An autoregressive distributed lag approach for estimating the nexus between CO2 emissions and economic determinants in Pakistan

Abstract

Carbon dioxide (CO2) emissions have become a critical aspect of the economic and sustainable development indicators of every country. In Pakistan, where there is a substantial increase in the population, industrialization, and demand for electricity production from different resources, the fear of an increase in CO2 emissions cannot be ignored. This study explores the link that betwixt CO2 emissions with different significant economic indicators in Pakistan from 1960 to 2018 using the autoregressive distributed lag (ARDL) modelling technique. We implemented the covariance proportion, coefficient of determination, the Durbin Watson D statistics, analysis of variance (ANOVA), variance inflating factor (VIF), the Breusch-Pagan test, the Theil’s inequality, the root mean quare error (RMSE), the mean absolute percentage error (MAPE), and the mean absolute error (MAE) for the diagnostics, efficiency, and validity of our model. Our results showed a significant association between increased CO2 emissions and increased electricity production from oil, gas, and other sources. An increase in electricity production from coal resources was seen to have resulted in a decrease in CO2 emissions. We observed that an increase in the gross domestic product (GDP) and population growth significantly contributed to the increased CO2 emissions. The increment in CO2 emissions resulting from industrial growth was not significant. The increment in CO2 emissions in the contemporary year is significantly associated with the preceding year’s increase. The rate of increase was very alarming, a sign that no serious efforts have been channelled in this regard to reduce this phenomenon. We call for policy dialogue to devise energy-saving and CO2 emission reduction strategies to minimize the impact of climate change on industrialization, population growth, and GDP growth without deterring economic and human growth. Electricity production from different sources with no or minimal CO2 emissions should be adopted. We also recommend rigorous tree planting nationwide to help reduce the concentration of CO2 in the atmosphere as well as environmental pollution.