The Relationship between Bitcoin and Carbon Emissions: Nonlinear Cointegration Analysis

In this study, the relationship between Bitcoin (BTC) and Carbon Emission (CO2) was examined using the data between the periods 2017M1-2022M1. ABased on recent studies, it is observed that crypto money and energy markets have a speculative and fragile structure, and therefore the variables may have a non-linear form. Therefore, within the framework of this information, the linearity test of the variables is carried out primarily by Luukkonen et al..(1988), Harvey et al..(2008) linearity test, and KSS (2003) nonlinear unit root test. Afterwards, KSS (2006) Nonlinear Co-integration analysis is used in the study since it is determined that the variables have a nonlinear form. According to the KSS (2006) test findings, it is determined that there is a nonlinear cointegration relationship between BTC and CO2 in the long run. This shows that the relationship between BTC and CO2 converges non-linearly to the long-run equilibrium. According to the result of the Granger causality test performed to determine the direction of this relationship after detecting the nonlinear cointegration relationship between its variables, it is determined that there is one-way causality from Bitcoin to Carbon Emission. This finding can be interpreted as policies towards obtaining the energy used in BTC production from environmentally friendly sources should be adopted.