Impact of fossil fuel energy consumption on CO2 emissions: Evidence from Pakistan (1980-2010)

Abstract

This present study empirically analyses the impact of fossil fuel energy consumption on CO2 emission for Pakistan using data from 1980-2010. Our broad objective is to estimate the Environmental Kuznets Curve (EKC) hypothesis and the impact of factors that affect the energy consumption. We have used Johansen Co-integration approach and a Vector Error Correction Model (VECM) to test the long run as well as short run relationship between variables. A log linear quadratic equation is specified to test the EKC hypothesis and results support the existence of inverted U hypothesis. Industrial value added and trade openness positively affect the CO2 emission while financial development reduces the CO2 emission. Results of the energy consumption equation show that income, investment, population and manufactured exports positively affect the energy consumption while manufactured imports negatively affect the energy consumption.