The threshold effect of energy intensity on the emission-growth nexus in Malaysia.

The relationship between energy consumption, environmental pollution, and economic growth has been the subject of intense research over the past few decades. However, empirical evidence remains scarce and with mixed results. This paper throws a new light on the nonlinear impact of environmental degradation on economic growth depending on the level of energy intensity. This study provides an original approach in the context of Malaysia by utilizing an innovative threshold regression approach suggested by Hansen (Econometrica 68(3):575–603, 2000), which allows the data to endogenously divided into two regimes with an exogenous threshold variable. We find strong evidence that environmental degradation has a nonlinear effect on economic growth in Malaysia. In particular, CO₂ has a negative effect on growth, but only after the primary energy intensity reaches a threshold level of 91.33 tons of oil equivalent (TOE)/GDP and the final energy intensity reaches 51.56 TOE/GDP, respectively. Our results are robust in terms of ecological footprint. Several policy implications are highlighted which aim to encourage sustainable energy use for sustainable growth in the future. [ABSTRACT FROM AUTHOR]