Impact of Energy Consumption and Trade on CO2 Emission in Pakistan

Abstract

Trade openness is the foundation of economic growth for developed as well as underdeveloped countries. Many countries are now trying to promote their energy sector because energy is an important factor in the production process. A country can trade with other countries only if the country has a surplus of production of Goods and Services. This is the key factor for the development of a country. This study provides empirical evidence of energy use and trade openness on carbon dioxide emission in Pakistan’s economy by using annual time series data from 1976-to 2019. Augmented Dickey-Fuller and Philips Perron tests are employed to check the stationary of the variables, and the ARDL method is employed to check the long-run relationship of variables. The result explores the effect of energy on the trade openness of Pakistan. Trade is the most significant variable in both the long run and short run. The CO2 (Carbon Dioxide) becomes the cause of environmental degradation. This study recommends that government must take serious steps regarding trade policies in Pakistan. Government must also take care of the poor farmers and traders through subsidies. With good policy implications, the trade level of a country will increase.