An analysis of the association among carbon dioxide emissions, energy consumption and economic performance: an econometric model

Abstract

ABSTRACTThis work is intended to present an investigation into the macroeconomic reasons for carbon dioxide emissions in Pakistan for the period 1971–2016. This study adds to the current empirical literature on the association among carbon dioxide emissions, energy consumption, economic growth and the level of investment in Pakistan. The data has been checked for its stationarity by applying the augmented Dickey-Fuller (ADF) unit root test, and then a cointegration test helped in the estimation of long-run equilibrium association between environmental variables. The outcomes of the co-integration test suggest the presence of a long-run equilibrium connection between series. The results of Vector Error Correction Model (VECM) demonstrate that all variables transform to sustain long-run equilibrium. The outcomes of a Granger causality test showed that causality runs from economic performance and population toward CO2 emissions, while bi-directional causality is found between carbon dioxide emissions and energy usage, and carbon dioxide emissions and trade openness. The results of cumulative sum of recursive residuals (CUSUM) and cumulative sum of recursive residuals squares (CUSUMSQ) show the stability of the functional relationship established in the present work, which implies that this model is an adequate and useful tool for strategy formulation. So, an upsurge or a decrease in macroeconomic series will cause and has caused variations in carbon dioxide emissions in the long run in Pakistan.