The Effect of Energy Consumption and Economic Growth on Environmental Sustainability in Egypt: Financial Development and Globalization, do they have a role?

The realization of environmental sustainability and the mitigation of the impact of climate change has become a global objective. The present paper tackles the effect of energy consumption, economic growth, financial development and globalization on the scale, intensity, and damage effects of carbon dioxide emissions in Egypt during the period 1990 – 2020. In addition, causality directions in the short run and the long run are investigated and the dynamic behavior of environmental sustainability is described.
In order to achieve its objective, the present study relied on the co-integration analysis using the Autoregressive Distributed Lag (ARDL) technique, Sasabuchi-Lind-Mehlum test, and Granger causality test within the framework of the Vector Error Correction Model (VECM) and Toda-Yamamoto causality analysis; in addition to impulse response functions and the analysis of variance components.
The results of the co-integration test revealed a long run correlation between carbon dioxide emissions and the explanatory factors. The study findings also showed that economic growth, energy consumption, globalization, and financial development reduce environmental sustainability. Moreover, the validity of the environmental Kuznets curve (EKC) hypo thesis was confirmed when applied to the Egyptian economy. Hence the income level effect on the emissions scale becomes negative when the annual real income per capita exceeds the amount of 33841.5 Egyptian Pounds.