IDEAS home Printed from https://ideas.repec.org/a/wly/ijfiec/v26y2021i3p3210-3221.html
   My bibliography  Save this article

Fossil energy consumption, economic development, inward FDI impact on CO2 emissions in Pakistan: Testing EKC hypothesis through ARDL model

Author

Listed:
  • Muhammad Uzair Ali
  • Zhimin Gong
  • Muhammad Ubaid Ali
  • Xiong Wu
  • Chen Yao

Abstract

The rapid rise in carbon production has been broadly accepted as a serious global issue and has become the centre of focus for policy makers and researchers. The consumption of fossil energy has been a chief source of carbon dioxide emission; in the meantime, academics focus on fossil energy consumption impact on carbon dioxide in developing like Pakistan is very infrequent. The current study investigated the long‐run and short‐run elasticities between economic development, square of economic development, fossil energy consumption, inward foreign direct investment (FDI) and carbon dioxide emission by utilizing the auto‐regressive distributive lag (ARDL) bound test technique for Pakistan from 1975 to 2014. The outcomes of co‐integration have confirmed the existence of long‐run relationship between variables. The results of short‐run and long‐run dynamics have confirmed the inverted U‐shaped relationship between economic development and carbon dioxide emission. ARDL model long run and short run coefficients have indicated that the fossil energy consumption has positive impact on carbon dioxide emission. Moreover, the impact of FDI on carbon emission is also quite considerable. Overall, the outcomes propose that Pakistan should encourage sustainable growth through energy efficiency, support the use of low GHG emission and efficient technologies, increase the consumption of renewable energy sources and channel the inward FDI to environment‐friendly technologies.

