Sustainability 2014, 6, 967-979; doi:10.

3390/su6020967
OPEN ACCESS

sustainability
ISSN 2071-1050
[Link]/journal/sustainability
Article

Oil Consumption, CO2 Emission, and Economic Growth:

Evidence from the Philippines
Kyoung-Min Lim, Seul-Ye Lim and Seung-Hoon Yoo *

Department of Energy Policy, Graduate School of Energy & Environment, Seoul National University
of Science & Technology, 232 Gongreung-Ro, Nowon-Gu, Seoul 139-743, Korea;
E-Mails: lkymin@[Link] (K.-M.L.); im@[Link] (S.-Y.L.)

* Author to whom correspondence should be addressed; E-Mail: shyoo@[Link];

Tel.: +82-2-970-6802; Fax: +82-2-970-6011.

Received: 26 November 2013; in revised form: 20 January 2014 / Accepted: 14 February 2014 /
Published: 21 February 2014

Abstract: This paper attempts to investigate the short- and long-run causality issues among
oil consumption, CO2 emissions, and economic growth in the Philippines by using time
series techniques and annual data for the period 1965–2012. Tests for unit root, co-integration,
and Granger-causality tests based on an error-correction model are presented. Three
important findings emerge from the investigation. First, there is bi-directional causality
between oil consumption and economic growth, which suggests that the Philippines should
endeavor to overcome the constraints on oil consumption to achieve economic growth.
Second, bi-directional causality between oil consumption and CO2 emissions is found,
which implies that the Philippines needs to improve efficiency in oil consumption in order
not to increase CO2 emissions. Third, uni-directional causality running from CO2 emissions
to economic growth is detected, which means that growth can continue without increasing
CO2 emissions.

Keywords: oil consumption; CO2 emissions; economic growth; Granger-causality; Philippines

1. Introduction

Oil plays an important role in economic growth and industrial development. It should not be
surprising to find that there is a close tie between GDP growth and oil supply. In the Philippines, oil
consumption ran to about 282 thousand barrels daily in 2012 [1]. In 2011, total primary energy
consumption in the Philippines was roughly 1.6 quadrillion Btu. Oil constituted around 40% of total
Sustainability 2014, 6 968

consumption, both coal and solid biomass and waste made up around 20% each, and the remainder
came from natural gas and renewable sources [2]. Moreover, the current economic situation is strongly
influenced by supply and demand of oil.
Over the last decades, some studies have been conducted to examine the relationship between oil
consumption and economic growth. In a summary of the literature, the empirical findings on the causal
relationship between oil consumption and real gross domestic product (GDP) are different from
country to country. We do not have any concrete and consistent results yet.
For example, uni-directional causality running from economic growth to oil consumption was
detected in Taiwan [3] and Pakistan [4]. That is, people are more likely to demand oil as the economy
develops. However, the reverse causality does not exist, which means demand-side management of oil
could be adopted since the less use of oil does not hold back economic growth. Uni-directional
causality running from oil consumption to economic growth was discovered by Zou and Chau [5] for
China and Lee and Chang [6] for Taiwan. An increase in oil consumption could push economic growth
in both cases. Shortage of oil supply infrastructure can hinder economic growth. Administers whose
country has these cases should cope with growing demand for oil. Yoo [7], Yuan et al. [8], and found
bi-directional causality in South Korea, China, respectively. In addition, Ghosh [9] reported that there
are the short-run bi-directional causality between economic growth and high speed diesel consumption
and the existence of a long-run uni-directional causality running from economic growth to high speed
diesel consumption in India. On the other hand, Fatai et al. [10] and Rufael [11] discovered no causality
between oil consumption and economic growth in New Zealand and in Shanghai of China, respectively.
Growth in oil use and the associated green house gases (GHG) emissions have accompanied the
economic growth seen after the recovery from the Asian financial crisis. Real GDP has doubled during
the past 30 years, and GHG emissions also increase significantly with high dependence on fossil fuel
in the Philippines. The Philippines government has opted to phase out oil as a primary fuel for power
generation and transport sector. The government continues to promote power sector reforms and
development of renewable energy through private sector investment [12]. Recently, some studies dealt
with the causality relationship between energy consumption, CO2 emissions, and economic growth.
That is, the question of whether it is really possible to achieve sustained economic growth without
increasing energy consumption or GHG has become a topic of special interest.
Bloch et al. [13] reported that there is a uni-directional short-run and long-run causality running
from income to coal consumption in China. Further, there also exists a bi-directional causality between
coal consumption and carbon emissions in short- and long-run Usama [14] found bi-directional
causality between oil consumption, CO2 emissions, and economic growth in the Middle East and North
African countries, respectively. Most of the studies examined the relationship between total energy
consumption and other factors. Funinhas and Marque [15] suggest bi-directional causality between
energy growth in both the long-run and short-run in Portugal, Italy, Greece, Spain and Turkey. The
Empirical results of causality tests among energy consumption, CO2 emissions, and economic growth
are shown in Table 1.
To date, no study that focuses on the causality relationship between oil consumption, CO2
emissions, and real GDP with respect to Philippines has been carried out. Thus, the purpose of this
paper is to investigate the causality among oil consumption, CO2 emissions, and economic growth, and
to obtain policy implications of the investigation. The remainder of the paper is organized as follows.
Sustainability 2014, 6 969

