An empirical analysis of CO2 emission in Pakistan using EKC hypothesis

Abstract

PurposeThe purpose of this paper is to fill the gap between energy and growth literature in Pakistan. In this regard, the authors investigated the environmental Kuznets curve (EKC) hypothesis and concluded the relationship between carbon emission and other four variables (energy consumption, economic growth, trade openness and population) at the same time. It is hoped that the policy implications of this research will provide a strong base to address the problem of environmental degradation in Pakistan.Design/methodology/approachThis study investigates the relationship between CO2 emission, economic growth, energy consumption, trade‐liberalization, and population density by using the EKC hypothesis for Pakistan. The cointegration analysis with Auto Regressive Distributed Lag (ARDL) bound testing approach is employed over time series data from the period 1971 to 2008. The stability of model was also checked at the end.FindingsThe results of the study do not support EKC in a short‐run, whereas the long‐run inverted U shaped hypothesis was confirmed between carbon emission and growth, energy consumption, trade openness and population density. Thus, findings of the study confirmed that EKC was a long‐run phenomenon in the case of Pakistan and most interestingly, with all other explanatory variables, population density also appeared to be a contributor to environmental degradation in Pakistan.Originality/valueThis work is original and a new contribution to single country analysis. It is first time that carbon emission is empirically tested for all four major determinants (economic growth, energy consumption, trade‐liberalization, and population density) at the same time. The long ranged time series data of 38 years enhances the validity of results. The most surprising finding of this research is that the population density also contributes to environmental degradation in Pakistan.