECT, if aa0, or through the lagged dynamic terms. The
lagged levels terms of the conditional ECM ðH 0 : b0 ¼
ECT measures the long-run equilibrium relationship while
b1 ¼    ¼ bk ¼ 0Þ can be employed to ‘bounds test’ for the
the coefficients on lagged difference terms indicate the
existence of a long-run relationship in Eq. (3). The test for
short-run dynamics. The statistical significance of the
cointegration is provided by two asymptotic critical value
coefficients associated with ECT provides evidence of an
bounds when the independent variables are either I(0) or
error correction mechanism that drives the variables back
I(1). The lower bound assumes all the independent
to their long-run relationship.
variables are I(0), and the upper bound assumes they are
Given the two different sources of causality, we can
I(1). If the test statistics exceed their respective upper
perform two different causality tests, i.e., short-run
critical values, the null is rejected and we can conclude that
Granger non-causality test and long-run weak exogeneity
a long-run relationship exists.
test. In Eq. (4.1), to test DG t and DG2t do not Granger cause
Our causality tests are preceded by cointegration testing
DCt in the short run, we examine the significance of the
since the presence of cointegrated relationships have
lagged dynamic terms by testing the null H 0 : all c1j ¼
implications for the way in which causality testing is
all d1j ¼ 0 using the Wald test. Rejection of the null implies
carried out. If cointegration is detected, the third step is to
output growth Granger causes pollution growth in the
test for causality by employing the appropriate types of
short run. To test the null that pollution growth does not
causality tests available in the recent literature. According
Granger cause output growth, a different procedure is
to Engle and Granger (1987), cointegrated variables must
necessary since there are two variables which indicate
1
This technique has also been widely adopted in other fields. See, e.g., output growth in the system, i.e., DG t and DG 2t . Using
Narayan and Narayan (2005), Narayan and Smyth (2006a, b) and Ang Eqs. (4.3) and (4.4), we formulate an unrestricted VECM
(2007), among others. by imposing the restrictions all f3j ¼ 0 and all f4j ¼ 0.
 ARTICLE IN PRESS
4776 J.B. Ang / Energy Policy 35 (2007) 4772–4778
Similar to the conventional F-test, a likelihood ratio test
can be performed on the determinants of residual variance
of these two models. Rejection of the null implies pollution
growth Granger causes output growth in the short run. The
weak exogeneity test, which is a notion of long-run non-
causality test, requires satisfying the null H 0 : a11 ¼ 0 for
non-causality from long-run equilibrium deviation to DCt.
For non-causality from long-run equilibrium deviation to
DGt and DG 2t , this requires non-rejection of the null
H 0 : a31 ¼ a41 ¼ 0. The hypothesis testing is based on a
likelihood ratio test which follows a w2 distribution.
4. Empirical findings
Three unit root tests are implemented: ADF, PP, and
ERS tests. The results reported in Table 1 shows that all
unit root tests yield remarkably similar results, i.e., Ct, Et,
Gt and G 2t are non-stationary in their levels but become
stationary after taking the first difference. Hence, we
conclude that all series are I(1) at the 5% level of
significance.
Given that Ct, Et, Gt and G 2t share common integration
properties, we can now proceed to test for the presence of a
common trend, or equivalently, a long-run cointegrating
relationship between the variables. Given the sample size,
we have considered a maximum lag length of five and
tested the model downwards. The optimal lag length is
found to be five based on the AIC model selection criterion
and likelihood ratio test. This lag structure is used for the
remaining analyses. The Johansen cointegration tests are
performed for the VARs at levels. In panel A of Table 2,
the results of the Johansen maximum eigenvalue tests,
based on both Johansen (1988) and the modified version
suggested by Reinsel and Ahn (1992), point to the
conclusion that there is one cointegrated relationship, at
the 1% level of significance. As a sensitivity check,