Section 2 provides an overview of the methodology adopted here. Section 3 explains the data
employed and presents the results and discussions. Some conclusions are made in the final section.

Table 1. Empirical results of causality tests between energy consumption, CO2 emissions,
and economic growth.

Countries Periods Causality Relationship Sources

Short run: C→Y, E→CY
BRICs 1971–2005 Long run: YC→E, CE→Y Pao and Tsai [16]
Strong: C→EY, E→CY, Y→E
short run: E→CY, Y→CE
Central America (6) 1971–2004 Apergis and Payne [17]
long run: EY→C, YC→E
1960–2007 long run: Y→E, E→C Zhang and Cheng [18]
China
1981–2006 long run: Y→CE, C→E, E→YC Chang [19]
short run: E→CY, Y→CE
CIS 1992–2004 Apergis and Payne [20]
long run: EY→C, CY→E
short run: (Denmark) Y→C,E
(Greece) Y→E (Italy) E→C, Y→CE
(Swiss) E→Y, Y→E
Europe (19) 1960–2005 long run: (Denmark) EY→C Acaravci and Ozturk [21]
(Greece) EY→C (Iceland) EY→C
(Italy) EY→C, YC→E (Portugal) EY→C
(Swiss) EY→C EC→Y
short run: Y→C, E→C
Greece 1977–2007 long run: Y→EC, E→C, C→E Hatzigeorgiou et al. [22]
strong: Y→EC, E→C
Iran 1967–2007 long run: Y→CE Lotfalipour et al. [23]
short run: Y→E
Malaysia 1971–1999 long run: CE→Y, YC→E Ang [24]
strong: CE→Y, Y→E
short run: E→Y
France 1960–2000 Ang [25]
long run: EY→C, CY→E
South Africa 1965–2006 C→Y, E→YC Menyah and Wolde-Rufael [26]
short run: C→EY, E→C, Y→C
1960–2005 Halicioglu [27]
Turkey long run: EY→C, EC→Y
1968–2005 long run: CE→Y Ozturk and Acaravci [28]
Note: Y, E, and C indicate real GDP, energy consumption, and CO2 emissions, respectively.

