Munich Personal RePEc Archive

Renewable and nonrenewable energy consumption, real GDP and CO2 emissions nexus: a structural VAR approach in Pakistan

Muhammad, Shahbaz Shabbir and Muhammad, Zeshan and Muhammad, Shahbaz (2011): Renewable and nonrenewable energy consumption, real GDP and CO2 emissions nexus: a structural VAR approach in Pakistan.

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Abstract

Any rise in real GDP crafts higher energy demand in Pakistan. This short-term rising energy requirement is fulfilled with the help of nonrenewable and renewable energy consumption, but nonrenewable energy consumption adds more in it. The rise in nonrenewable energy consumption lifts real GDP up in short-run. Forecast error variance decomposition illustrates nonrenewable energy consumption alone passes 87% variation in the CO2 emissions. This verifies fossil fuels are accountable for environmental degradation in Pakistan. The CO2 emissions worsen economic activity, real GDP falls but renewable energy consumption augments. This elevation in renewable energy consumption is the proof of stabilization efforts that are being initiated by official authorities as CO2 emissions reach to alarming level. The rise in renewable energy consumption boosts economic activity, and real GDP breeds. Most of times, an increase in renewable energy consumption is an effort to substitute it with nonrenewable energy consumption, resulting in lower level of CO2 emissions.

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