Suggested Citation

  • Muhammad Uzair Ali & Zhimin Gong & Muhammad Ubaid Ali & Xiong Wu & Chen Yao, 2021. "Fossil energy consumption, economic development, inward FDI impact on CO2 emissions in Pakistan: Testing EKC hypothesis through ARDL model," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(3), pages 3210-3221, July.
    • Handle: RePEc:wly:ijfiec:v:26:y:2021:i:3:p:3210-3221
    DOI: 10.1002/ijfe.1958
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/ijfe.1958
    Download Restriction: no
    File URL: https://libkey.io/10.1002/ijfe.1958?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Apergis, Nicholas & Payne, James E., 2009. "CO2 emissions, energy usage, and output in Central America," Energy Policy, Elsevier, vol. 37(8), pages 3282-3286, August.
    2. Stern,Nicholas, 2007. "The Economics of Climate Change," Cambridge Books, Cambridge University Press, number 9780521700801, October.
    3. Grossman, G.M & Krueger, A.B., 1991. "Environmental Impacts of a North American Free Trade Agreement," Papers 158, Princeton, Woodrow Wilson School - Public and International Affairs.
    4. Rahman, Mohammad Mafizur & Kashem, Mohammad Abul, 2017. "Carbon emissions, energy consumption and industrial growth in Bangladesh: Empirical evidence from ARDL cointegration and Granger causality analysis," Energy Policy, Elsevier, vol. 110(C), pages 600-608.
    5. Matthew A. Cole & Robert J.R. Elliott & Jing Zhang, 2011. "Growth, Foreign Direct Investment, And The Environment: Evidence From Chinese Cities," Journal of Regional Science, Wiley Blackwell, vol. 51(1), pages 121-138, February.
    6. Bhattacharya, Mita & Awaworyi Churchill, Sefa & Paramati, Sudharshan Reddy, 2017. "The dynamic impact of renewable energy and institutions on economic output and CO2 emissions across regions," Renewable Energy, Elsevier, vol. 111(C), pages 157-167.
    7. Yang, Lisha & Li, Zhi, 2017. "Technology advance and the carbon dioxide emission in China – Empirical research based on the rebound effect," Energy Policy, Elsevier, vol. 101(C), pages 150-161.
    8. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    9. Zhu, Huiming & Duan, Lijun & Guo, Yawei & Yu, Keming, 2016. "The effects of FDI, economic growth and energy consumption on carbon emissions in ASEAN-5: Evidence from panel quantile regression," Economic Modelling, Elsevier, vol. 58(C), pages 237-248.
    10. World Bank, 2017. "World Development Indicators 2017," World Bank Publications - Books, The World Bank Group, number 26447.
    11. Elliott, Graham & Rothenberg, Thomas J & Stock, James H, 1996. "Efficient Tests for an Autoregressive Unit Root," Econometrica, Econometric Society, vol. 64(4), pages 813-836, July.
    12. DeJong, David N, et al, 1992. "Integration versus Trend Stationarity in Time Series," Econometrica, Econometric Society, vol. 60(2), pages 423-433, March.
    13. Granger, C. W. J., 1988. "Some recent development in a concept of causality," Journal of Econometrics, Elsevier, vol. 39(1-2), pages 199-211.
    14. Panayotou T., 1993. "Empirical tests and policy analysis of environmental degradation at different stages of economic development," ILO Working Papers 992927783402676, International Labour Organization.
    15. Jahangir Alam, Mohammad & Ara Begum, Ismat & Buysse, Jeroen & Van Huylenbroeck, Guido, 2012. "Energy consumption, carbon emissions and economic growth nexus in Bangladesh: Cointegration and dynamic causality analysis," Energy Policy, Elsevier, vol. 45(C), pages 217-225.
    16. Ahmad, Ashfaq & Zhao, Yuhuan & Shahbaz, Muhammad & Bano, Sadia & Zhang, Zhonghua & Wang, Song & Liu, Ya, 2016. "Carbon emissions, energy consumption and economic growth: An aggregate and disaggregate analysis of the Indian economy," Energy Policy, Elsevier, vol. 96(C), pages 131-143.
    17. Binyam Afewerk Demena & Peter A. G. van Bergeijk, 2019. "Observing FDI spillover transmission channels: evidence from firms in Uganda," Third World Quarterly, Taylor & Francis Journals, vol. 40(9), pages 1708-1729, September.
    18. Nasir, Muhammad & Ur Rehman, Faiz, 2011. "Environmental Kuznets Curve for carbon emissions in Pakistan: An empirical investigation," Energy Policy, Elsevier, vol. 39(3), pages 1857-1864, March.
    19. Menyah, Kojo & Wolde-Rufael, Yemane, 2010. "CO2 emissions, nuclear energy, renewable energy and economic growth in the US," Energy Policy, Elsevier, vol. 38(6), pages 2911-2915, June.
    20. Ahmad, Najid & Du, Liangsheng & Lu, Jiye & Wang, Jianlin & Li, Hong-Zhou & Hashmi, Muhammad Zaffar, 2017. "Modelling the CO2 emissions and economic growth in Croatia: Is there any environmental Kuznets curve?," Energy, Elsevier, vol. 123(C), pages 164-172.
    21. Shahbaz, Muhammad & Salah Uddin, Gazi & Ur Rehman, Ijaz & Imran, Kashif, 2014. "Industrialization, electricity consumption and CO2 emissions in Bangladesh," Renewable and Sustainable Energy Reviews, Elsevier, vol. 31(C), pages 575-586.
    22. Jalil, Abdul & Mahmud, Syed F., 2009. "Environment Kuznets curve for CO2 emissions: A cointegration analysis for China," Energy Policy, Elsevier, vol. 37(12), pages 5167-5172, December.
    23. Chew Ging Lee, 2009. "Foreign direct investment, pollution and economic growth: evidence from Malaysia," Applied Economics, Taylor & Francis Journals, vol. 41(13), pages 1709-1716.
    24. Dinda, Soumyananda, 2004. "Environmental Kuznets Curve Hypothesis: A Survey," Ecological Economics, Elsevier, vol. 49(4), pages 431-455, August.
    25. Zhang, Yu & Zhang, Sufang, 2018. "The impacts of GDP, trade structure, exchange rate and FDI inflows on China's carbon emissions," Energy Policy, Elsevier, vol. 120(C), pages 347-353.
    26. Shafik, Nemat & Bandyopadhyay, Sushenjit, 1992. "Economic growth and environmental quality : time series and cross-country evidence," Policy Research Working Paper Series 904, The World Bank.
    27. Kanjilal, Kakali & Ghosh, Sajal, 2013. "Environmental Kuznet’s curve for India: Evidence from tests for cointegration with unknown structuralbreaks," Energy Policy, Elsevier, vol. 56(C), pages 509-515.
