Study Of Causal Relationship Between Economic Development And Carbon Dioxide Emission In Maldives

The objective of this dissertation “Study of Causal relationship between Economic Development and Carbon Emission in Maldives” is statistically understand the relationship between Economic development and Carbon emission in Maldives.Relationship between GDP growth and carbon emission were tested using Environmental Kuznets Curve and Ordinary Lease Square method. All the data were tested for stationary properties. Time series data from 1975 to 2008 were tested. Granger Causality tests was used to test the causality among two variables. Results show strong positive relationship between Carbon emission and Economic growth. Quadratic EKC equation best suits to explain the relationship in the long term. EKC estimation shows Maldives Carbon emission should reduce in the long run.Relationship between Sector Growth and Carbon emission were tested using Ordinary Least Square method. Johansen Cointegration test and Vector Error Correlation Method was used to test the short run and long run causality. Data from 1984-2010 were tested. Results shows all three sectors have very high correlation with Carbon emission. Secondary sector relationship with Carbon emission is lower than Primary and Tertiary Sector. Tertiary sector correlation is highest. Causality tests shows short run and long run causality running from sector growth and Carmon emission.Relationship between Tourism development and Carbon emission was tested using Tourism growth indicators. Tourism growth data from 1984-2010 were used to test the correlation and Causality. Correlation was tested using Ordinary Least Square method. Causality was tested using Granger causality. Results shows Tourism growth and Carbon emission have very significant positive correlation. Causality results suggests there exists tourism development driven Carbon emission in Maldives.Results suggest Maldives Economic development and Carbon emission is very positively correlated. Any increase in economic development will increase the carbon emission proportionally if no direct measures are taken to reduce the Carbon emission. Causality shows any direct reduction in carbon emission will not lower the economic development.