2. Methodology

2.1. Granger-Causality and Stationarity

We employed the Granger-causality test to determine the direction of causality [29,30]. This test is
simple and straightforward and represents a convenient and general method for detecting any presence
of a causality relationship between variables. According to this test, a time series (X) is said to
Granger-cause another time series (Y) if the prediction error of the current series Y declines through the
Sustainability 2014, 6 970

use of past values of X in addition to past values of Y. The Granger-causality test is selected in this
study over other alternative techniques because of the favorable Monte Carlo evidence reported by
Geweke et al. [31].
The Granger-causality test requires the time series of variables to be stationary. It has been shown
that the use of non-stationary data in causality tests can lead to spurious results [32]. Therefore, following
Engle and Granger [33], we first tested the unit roots of X and Y to confirm the stationarity of each variable.
For this, we employed the Phillips-Perron (PP) test because this test is known to be robust to serial
correlation and time-dependent heteroscedasticity [34]. If any variable is found to be non-stationary,
we must compute the differences and then apply the causality test with the differenced data.

2.2. Co-Integration

The concept of co-integration can be defined as a systematic co-movement between two or more
economic variables over the long run. According to Engle and Granger [33], if X and Y are both
non-stationary, one would expect that a linear combination of X and Y would be a random walk process.
However, the two variables may have a property whereby a particular combination of X and Y
(e.g., Z = X − bY) is stationary. Thus, if such a property holds true, then we can assume that X and Y
are co-integrated.
If X and Y are non-stationary and co-integrated, then any standard Granger-causal inferences will be
invalid, and a more comprehensive causality test based on an error correction model (ECM) is needed [33].
However, if X and Y are both non-stationary, and the linear combination of the series of the two
variables is non-stationary, then the standard Granger-causality test should be adopted [35]. Therefore,
testing the co-integration property of the series of oil consumption, CO2 emissions, and economic
growth is required before performing the Granger-causality test. When both series are integrated in the
same order, we can test for the presence of co-integration. For this, we employ the Johansen
co-integration test [36].

2.3. Error-Correction Model

The In the ECM procedure, X and (or) Z Granger-cause(s) Y if either the estimated coefficients on
lagged values of X and (or) Z or the estimated coefficient on the lagged value of the error term from
the co-integration regression are (is) statistically significant. Similarly, Y and (or) Z Granger-cause(s) X
if either the estimated coefficients on lagged values of Y and (or) Z or the estimated coefficient of the
error term from the co-integration regression are (is) statistically significant. In the same manner, X
and (or) Y Granger-cause(s) Z if either the estimated coefficients on the lagged values of X and (or) Y
or the estimated coefficient on the lagged value of the error term from the co-integration regression are
(is) statistically significant. This procedure specifically allows for a causal linkage between two or
more variables stemming from an equilibrium relationship, thus characterizing the long-run equilibrium
alignment that persists beyond the short-run adjustment.
If three variables are non-stationary, but they become stationary after the first differencing, and
co-integrated, the ECMs for the Granger-causality test can be specified accordingly as follows:
L11 L12 L13
Yt  10   11i Yt i  12 j X t  j   13k Z t k  14 t 1  u1t (1)
i 1 j 1 k 1
Sustainability 2014, 6 971

