Energy and its impact on economic sectors and the environment

The issue of energy has come to the fore since the proliferation of studies on the effects of its consumption on the environment. A vast array of empirical evidence related to this issue has lent credence to the environmental Kuznets curve (EKC) that economic growth causes greater environmental degradation at the early stages but improves the environment at the final stages. Therefore, this study endeavours to investigate the effects of energy (electricity, gas and oil) consumption on sectorial output and CO2 emission in Malaysia from 1990 to 2014. Panel data analysis methods (namely, Fully Modified Ordinary Least Square, Pooled Mean Group and Mean Group) are employed in this study. The results show that, in the long run, aggregate output hinges on energy consumption. In the short run, energy consumption does not contribute to any change in output. It is found that gas consumption can have an influence on output in the industrial and transportation sectors but oil and electricity consumption does not have any impact on all sectorial output in Malaysia. The findings show that the consumption of electricity, gas and oil can have detrimental effects on the environment in the long run. However, in the short run, only oil consumption can be hazardous to the environment. Oil consumption in the agricultural and transportation sectors has a significant effect on CO2 emission. Gas consumption in the transportation sector can also cause pollution albeit a little. Electricity consumption in the transportation sector has a favourable effect on the environment as it can reduce CO2 emission. The results show that increasing aggregate output can inflict pollution only in the long run. Enhancing output in the agricultural, transportation and industrial sectors does not trigger any environmental issue. Therefore, the consumption of non-renewable energy such as oil, gas and electricity should be reduced in order to conserve the environment.