This study examines the causal relationship between gross domestic product (GDP), exports, energy consumption (EC) and CO2 emissions in Thailand and Malaysia for the period of 1965 to 2010. There are the same empirical results for Thailand and Malaysia. Results show six bidirectional causality relationships between GDP and exports, GDP and EC, GDP and CO2 emissions, exports and EC, exports and CO2 emissions, as well as EC and CO2 emissions. The finding of this research has powerful policy implication for Thailand and Malaysia. The policy makers are under pressure from the environmental representatives to reduce emissions although the state still faces enormous challenge to improve its income. Therefore, GDP, exports and CO2 emissions are associated with EC. Also, energy consumption, exports or GDP will cause to CO2 emissions then policy makers in Thailand or Malaysia encounter a main dilemma as the environmental degradation through CO2 emissions would worsen the life in the long-run. The policy makers should pay higher attention to invest energy infrastructure, encourage using less polluting or renewable energy sources, educate public awareness, upgrade energy efficiency, or offer tax credit to meet the increasing energy demands but can promote economic growth and exports at the same time.