cointegration tests are also performed using the ARDL
bounds test of Pesaran et al. (2001). The results reported in
panel B indicate that the null hypothesis of cointegration is
rejected at the 5% significance level. Given the small
sample used in the present study, the F-statistic is also
Table 1
Unit root tests
ADF PP ERS
Level 1st difference Level 1st difference Level 1st difference
Ct 1.242 6.214*** 1.370 6.221*** 15.759 1.344***
Et 1.934 5.273*** 1.937 5.292*** 52.536 1.298***
Gt 2.378 3.367** 2.333 3.314** 126.604 2.679**
Gt2 2.312 3.414** 2.191 3.381** 102.336 2.347**
Notes: For ADF, AIC is used to select the lag length. The maximum
number of lags is set to be five. For PP, Barlett Kernel is used as the
spectral estimation method. The bandwidth is selected using the Newey–
West method. For ERS, AR spectral OLS is used as the spectral
estimation method. The optimal lag length is chosen using AIC. *, ** and
*** indicate 10%, 5% and 1% level of significance, respectively.
compared against the critical values provided by Narayan
(2005), which are based on small samples. We obtain the
same conclusion that no evidence against cointegration is
found.
Table 3 presents the cointegrating equation and speed
of adjustment coefficient of this cointegrating vector.
Lagrange Multiplier (LM) tests suggest no evidence of
serial correlation in the residuals up to the second order. By
normalizing the coefficient of Ct to one, the cointegrated
equation shows that all coefficients are statistically
significant at the 1% level. All coefficients in the long-run
relationship have the expected signs. That is, Ct are
positively related to Et and G t but negatively related to
G2t . The results provide some support for our argument to
examine these variables under an integrated framework.
The long-run elasticity of Ct with respect to Et is found
to be 2.25, suggesting that a 1% point increase in Et is
associated with 2.25% points increase in Ct. The results
that Et has a positive influence on Ct are consistent with
our predictions. The elasticity of pollution with respect to
income in the long run is found to be 31.113.34Gt.The
statistical significance of G 2t rules out the case where output
increases monotonically with the level of pollution. The
results provide some support for the EKC hypothesis that
the level of environmental pollution first increases with
income, and then stabilizes and declines. The results imply
that the turning point of the EKC occurs at an income level
of 9.31 (in logarithms), which is rather close to the actual
level of 9.55 (in logarithms). Our findings are broadly
consistent with Shafik and Bandyopadhyay (1992), Selden
and Song (1994) and Grossman and Krueger (1995), who
have also reported an inverted U-shaped relationship
between pollution and output.
The loading factor, which measures the speed of
adjustment back to the long-run equilibrium value, is
statistically significant and correctly signed (negative). This
implies that the long-run equilibrium deviation has a
significant impact on the growth of CO2 emissions. The
speed of adjustment at 77% a year is considered relatively
high. In other words, it takes less than 1.5 years to achieve
long-run equilibrium whenever there is a deviation from
the long-run steady state. The results are not surprising
given that there is little control on the growth of CO2
emissions.
Cointegration implies the existence of causality, at least
in one direction. However, it does not indicate the direction
of the causal relationship. Hence, to shed light on the
direction of causality, we perform the ECM-based caus-
ality tests. The results reported in Table 4 show a uni-
directional causality running from output growth to
growth of pollutant emissions in the long run. When
examining the causal relationship between economic
growth and growth of energy use, we find evidence of
causality running from the former to the latter in the long
run, but a reverse causality is observed in the short run.
The results also suggest that degradation of the
environment does not have a causal impact on economic
 ARTICLE IN PRESS
J.B. Ang / Energy Policy 35 (2007) 4772–4778 4777

