Nexus between carbon emission, financial development, and access to electricity: Incorporating the role of natural resources and population growth

Abstract

This study explores the nexus between financial development, access to electricity, and CO2 emissions in Pakistan over the period from 1990 to 2015, incorporating the role of natural resources and population growth. We checked the stationarity of the data by using three different unit root tests (ADF, Phillip Pesaran, and DG‐FLS). Long‐ and short‐run elasticities have been determined through auto‐regressive distributive lag (ARDL) method. The empirical results confirmed that financial development and access to electricity increase CO2 emissions and deteriorate the environmental quality. In addition, the population growth is responsible for growing CO2 emissions in Pakistan, while natural resources have insignificant relation with CO2 emissions. Furthermore, bidirectional causality exists between population growth and natural resources, whereas unidirectional causality is detected among financial development and CO2 emissions, natural resources and population growth, and financial development and population growth. The newly developed findings suggest helpful policy implications to adequately address the issue of CO2 emissions without compromising economic development.