The Impact of Lending Interest Rate on Air Pollution: The Case of Lebanon

Abstract

The purpose of this chapter is to determine the association among CO2 emissions, gross domestic product, energy usage, and loan interest rates in Lebanon, within the time frame of 1990-2019. To do so, the Autoregressive Distributed Lag (Lag) approach will be utilized to achieve the goal of the study. The results reveal the existence of a long-term equilibrium relationship among the variables under investigation, namely, carbon dioxide emissions, energy consumption, economic growth, and lending interest rates. There is a positive relationship between energy consumption, economic growth, and carbon dioxide emissions, indicating that an increase in economic growth leads to higher energy consumption, which in turn results in increased carbon dioxide emissions. Conversely, GDP and the lending interest rate (LIR) show a negative correlation. Increasing economic growth leads to more energy consumption, which in turn leads to increased carbon dioxide emissions. Environmental pollution is a significant problem in Lebanon. Since the average CO2 emissions in Lebanon are 0.5 kg per $2015 of GDP, the global average is 0.3. Hence, the search for clean and low-carbon energy sources (renewable energy) has become an urgent matter, especially since Lebanon possesses water and solar resources that can be harnessed. Thus, it will achieve many goals, including reducing carbon emissions, achieving sustainable levels of growth, preserving the environment, lowering local energy prices, and enhancing welfare.