Table 2
Cointegration test results

Hypothesized no. of cointegrating Eigenvalue Maximum eigenvalue Modified Maximum eigenvalue

equations statistics statistics

A. Johansen cointegration tests

r¼0 0.911 84.846*** 43.458***
r¼1 0.430 19.699 10.090
r¼2 0.290 11.996 6.144
r¼3 0.071 2.565 1.314

Critical bounds of the F-statistic: unrestricted intercept and no trend 1% level 5% level 10% level

I(0) I(1) I(0) I(1) I(0) I(1)

B. ARDL Bounds test

Pesaran et al. (2001) 4.290 5.610 3.230 4.350 2.720 3.770
Narayan (2005), N ¼ 40 4.428 6.250 3.202 4.544 2.660 3.838
Narayan (2005), N ¼ 45 4.394 5.914 3.178 4.450 2.638 3.772
Calculated F-statistic 4.868**

Notes: The modified maximum eigenvalue statistics were obtained by multiplying the Johansen maximum eigenvalue statistic with the scale factor (Npk)/
N, where N is the number of observation, and p and k are the order of the VAR and the dimensions, respectively. For the ARDL bounds test, the optimal
lag length was found to be four using AIC. The critical values provided by Narayan (2005) are based on small samples. They are calculated using
stochastic simulations specific to the sample size based on 40,000 replications. The sample size N of the present study is 41. *, ** and *** indicate 10%, 5%
and 1% level of significance, respectively.

higher cost such as environmental taxes or greater

Table 3 command-and-control efforts may result in input material
Cointegrating vector
substitution, which may reduce or increase the pollution
Cointegrated equation a11 levels.
The finding of a uni-directional causality running from
C t ¼  161:38 þ 2:25E t þ 31:11Gt  1:67G 2t 0.77 output growth to growth of energy use in the long run
ð4:30 Þ ð3:92 Þ ð4:32 Þ implies that France is an energy-independent economy, in
line with its economic policy to achieve energy indepen-
w2SERIAL ð1Þ ¼ 17:29ð0:37Þ; w2SERIAL ð2Þ ¼ 12:03ð0:74Þ (5.68**)
dence in the long run. The results seem to suggest that the
Notes: The normalized variable is Ct, figures in parentheses indicate implementation of energy conservation policies has not
t-statistics; w2SERIAL ð1Þ and w2SERIAL ð2Þ are the Lagrange multiplier test inversely affected the long-term economic performance of
statistics for no first and second serial correlation, respectively; and *, ** France. Hence, the results imply that the economy of
and *** indicate 10%, 5% and 1% level of significance, respectively. France may be less vulnerable to energy shocks, which
could adversely affect GDP growth.
In the short run, more energy use is required to fuel
Table 4
economic development. Economic growth is the outcome
Causality tests
of growth in inputs and increases in the productivity of the
Hypothesis Short-run Long-run weak inputs. Therefore, economic expansion requires higher or
Granger non- exogeneity test more efficient consumption of energy products. However,
causality test
there is much scope for the development of energy
H0:DG,DG2QDC 8.68 38.77*** conservation strategies given that over-consumption of
H0:DCQDG,DG2 11.79 0.07 resources can have negative impacts on the environment.
H0:DG,DG2QDE 7.29 24.98***
H0:DEQDG,DG2 27.72*** 0.07

Notes: *, ** and ***

indicate 10%, 5% and 1% level of significance,
respectively.
growth. Instead, expansion of the economy exerts a causal
effect on CO2 emissions. The results call for more
environmental protection since environmental pollution
may cause a negative externality to the economy through
affecting human health and thereby reduce productivity.
However, one must be mindful that policies that impose a
5. Summary and conclusions
In this paper, we examine the dynamic relationship
between CO2 emissions, energy consumption, and output
for France over the period 1960–2000 using a multivariate
vector error-correction model. The empirical results for the
case of France suggest the existence of a robust long-run
relationship between the variables. The results indicate that
more energy use results in more CO2 emissions, and CO2
emissions and output have a quadratic relationship in the
 ARTICLE IN PRESS
4778 J.B. Ang / Energy Policy 35 (2007) 4772–4778
long run. To complement the findings of cointegration
analysis, we also perform two causality tests to throw light
on the causal links of output energy and output pollution.
The results suggest that output growth causes CO2
emissions and energy consumption in the long run. A
uni-directional causality running from growth of energy
use to output growth is observed in the short run.
Acknowledgements
Useful suggestions and comments from Warwick
McKibbin, Sjak Smulders, Russell Smyth and a referee
of this journal are greatly appreciated.
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