An econometric study of carbon dioxide (CO2) emissions, energy consumption, and economic growth of Pakistan

Purpose - The purpose of this paper is to examine the relationship among environmental pollution, economic growth and energy consumption per capita in the case of Pakistan. The per capital carbon dioxide (CO2) emission is used as the environmental indicator, the commercial energy use per capita as the energy consumption indicator, and the per capita gross domestic product (GDP) as the economic indicator. Design/methodology/approach - The investigation is made on the basis of the environmental Kuznets curve (EKC), using time series data from 1971 to 2006, by applying different econometric tools like ADF Unit Root Johansen Co-integration VECM and Granger causality tests. Findings - The Granger causality test shows that there is a long term relationship between these three indicators, with bidirectional causality between per capita CO2 emission and per capita energy consumption. A monotonically increasing curve between GDP and CO2 emission has been found for the sample period, rejecting the EKC relationship, implying that as per capita GDP increases a linear increase will be observed in per capita CO2 emission. Research limitations/implications - Future research should replace the economic growth variable, i.e. GDP by industrial growth variable because industrial sector is major contributor of pollution by emitting CO2. Practical implications - The empirical findings will help the policy makers of Pakistan in understanding the severity of the CO2 emissions issue and in developing new standards and monitoring networks for reducing CO2 emissions. Originality/value - Energy consumption is the major cause of environmental pollution in Pakistan but no substantial work has been done in this regard with reference to Pakistan.