L21 L22 L23

X t   20    21i X t i   22 j Yt  j    23k Zt k  24 t 1  u2t (2)
i 1 j 1 k 1

L31 L32 L33

Z t   30    31i Z t i   32 j X t  j    33k Yt k   34 t 1  u3t (3)
i 1 j 1 k 1

where Xt, Yt, and Zt represent the natural logarithms of oil consumption, CO2 emission, and real GDP,
respectively; ∆ is the difference operator; L’s are the number of lags, β’s are parameters to be
estimated, μt’s are the serially uncorrelated error terms, and εt−1 is the error correction term (ECT) ,
which is derived from the long run co-integration relationship Yt=η0+η1Xt+η2Zt+εt, where η represents
the parameters to be estimated and εt is an error term. The co-integration vector equation is estimated
by the use of a canonical co-integrating regression method suggested by Park [37].
In each equation, the change in the dependent variable is caused not only by their lags, but also by
the previous period’s disequilibrium in the level, εt−1. Given such a specification, the presence of
short-run and long-run causality can be tested [33]. Let us consider Equation (1). If the estimated
coefficients on the lagged values of oil consumption (β12) are statistically significant, then it is implied
that oil consumption Granger-causes real GDP in the short run. This test can be conducted by a joint
F-test, whose null hypothesis is that all coefficients of ∆X are zero (β121= β122 = … = 0). Similarly, if
the estimated coefficients on the lagged values of CO2 emissions (β13) are statistically significant, then
the implication is that CO2 emission Granger-causes real GDP in the short run. On the other hand,
long-run causality can be found by testing the significance of the estimated coefficient of ECT (β14) by
a t-test. Finally, the strong Granger-causality running from oil consumption to GDP can be determined
through a joint test of the statistical significance of β12’s and β14 by the joint F-test. The strong
Granger-causality from CO2 emissions to GDP can be determined through a joint test of the statistical
significance of β13’s and β14 by a joint F-test. Similarly, we can examine whether real GDP and CO2
emissions Granger-cause oil consumption through Equation (2) and whether real GDP and oil
consumption Granger-cause CO2 emissions through Equation (3).

3. Results and Discussion

3.1. Data

In order to examine whether there is a causal relationship between oil consumption, CO2, and
economic growth, data covering the period 1965–2012 are used. The choice of the starting period was
constrained by the availability of data on oil consumption from the BP [1]. Oil consumption is
expressed in terms of thousand bbl daily. We employed real GDP in Peso as a proxy for economic
growth from World Bank [38]. Finally, CO2 emissions per year were in million ton. The data of CO2
emissions was obtained from BP [1].

3.2. Results of Unit Roots and Co-Integration Tests

When testing for unit roots, co-integration, and causality, we have chosen to use probability values
of 0.05 and 0.1 in this study, which are appropriate levels of significance to be used with small sample
sizes such as that used here. We employed the PP test to verify the stationarity of the time series data.
Sustainability 2014, 6 972

The test results for levels and first-differences are summarized in Table 2. The null hypothesis is that
the series of all the variables would be non-stationary, which means each variable has a unit root.
According to the first run of the PP test, the p-value exceeds 0.05, and thus the null hypothesis cannot
be rejected. This implies that this data set was non-stationary. However, the p-value for the
first-differenced data set is less than 5%, and thus, the null hypothesis can be rejected; that is, the
first-differenced data are stationary.

Table 2. Results of Phillips-Perron (PP) unit root tests.

Levels First differences
Variables
PP values p-values PP values p-values
Oil consumption (X) −6.24 [4] 0.727 −21.88 [3]** 0.048
CO2 emissions (Y) −10.00 [10] 0.436 −41.33 [2]** 0.001
GDP (Z) −7.31 [8] 0.639 −44.19 [2]** 0.000
Note: The numbers inside brackets are the optimum lag lengths determined using the Akaike information
criterion described in Pantula et al. [39]. The p-values are calculated under the null hypothesis of non-stationarity.
** indicates the rejection of the null hypothesis at the 5% level.

However, the standard unit root tests are known to have reduced power if the time series contains
structural break. Therefore, we have considered unit root tests that allow for a level shift at a known
point in time. Lanne et al. [40] propose the unit root test for the model, which is based on estimating
the deterministic term by a generalized least squares (GLS) under the unit root null hypothesis and
subtracting it from the original series. Then, augmented Dickey-Fuller (ADF) type tests are applies to
the adjusted series. This study employs ADF unit root test that allows for structural break and the test
results are presented in Table 3. The test statistics is lower than the critical values at the 10% level
which are tabulated in Lanne et al. [40]. The test results provide evidence of non-sationarity in three
series when breaks are allowed. Hence, the variables are non-stationary when level but stationary at
their first differences. The Granger-causality tests are run with the first differenced data.

Table 3. Results of unit root tests with structural break.