    28. Mirza, Faisal Mehmood & Kanwal, Afra, 2017. "Energy consumption, carbon emissions and economic growth in Pakistan: Dynamic causality analysis," Renewable and Sustainable Energy Reviews, Elsevier, vol. 72(C), pages 1233-1240.
    29. Kearsley, Aaron & Riddel, Mary, 2010. "A further inquiry into the Pollution Haven Hypothesis and the Environmental Kuznets Curve," Ecological Economics, Elsevier, vol. 69(4), pages 905-919, February.
    30. Seker, Fahri & Ertugrul, Hasan Murat & Cetin, Murat, 2015. "The impact of foreign direct investment on environmental quality: A bounds testing and causality analysis for Turkey," Renewable and Sustainable Energy Reviews, Elsevier, vol. 52(C), pages 347-356.
    31. Pao, Hsiao-Tien & Tsai, Chung-Ming, 2011. "Multivariate Granger causality between CO2 emissions, energy consumption, FDI (foreign direct investment) and GDP (gross domestic product): Evidence from a panel of BRIC (Brazil, Russian Federation, I," Energy, Elsevier, vol. 36(1), pages 685-693.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Muhammad Shahbaz & Avik Sinha, 2019. "Environmental Kuznets curve for CO2emissions: a literature survey," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 46(1), pages 106-168, January.
    2. Pata, Ugur Korkut, 2018. "The influence of coal and noncarbohydrate energy consumption on CO2 emissions: Revisiting the environmental Kuznets curve hypothesis for Turkey," Energy, Elsevier, vol. 160(C), pages 1115-1123.
    3. Shahbaz, Muhammad & Sinha, Avik, 2019. "Environmental Kuznets Curve for CO2 emission: A survey of empirical literature," MPRA Paper 100257, University Library of Munich, Germany, revised 2019.
    4. Seker, Fahri & Ertugrul, Hasan Murat & Cetin, Murat, 2015. "The impact of foreign direct investment on environmental quality: A bounds testing and causality analysis for Turkey," Renewable and Sustainable Energy Reviews, Elsevier, vol. 52(C), pages 347-356.
    5. Priscilla Massa-Sánchez & Luis Quintana-Romero & Ronny Correa-Quezada & María de la Cruz del Río-Rama, 2020. "Empirical Evidence in Ecuador between Economic Growth and Environmental Deterioration," Sustainability, MDPI, vol. 12(3), pages 1-20, January.
    6. Islam, Faridul & Shahbaz , Muhammad & Butt, Muhammad Sabihuddin, 2013. "Is There an Environmental Kuznets Curve for Bangladesh? Evidence from ARDL Bounds Testing Approach," Bangladesh Development Studies, Bangladesh Institute of Development Studies (BIDS), vol. 36(4), pages 1-23, December.
    7. Muhammad Bilal Khan & Hummera Saleem & Malik Shahzad Shabbir & Xie Huobao, 2022. "The effects of globalization, energy consumption and economic growth on carbon dioxide emissions in South Asian countries," Energy & Environment, , vol. 33(1), pages 107-134, February.
    8. Ali, Wajahat & Abdullah, Azrai & Azam, Muhammad, 2017. "Re-visiting the environmental Kuznets curve hypothesis for Malaysia: Fresh evidence from ARDL bounds testing approach," Renewable and Sustainable Energy Reviews, Elsevier, vol. 77(C), pages 990-1000.
    9. Dogan, Eyup & Seker, Fahri, 2016. "Determinants of CO2 emissions in the European Union: The role of renewable and non-renewable energy," Renewable Energy, Elsevier, vol. 94(C), pages 429-439.
    10. Ertugrul, Hasan Murat & Çetin, Murat & Şeker, Fahri & Dogan, Eyüp, 2015. "The impact of trade openness on global carbon dioxide emissions: Evidence from the top ten emitters among developing countries," MPRA Paper 97539, University Library of Munich, Germany, revised 10 Mar 2016.
    11. Balsalobre-Lorente, Daniel & Shahbaz, Muhammad & Roubaud, David & Farhani, Sahbi, 2018. "How economic growth, renewable electricity and natural resources contribute to CO2 emissions?," Energy Policy, Elsevier, vol. 113(C), pages 356-367.
    12. Wang, Kuan-Min, 2012. "Modelling the nonlinear relationship between CO2 emissions from oil and economic growth," Economic Modelling, Elsevier, vol. 29(5), pages 1537-1547.
    13. Shahbaz, Muhammad & Mahalik, Mantu Kumar & Shah, Syed Hasanat & Sato, João Ricardo, 2016. "Time-varying analysis of CO2 emissions, energy consumption, and economic growth nexus: Statistical experience in next 11 countries," Energy Policy, Elsevier, vol. 98(C), pages 33-48.
    14. Alexandra-Anca Purcel, 2020. "New insights into the environmental Kuznets curve hypothesis in developing and transition economies: a literature survey," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 22(4), pages 585-631, October.
    15. Faridul, Islam & Muhammad, Shahbaz, 2012. "Is There an Environmental Kuznets Curve for Bangladesh?," MPRA Paper 38490, University Library of Munich, Germany, revised 30 Apr 2012.
    16. Mumin Atalay Cetin & Ibrahim Bakirtas, 2020. "The long-run environmental impacts of economic growth, financial development, and energy consumption: Evidence from emerging markets," Energy & Environment, , vol. 31(4), pages 634-655, June.
    17. Zambrano-Monserrate, Manuel A. & Silva-Zambrano, Carlos A. & Davalos-Penafiel, Jose L. & Zambrano-Monserrate, Andrea & Ruano, Maria Alejandra, 2018. "Testing environmental Kuznets curve hypothesis in Peru: The role of renewable electricity, petroleum and dry natural gas," Renewable and Sustainable Energy Reviews, Elsevier, vol. 82(P3), pages 4170-4178.
    18. Saboori, Behnaz & Sulaiman, Jamalludin & Mohd, Saidatulakmal, 2012. "Economic growth and CO2 emissions in Malaysia: A cointegration analysis of the Environmental Kuznets Curve," Energy Policy, Elsevier, vol. 51(C), pages 184-191.
    19. Azad Haider & Wimal Rankaduwa & Muhammad Iftikhar ul Husnain & Farzana Shaheen, 2022. "Nexus between Agricultural Land Use, Economic Growth and N 2 O Emissions in Canada: Is There an Environmental Kuznets Curve?," Sustainability, MDPI, vol. 14(14), pages 1-23, July.
    20. Danish, & Wang, Bo & Wang, Zhaohua, 2018. "Imported technology and CO2 emission in China: Collecting evidence through bound testing and VECM approach," Renewable and Sustainable Energy Reviews, Elsevier, vol. 82(P3), pages 4204-4214.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:ijfiec:v:26:y:2021:i:3:p:3210-3221. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.interscience.wiley.com/jpages/1076-9307/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.