Analysis and Projection of Transport Sector Demand for Energy and Carbon Emission: An Application of the Grey Model in Pakistan

Abstract

The incredible increase in carbon emissions is a major global concern. Thus, academicians and policymakers at COP26 are continuously urging to devise strategies to reduce carbon and other greenhouse gas emissions. The transportation sector is a major contributor to greenhouse gas emissions in developing countries. Therefore, this study projected an increase in fossil fuel demand for transportation and corresponding carbon dioxide emission in Pakistan from 2018 to 2030 by employing the Grey model and using annual data from 2010 to 2018. Furthermore, the determinant of fossil fuel demand is modeled using an environmental sustainability model such as stochastic regression IPAT that links environmental impact as a product of population, affluence, and technology on annual time series data spanning from 1990 to 2019. The projected values of oil demand and carbon emissions reveal an increasing trend, with average annual growth rates of 12.68% and 11.45%, respectively. The fully modified ordinary least squares (FM-OLS) findings confirmed the environmental Kuznets hypothesis. The increase in population growth emerged as the major driver for oil demand and carbon dioxide emissions, while technological advancement can reduce oil demand and corresponding carbon emissions. This study urges Pakistan to switch from oil to gas and other green energies by encouraging hybrid vehicles, as the number of vehicles on the road positively impacts the transport sector’s oil demand. Moreover, increasing economic growth and controlling the population growth rate by discouraging more children can be a valid policy for reducing oil demand and corresponding carbon emissions.