Capital Formation and Oil Consumption Drive CO2 Emissions in Ecuador: Evidence from an ARDL Model in Log-First Differences

This study investigates the impact of key economic variables on carbon dioxide (CO2) emissions in Ecuador within the broader context of sustainable development. Annual data from 1990 to 2022 are analyzed using an Autoregressive Distributed Lag (ARDL) model in first logarithmic differences, estimated via Ordinary Least Squares (OLS). The model examines both short- and long-term relationships between CO2 emissions and three core macroeconomic indicators: gross fixed capital formation (GFCF), GDP per capita, and oil consumption. Descriptive analysis reveals substantial variation in investment and fossil fuel use across the study period. Empirical findings indicate that oil consumption has a positive and statistically significant effect on emissions, while GFCF exhibits a significant negative association in the current period, suggesting the role of cleaner or more efficient investment. Lagged GDP per capita shows a negative effect on emissions, partially supporting the Environmental Kuznets Curve hypothesis. Although renewable energy is discussed in the conceptual framework, it is not included in the current empirical specification—a limitation that will be addressed in future model extensions. The results provide empirical support for directing investments toward low-carbon sectors and accelerating the energy transition, particularly in transport and industry.