The Influencing Factors of CO2 Emissions and the Role of Biomass Energy Consumption: Statistical Experience from G-7 Countries

This paper examines the impact of biomass energy consumption on CO2 emissions and the environmental Kuznets curve (EKC) hypothesis in G-7 countries. We also incorporate capitalization, financial development and globalization measures (economic, social and political) as additional determinants of CO2 emissions. This study covers the period of 1980-2014. We apply the generalized moments method (GMM) for empirical analysis. The empirical results reveal that biomass energy consumption contributes to CO2 emissions. The EKC hypothesis is valid in G-7 countries. Capitalization is inversely linked with CO2 emissions. Financial development deteriorates environmental quality. Foreign direct investment (FDI) and trade openness improve environmental quality. Globalization increases CO2 emissions. Institutional quality improves environmental quality through effective economic and environmental policies. Urbanization impedes environmental quality. These results provide new insights for policy makers in designing comprehensive environmental policy by considering biomass energy as an economic tool for sustainable economic development and to improve environmental quality.