IMPACT OF FOSSIL FUEL ENERGY CONSUMPTION ON CO2 EMISSIONS: EVIDENCE FROM PAKISTAN (1980-2010), A REVISIT

Abstract

The present study empirically analyzes the impact of fossil fuel energy consumption on CO₂ emission for Pakistan using data from 1980-2010. Our broad objective is to test the environmental Kuznets curve (EKC) hypothesis and factors that affect the energy consumption. We have used Johansen Cointegration 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. 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 manufacture export positively affect the energy consumption while manufacture import negatively affect the energy consumption.