INVESTIGATING THE INTERPLAY BETWEEN ECONOMIC GROWTH, RENEWABLE ENERGY, AND URBANIZATION ON CARBON EMISSIONS IN PAKISTAN

Abstract

The purpose of this article is to expose the complex inter-related dynamics behind economic growth, FDI inflows, oil prices, renewable energy consumption, and urbanization in terms of carbon dioxide (CO₂) emissions in the energy-using country Pakistan. It uses annual data between 1980 and 2023 and employs Autoregressive Distributed Lag (ARDL) and Non-linear ARDL (NARDL) models to evaluate the short- and long-run manipulation of these factors. The results confirm the Environmental Kuznets Curve (EKC) hypothesis; that is existence of an inverted U-shape relation between economic growth and emissions. On the other hand economic growth and foreign direct investment (FDI) causes carbon emissions to increase, while consumption of renewable energy is identified as a strong variable in decreasing carbon emissions, taking into consideration infrastructure and policy constraints. The effect of urbanization is mixed, where unplanned urban expansion leads to increase in the emissions and well-planned urban policies could help mitigating environmental degradation. Moreover, oil prices impact emissions asymmetrically in that low oil prices result in higher FFS, while increased oil prices promote energy savings. The findings of the study highlight the reinforced attention that should be given to the development of renewable energies as well as the commensurable control of FDI towards the natural environment sustainability alongside encouraging urban planning strategy with a bias towards environmentally friendly objectives. The paper is useful for the policymakers of Pakistan to balance its high economic growth with environmental protection as well as achieving its obligations of climate commitments under the Paris Agreement.