Do economic openness and electricity consumption matter for environmental deterioration: silver bullet or a stake?

Abstract

Developing countries are enthusiastically on the road to economic progress and economic openness, which is proved to be a silver bullet forthem.However, it has put their environmental quality at stake. This study examines whether economic openness and electricity consumption matter for environmental deterioration by controlling for the influence of economic progress. For this, we have used time series frequency data of Pakistan from 1971 to 2016 and employed the state-of-the-art dynamic autoregressive distributed lag (ARDL) simulation model. The model has the advantage over traditional ARDL in determining the positive and negative environmental deterioration variations induced by economic openness, electricity consumption, and economic progress. The main findings are as follows: Firstly, electricity consumption in both long and short run positively and significantly influenced CO2 emissions, while long-run influence exceeded that of short run. Secondly, economic progress validated an environmental Kuznets curve hypothesis and thus limited the environmental degradation. Thirdly, economic openness showed an insignificant influence on CO2 emissions both in the long and short run. Based on research findings, it is suggested that economic progress and economic openness are not the direct culprits to deteriorate a developing country's environmental condition like Pakistan; rather, electricity consumption remained the key role player. Therefore, the transition from fossil-based electricity consumption to renewable energy consumption would provide a sustainable pathway towards achieving sustainable economic openness in the future.