Asymmetric nexus between commercial policies and consumption-based carbon emissions: new evidence from Pakistan

Abstract

AbstractThe current study extends the previous literature by exploring the effects of a newly discovered driver, i.e., import taxes (as a proxy for commercial policies), on the consumption-based carbon emissions (CCO2e) for 1990Q1-2017Q4. For empirical analysis, several tests and methods, including Augmented Dickey–Fuller unit root test, Zivot–Andrews unit root test, asymmetric cointegration bound testing approach, non-linear ARDL, Wald-test, Granger causality test and wavelet quantile correlation (WQC) method are utilized. Furthermore, NARDL technique estimates reveal that contractionary commercial policy enhances the environmental quality by disrupting the detrimental effects of CCO2e. However, expansionary commercial policy escalates the environmental pollution by boosting the carbon emissions. Also, the exports and the renewable energy improve the ecological quality; however, GDP deteriorates the atmospheric quality by increasing the CCO2e. Besides, WQC method and the trivariate Granger causality test are deployed to confirm the robustness of the results. Based on the findings, some crucial policies are also recommended for sustainable and green development in Pakistan.