Variables Optimal lags Break points Test statistics Inferences
Oil consumption (X) 6 1984 −2.77 Non-stationary
CO2 emissions (Y) 10 1987 −2.19 Non-stationary
GDP (Z) 1 1985 −1.58 Non-stationary
Note: The test is based on Lanne et al. [40]. The numbers inside brackets are the optimum lag lengths
determined using the Akaike information criterion described in Pantula et al. [39]. Break points are computed
which minimizes the generalized least squares objective function used the parameters of the deterministic part.

We conducted a co-integration test to determine the presence of a long-run causality relationship

among the three individually non-stationary variables. In a co-integration test, if three series are
integrated of the same order and the linear combination of the three series has no unit root, then it is
stationary, that is, there is a long-run causality relationship. Table 4 shows the results of the Johansen
co-integration test for the three series. The null hypothesis that the number of co-integrating equations
would be zero was rejected at the 10% level, but the null hypothesis that the number of co-integration
Sustainability 2014, 6 973

equations would be at most one and tow could not be rejected. This implies that there was one
co-integration equation. We can conclude that oil consumption, CO2 emissions, and real GDP were
co-integrated and showed an inherent co-movement tendency in the long run. Based on these results,
we employed the ECM for the Granger-causality test.

Table 4. Results of Johansen co-integration tests.

Null hypotheses Likelihood ratio test statistic p-values
The number of co-integrating equations is zero (R = 0) 36.63 0.027
The number of co-integrating equations is at most one (R ≤ 1) 14.43 0.158
The number of co-integrating equations is at most two (R ≤ 2) 0.04 0.620
Note: The optimal lag length was chosen as 9 by using the Akaike information criterion described in
Pantula et al. [39]. The p-values were calculated under the corresponding null hypothesis. R denotes the
number of co-integrating equations.

3.3. Results of the Error-Correction Model and Granger-Causality Tests

As previously stated, if the series of three variables are non-stationary and the linear combination of
the three variables is stationary, then the ECM rather than the standard Granger-causality test should
be employed. Therefore, we conducted an ECM to investigate both short-run and long-run causality. In
the ECM, the first difference of each endogenous variable (oil consumption, CO2 emissions, and real
GDP) was regressed on the one-period lag of the co-integrating equation and the lagged first
differences of all endogenous variables in the system, as shown in Equations (1), (2) and (3). We chose
the lag lengths (L in Equations (1), (2) and (3) by using the Akaike information criterion [39].
The results of the tests on causality are presented in Table 5. Significance levels of 5% and 10% are
used for causality tests. In order to check for the appropriateness of the estimation results of the ECM,
we conduct two types of specification tests. We check the model stability using CUSUM and
CUSUMSQ tests suggested by Brown et al. [41]. The results of both tests suggest that the null
hypothesis of absence of structural break cannot be rejected at the 5% level. In addition, we conduct a
Durbin-Watson test to detect the presence of the first-order autocorrelation in the residuals from the
regression analysis, but the null hypothesis of no autocorrelation cannot be rejected. In this case, we
estimated the statistics of Durbin-h, because of lagged dependent variables.
Let us first discuss the estimation results for Equation (1). The estimated coefficients for the lagged
values of changes in oil consumption (∆X) are statistically significant at the 5% level, which implies
the presence of short-run causality running from oil consumption to economic growth. Similarly, those
in CO2 emissions (∆Y) are also statistically significant at the 5% level, which indicates the existence of
short-run causality running from CO2 emissions to economic growth. The statistical significance, at the
5% level, of the coefficient for the ECT in Equation (1) suggests that there are long-run causality not
only from oil consumption to economic growth but also from CO2 emissions to economic growth. The
statistical significance, at the 5% level, of the estimated coefficients for the lagged values of changes in
oil consumption (∆X) and the coefficient of the ECT in Equation (1) shows the presence of strong
causality from oil consumption to economic growth. Moreover, we can find strong causality running
from CO2 emissions to economic growth at the 5% level.
Sustainability 2014, 6 974

Table 5. Results of causality tests based on the error-correction model.

