Muhammad, Shahbaz and Lean, Hooi Hooi and Muhammad, Shahbaz Shabbir (2011): Environmental Kuznets Curve and the role of energy consumption in Pakistan.
Download (168kB) | Preview
The paper is an effort to fill the gap in the energy literature with a comprehensive country study for Pakistan. We investigate the relationship between CO2 emissions, energy consumption, economic growth and trade openness for Pakistan over the period of 1971-2009. Bounds test for cointegration and Granger causality test are employed for the empirical analysis. The result suggests that there exists long-run relationship among the variables and the Environmental Kuznets Curve (EKC) hypothesis is supported. The significant existence of EKC shows the country's effort to condense CO2 emissions and indicates a reasonable achievement of controlling environmental degradation in Pakistan. Furthermore, we find one-way causal relationship running from income to CO2 emissions. Energy consumption increases CO2 emissions both in the short and long runs. Trade openness reduces CO2 emissions in the long run but it is insignificant in the short run. In addition, the change in CO2 emissions from short run to the long span of time is corrected by about 10 percent each year.
|Item Type:||MPRA Paper|
|Original Title:||Environmental Kuznets Curve and the role of energy consumption in Pakistan|
|English Title:||Environmental Kuznets Curve and the role of energy consumption in Pakistan|
|Keywords:||CO2 emissions, energy consumption, trade openness|
|Subjects:||P - Economic Systems > P2 - Socialist Systems and Transitional Economies > P28 - Natural Resources ; Energy ; Environment|
|Depositing User:||Muhammad Shahbaz|
|Date Deposited:||22 Nov 2011 12:50|
|Last Modified:||15 Jan 2017 00:56|
. Kuznets, S. Economic growth and income inequality. The American Economic Review 1955; 45: 1-28.
2]. Dasgupta, S., Hong, J. H., Laplante, B and Mamingi, N. Disclosure of environmental violations and stock market in the Republic of Korea. Ecological Economics 2004; 58: 759-777.
3]. Agenor, P. R. Does globalization hurt the poor? World Bank Policy Research 2003, Working Paper, No. 2922, Washington.
4]. Heckscher, E., The effect of foreign trade on the distribution of income. Ekonomisk Tidskriff 1919, 497-512. Translated as chapter 13 in American Economic Association.
. Ohlin, B. Interregional and International Trade. Cambridge University Press 1933, Mass: Harvard.
. Barro, R. J and Sala-i-Martin, X. Technological diffusion, convergence, and growth. Journal of Economic Growth 1997; 2: 1-26.
. Feridun, M., Ayadi, F. S and Balouga, J. Impact of trade liberalization on the environment in developing countries: The case of Nigeria. Journal of Developing Societies 2006; 22: 39-56.
. Antweiler, W., Copeland, R. B and Taylor, M. S. Is free trade good for the emissions: 1950-2050. The Review of Economics and Statistics 2001; 80: 15-27.
. Copeland, B. R and Taylor, M. S. Free trade and global warming: a trade theory view of the Kyoto Protocol. Journal of Environmental Economics and Management 2005; 49: 205-234.
. Managi, S., Hibiki, A., Tetsuya, T., Does trade liberalization reduce pollution emissions? Discussion papers 08013/2008, Research Institute of Economy, Trade and Industry (RIETI).
. McCarney, G and Adamowicz, V. The effects of trade liberalization of the environment: an empirical study. International Association of Agricultural Economists, 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia.
. Gregory, A.W and Hansen, B. E. Residual-based tests for cointegration in models with regime shifts. RCER Working Papers 335/1996, University of Rochester - Center for Economic Research (RCER).
. Grossman, G. M and Krueger, A. B. Environmental impacts of a North American Free Trade Agreement, NBER Working Paper, No. 3914/1991, Washington.
. Lucas, G., Wheeler, N and Hettige, R. The Inflexion Point of Manufacture Industries: International trade and environment, World Bank Discussion Paper, No. 148/1992, Washington.
. Wyckoff, A. W and Roop, J. M. The embodiment of carbon in imports of manufactured products: implications for international agreements on greenhouse gas emissions. Energy Policy 1994; 22: 187-194.
. Suri, V and Chapman, D. Economic growth, trade and the energy: implications for the environmental Kuznets curve. Ecological Economics 1998; 25: 195-208.
. Heil, M. T and Selden, T. M. Panel stationarity with structural breaks: carbon emissions and GDP. Applied Economics Letters 1999; 6: 223-225.
. Friedl, B and Getzner, M. Determinants of CO2 emissions in a small open economy. Ecological Economics 2003; 45: 133-148.
. Stern, D. I. The rise and fall of the environmental Kuznets curve. World Development 2004; 32: 1419-1439.
. Nohman, A and Antrobus, G. Trade and the environmental Kuznets curve: is Southern Africa a pollution heaven? South African Journal of Economics 2005; 73: 803-814.
