The Relationship between Energy Consumption, Income, Foreign Direct Investment, and CO2 Emissions: The Case of Turkey

The purpose of this study is to explore the relationship between the energy consumption, income, foreign direct investment (FDI) inflows, and CO2 emission in Turkey, for the period 1974-2011. For this purpose, Maki (2012) cointegration method and Granger causality analysis have been used. The cointegration method results indicate that there is a long term relationship among the variables. Results also show that, both in the short and long run, Environmental Kuznets Curve (EKC) hypothesis is supported in Turkey. In addition, the pollution halo hypothesis, meaning that FDI has positive effects on environment, is valid for Turkey in the short and long run since there is bilateral causality relationship between CO2 emission and FDI inflows, and also negative coefficients of FDI. According to Granger causality test, the growth hypothesis, which means there is a unilateral causality relation from energy consumption to economic growth, is also valid for Turkey.