Energy production, economic growth and CO2 emission: evidence from Pakistan

An extensive body of knowledge is available on the relationship between energy consumption and CO2 emission incorporated by different variables. However, the role of energy production in the pollution equation is largely unknown. The present work quantifies the relationship between energy production, economic growth and CO2 emission. A family of econometric tools is used to achieve the objective of the study. Due to the sensitivity of objective of the present work, we use structural break unit root test to measure the stability of parameters within the time span of 1970-2011. Johansen cointegration test confirms the existence of cointegration among variables. Autoregressive distributive lag model reveals that energy production from the fossil fuel is the main culprit behind growing CO2 emission. Additionally, the finding of the study claims the existence of environmental Kuznets curve hypothesis in the significance of energy production in Pakistan. Moreover, bidirectional causality is detected between energy production and carbon dioxide emission in the long-run path. It is suggested that pollution can be condensed by producing energy from the renewable source (hydropower, solar power, geothermal and wind energy) and add more renewable energy to the energy mix.