Unraveling consumption‐based carbon dioxide emissions: Sectoral analysis and temporal dynamics in G7 economies

Abstract

This research investigates consumption‐based carbon dioxide emissions (CBE) within the Group of Seven (G7) economies from 1990 to 2022, particularly under the Paris Agreement. The main focus of the study is on key determinants such as trade, income, renewable energy consumption, foreign direct investment, and technological innovation. The study aims to unravel the complexities underlying the environmental footprint of consumption. A novel aspect of this research is its intent to fill existing gaps in the literature by providing a sectoral analysis and exploring the temporal dynamics of consumption patterns within these advanced industrial nations. Advanced econometric methods, specifically the Cross‐Section Augmented Autoregressive Distributed Lag (CS‐ARDL), are employed to enhance the robustness and reliability of the analysis. Cointegration relationships among CBE and its determinants shed light on the short and long‐term interdependencies among these factors. Using the Augmented Mean Group (AMG) and Common Correlated Effect Mean Group (CCEMG) methods to conduct robustness checks makes the models even more substantial and ensures the results' validity. The implications of this research are far‐reaching, extending to various stakeholders, including policymakers, businesses, industries, and supply chain decision makers. Our study identifies significant long‐term relationships between CBE and key determinants within G7 economies. The findings emphasize the urgency of adopting strategies that promote the sustainable management of natural resources. As global efforts intensify to address climate change, this research provides practical implications for shaping sustainable policy strategies and environmental initiatives on a global scale.