Source of Causality (Independent Variables)
Short-Run Long-Run Joint (Short/Long-Run)
Null Hypotheses
F-values t-values F-values
Z X Y εt-1  Z, εt-1  X, εt-1  Y, εt-1
Oil consumption and/or CO2 emissions do 7.244** 8.515** −3.890** 17.777** 17.601**
not cause economic growth (0.010) (0.006) (0.000) (0.005) (0.000)
Economic growth and/or CO2 emissions 2.996** 2.490* −2.118** 4.762** 2.713*
do not cause oil consumption (0.045) (0.086) (0.042) (0.007) (0.061)
Oil consumption and/or economic 1.825 5.320** 1.439 2.793* 5.590**
growth do not cause CO2 emissions (0.175) (0.009) (0.158) (0.074) (0.007)
Notes: X, Y, and Z indicate oil consumption, CO2 emissions, and economic growth, respectively. The
optimal lag lengths are selected by using the Akaike information criterion described in Pantula et al. [39].
The numbers in parenthesis are p-values calculated under the null hypothesis of no causality. * and ** imply
the rejection of the null hypothesis at the 10% and 5% levels, respectively.

Let us move on to Equation (2). The estimated coefficients for the lagged values of changes in real
GDP (∆Z) are statistically significant at the 5% level, which implies the presence of short-run causality
running from economic growth to oil consumption. Similarly, those in CO2 emissions (∆Y) are also
statistically significant at the 10% level, which indicates the existence of short-run causality running
from CO2 emissions to oil consumption. The statistical significance, at the 5% level, of the coefficient
for the ECT in Equation (2) suggests that there are long-run causality not only from economic growth
to oil consumption but also from CO2 emissions to oil consumption. The statistical significance, at the
10% level, of the estimated coefficients for the lagged values of changes in real GDP (∆Z) and the
coefficient of the ECT in Equation (2) shows the presence of strong causality economic growth to oil
consumption. In addition, we can detect strong causality running from CO2 emissions to oil
consumption at the 10% level.
Finally, let us look into the estimation results for Equation (3). The estimated coefficients for the
lagged values of changes in real GDP (∆Z) are not statistically significant at the 10% level, which
implies the absence of short-run causality running from economic growth to CO2 emissions. However,
those in oil consumption (∆X) are statistically significant at the 5% level, which indicates the existence
of short-run causality running from oil consumption to CO2 emissions. The statistical insignificance, at
the 10% level, of the coefficient for the ECT in Equation (3) suggests that there do not exist long-run
causality not only from oil consumption to CO2 emissions but also from economic growth to CO2
emissions. The statistical significance, at the 10% level, of the estimated coefficients for the lagged
values of changes in real GDP (∆Z) and the coefficient of the ECT in Equation (3) shows the presence
of strong causality economic growth to CO2 emissions. Moreover, we can discover strong causality
running from oil consumption to CO2 emissions at the 5% level.

3.4. Discussions

Figure 1 summarizes the results of the causality tests. Three important findings emerge from the
results. First, we found that a bi-directional causality between oil consumption and economic growth.
Sustainability 2014, 6 975

This study lends support to the argument that oil consumption stimulates economic growth with
feedback effect. A high level of oil consumption leads to high level of real GDP, though there are
many other factors contributing to economic growth, and oil is only one of such factors. The oil
consumption infrastructure shortage may restrain the economic growth in the Philippines. Space and
water heating, and cooking in homes and businesses, processing heat for industry, and production in
industries such as electricity generation, mechanical power and transportation demand a substantial
amount of oil infrastructure. In order not to adversely affect economic growth, efforts must be made to
encourage government and industry to increase oil supply investment. Furthermore, one could
reasonably expect that economic growth enhances oil consumption. Households, because of their
higher income, have come to consume more and more oil (gasoline, diesel, etc.). Economic growth
causes expansion in the industrial and commercial sectors where oil has been used as a basic input.

