Energy consumption, carbon emissions and economic growth in Pakistan: Dynamic causality analysis

This paper explores the presence of dynamic causality between economic growth, energy consumption and CO2 emissions for Pakistan. We first test for the presence of bi-variate long run relationships between these variables using Johansen-Julius co-integration test. The robustness of the long-run relationship results has been examined using ARDL approach to cointegration. Existence of Grangers' long run, short run and strong causalities has been studied in a VECM framework. The short run, long run and strong Granger causality results indicate the presence of bidirectional causalities between energy consumption, economic growth and the CO2 emissions. Implications of the results suggest that government should focus on building resources for ensuring adequate energy supplies in the economy by gradually increasing the share of renewable energy resources in the overall energy mix. Footprints of Denmark, Norway and Germany in Europe and Mauritius in Africa can be followed who have gradually increased energy production from renewable resources over the years. Furthermore, emission abatement activities should be made the central agenda in energy and environmental policies of Pakistan for reduction in damages associated with CO2 emissions.