Whether crude oil dependence and CO2 emissions influence military expenditure in net oil importing countries?

Abstract

Abstract This paper investigates the cointegration relationship among crude oil dependence (COD), CO2 emissions (CO2) and military expenditure (ME) in net oil importing countries using a bootstrap autoregressive distributed lag model with a Fourier function (FARDL). The empirical results indicate that there is cointegration in China and India due to their rapid economic development, very high CO2 emissions, strong oil demand and growth in military strength. Italy has a high level of oil dependence and an oil-dominated energy structure and is closely located to the Middle East, leading its ME to be influenced by COD and CO2. However, military strategies and alliances, governmental budget constraints, and energy structure and policies eliminate the cointegration relationship in the U.S., France and other countries. Some policy implications include the need to diversify oil supply channels and build strategic reserves to relieve pressure on the military to protect oil security. Expenditures for military research and development should be encouraged, and the transfer of military technologies to civil fields to improve energy efficiency should be accelerated. Renewable energy development is an effective instrument for relieving pressure due to oil dependence and the need to reduce CO2.