Figure 1. Causality relationship for the Philippines.

Second, a bi-directional causal relationship between oil consumption and CO2 emissions is
detected. Currently, oil is the biggest resource that emits CO2 in the Philippines. Therefore, the
efficiency in oil consumption is extremely important and has a major impact. If more renewable
energy is subsequently used, the causal relationship between oil consumption and CO2 emissions
might be weakened because renewable energy produces less, or no, CO2 emissions.
However, we need to note that the results in Table 5 strongly support causality from CO2 emissions
to oil consumption, but weakly support the reverse causality [42]. There are short-run, long-run, and
strong causality from CO2 emissions to oil consumption. On the other hand, there exist short-run and
strong causality from oil consumption to CO2 emissions, but long-run causality does not exist. This
difference in the interpretation evidence of causality may be important. The notion that oil
consumption has not been strongly causal in CO2 emissions does offer hope that oil consumption can
be increased without increasing CO2 emissions, as long as policy continues to foster efficiency and
support a shift from dirtier fossil fuels.
Finally, there is a uni-directional causality running from CO2 emissions to economic growth.
Increasing CO2 emissions is linked to inducing more economic growth. This means that the economic
Sustainability 2014, 6 976

development of the Philippines is dependent on CO2 emissions. Thus, implementing the policies of
mitigating CO2 emissions may adversely affect economic growth. The Philippines needs to reduce
domestic CO2 emissions minimizing their impact on its economy, and to maintain its existing
industrial structure, which is not very energy-intensive, and emphasize the development of renewable
energy sources. Moreover, for the purpose of reducing CO2 emissions, energy needs to be used more
efficiently and directed toward using more clean energy source in order not to produce the consequent
deteriorating economic side effects.
Previous studies in the case of the Philippines have provided only the causality between economic
growth and consumption. Rafiq and Salim [43] suggested uni-directional causality from energy
consumption to economic growth for strong causality and in the long-run, but no causality in the short-
run. Apergis and Tang [44] founded that energy consumption Granger-cause economic growth.
Although the previous results do not correspond with ours, the findings are based on total energy
consumption, not oil consumption.

4. Conclusions

The policy-makers in the Philippines are interested in the causal relationship between oil
consumption, CO2 emissions, and economic growth. This study attempted to examine the causal
relationship among them. Specifically, Granger-causality tests were performed using time series techniques
in a framework in which both traditional and additional channels of causality could be exposed. This
study provided new evidence in terms of the causality relationship among oil consumption, CO2
emissions, and real GDP as well as the direction of causality with respect to the Philippines. We
obtained three important findings from the examination. First, there is bi-directional causality between
oil consumption and economic growth, which suggests that the Philippines should endeavor to overcome
the constraints on oil consumption to achieve economic growth. Second, bi-directional causality
between oil consumption and CO2 emissions is found, which implies that the Philippines needs to
improve efficiency in oil consumption in order not to increase CO2 emissions. Third, uni-directional
causality running from CO2 emissions to economic growth is detected, which means that growth can
continue without increasing CO2 emissions.

Author Contributions

Kyoung-Min Lim, Seul-Ye Lim and Seung-Hoon Yoo conceived and designed the study. The data
were collected and analyzed by Seul-Ye Lim and Kyoung-Min Lim.

Conflicts of Interest

The authors declare no conflict of interest.

References and Notes

1. BP Statistical Review of World Energy 2012. Available online: [Link]

bp_internet/globalbp/globalbp_uk_english/reports_and_publications/statistical_energy_review_
Sustainability 2014, 6 977

2011/STAGING/local_assets/pdf/statistical_review_of_world_energy_full_report_2012.pdf
(accessed on 10 November 2013).
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