Forecasting European Union CO2 Emissions Using Autoregressive Integrated Moving Average-autoregressive Conditional Heteroscedasticity Models

Melina Dritsaki and Chaido Dritsaki
Additional contact information
Melina Dritsaki: University of Oxford, Oxford, UK
Chaido Dritsaki: Department of Accounting and Finance, University of Western Macedonia, Kozani, Greece.

International Journal of Energy Economics and Policy, 2020, vol. 10, issue 4, 411-423

Abstract: In the past few decades, there are lot of discussions around global warming and climate change primarily due to the increased CO2 emissions generated by the consumption of fossil fuels, such as oil and natural gas. After an enormous effort, the EU-28 managed to reduce CO2 emissions in 2014 by 25.7% comparing to 1990 (Kyoto Protocol). This effort should continue in the future so that the EU-28 achieve a 40% reduction on CO2 emissions by 2030. The current paper aims at investigating the optimum model to forecast CO2 emissions in the EU-28. To achieve this aim an ARIMA(1,1,1)-ARCH(1) model was used, combined with the linear ARIMA model and the conditional variance of the ARCH model. The estimation of parameter optimisation of ARIMA(1,1,1)-ARCH(1) model was done with the Maximum Likelihood approach using the Marquardt (1963), and Berndt-Hall-Hall-Hausman (BHHH) algorithms and the three distributions (Normal, t-Student, Generalized error), whereas for the estimation of the covariance coefficient the reversed matrix by Hessian was used. Finally, in order to forecast the ARIMA(1,1,1)-ARCH(1) model, a dynamic as well as a static process was applied. The results of the forecasting revealed that the static procedure provides a better forecast comparing to the dynamic one.

Keywords: CO2 Emissions; ARIMA(1; 1; 1)-ARCH(1) model; Forecasting; E.U (search for similar items in EconPapers)
JEL-codes: C22 C53 Q50 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://www.econjournals.com/index.php/ijeep/article/download/9186/5149 (application/pdf)
https://www.econjournals.com/index.php/ijeep/article/view/9186/5149 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eco:journ2:2020-04-52

Access Statistics for this article

International Journal of Energy Economics and Policy is currently edited by Ilhan Ozturk

More articles in International Journal of Energy Economics and Policy from Econjournals
Bibliographic data for series maintained by Ilhan Ozturk ().