. Dinda, S and Coondoo, D. Income and emission: a panel data-based cointegration analysis. Ecological Economics 2006; 57: 167-181.
. Coondoo, D and Dinda, S. The carbon dioxide emission and income: a temporal analysis of cross-country distributional patterns. Ecological Economics 2008; 65: 375-385.
. Song, T., Zheng, T and Tong, L. An empirical test of the environmental Kuznets curve in China: a panel cointegration approach. China Economic Review 2008; 19: 381-392.
. Dhakal, S. Urban energy use and carbon emissions from cities in China and policy implications. Energy Policy 2009; 37: 4208-4219.
. Jalil, A and Mahmud, S. Environment Kuznets curve for CO2 emissions: a cointegration analysis for China. Energy Policy 2009; 37: 5167-5172.
. Zhang, X. P and Cheng, X-M. Energy consumption, carbon emissions and economic growth in China. Ecological Economics 2009; 68: 2706-2712.
. Fodha, M and Zaghdoud, O. Economic growth and pollutant emissions in Tunisia: an empirical analysis of the environmental Kuznets curve. Energy Policy 2010; 38: 1150-1156.
. AkbostancI, E., Türüt-AsIk, S and Ipek., T. G. The relationship between income and environment in Turkey: is there an environmental Kuznets curve? Energy Policy 2009; 37: 861-867.
. Kraft, J and Kraft, A. On the relationship between energy and GNP. Journal of Energy Development 1978; 3: 401-403.
. Masih, A. M. M and Masih, R. On temporal causal relationship between energy consumption, real income and prices: some new evidence from Asian energy dependent NICs based on a multivariate cointegration vector error correction approach. Journal of Policy Modeling 1997; 19: 417-440.
. Aqeel, A and Butt, M. S. The relationship between energy consumption and economic growth in Pakistan. Asia Pacific Development Journal 2001; 8: 101-110.
. Wolde-Rufael, Y. Electricity consumption and economic growth: a time series experience for 17 African countries, Energy Policy 2006; 34: 1106-1114.
. Narayan, P. K and Singh, B. The electricity consumption and GDP nexus for the Fiji islands. Energy Economics 2007; 29: 1141-1150.
. Reynolds, D. B., Kolodziej, M. Former Soviet Union oil production and GDP decline: granger causality and the multi-cycle Hubbert curve. Energy Economics 2008; 30: 271-289.
. Chandran, V. G. R., Sharma, S., Madhavan, K. Electricity consumption–growth nexus: The case of Malaysia. Energy Policy 2009; 38: 606-612.
. Narayan, P. K and Smyth, R. Multivariate granger causality between electricity consumption, exports and GDP: evidence from a panel of Middle Eastern countries. Energy Policy 2009; 37: 229-236.
. Yoo, S-H and Kwak, S-Y. Electricity consumption and economic growth in seven South American countries. Energy Policy 2010; 38: 181-188.
. Altinay, G and Karagol, G. Structural break, unit root and causality between energy consumption and GDP in Turkey. Energy Economics 2004; 26: 985-994.
. Khalil, S and Inam, Z. Is trade good for environment? a unit root cointegration analysis? The Pakistan Development Review 2006; 45: 1187-1196.
. Halicioglu, F. An econometric study of CO2 emissions, energy consumption, income and foreign trade in Turkey. Energy Policy 2009; 37: 1156-1164.
. Sqauli, J. Electricity consumption and economic growth: bounds and causality analyses of OPEC members. Energy Economics 2006; 29: 1192-1205.
. Yuan, J., Zhao, C.., Yu, S and Hu, Z. Electricity consumption and economic growth in China: cointegration and co-feature collection. Energy Economics 2007; 29: 1179-1191.
. Odhiambo, N. M. Energy consumption and economic growth nexus in Tanzania: an ARDL bounds testing approach. Energy Policy 2009; 37: 617-622.
. Asafu-Adjaye, J. The relationship between energy consumption, energy prices and economic growth: time series evidence from Asian Developing Countries. Energy Economics 2000; 22: 615-625.
. Ang, J. B. CO2 emissions, energy consumption, and output in France. Energy Policy 2007; 35: 4772-4778.
. Ang, J. B. Economic development, pollutant emissions and energy consumption in Malaysia. Journal of Policy Modeling 2008; 30: 271-278.
. Ghosh, S. Examining carbon emissions-economic growth nexus for India: a multivariate cointegration approach. Energy Policy 2010; 38: 2613-3130.
. Apergis, N., Payne, J. E. CO2 emissions, energy usage, and output in Central America. Energy Policy 2009; 37: 3282-3286.
. Lean, H. H., Smyth, R. CO2 emissions, electricity consumption and output in ASEAN. Applied Energy 2010; 87: 1858-1864.
. Apergis, N., Payne, J. E. The emissions, energy consumption, and growth nexus: evidence from the commonwealth of independent states. Energy Policy 2010; 38: 650-655.
. Narayan, P. K., Narayan, S., 2010. Carbon dioxide emissions and economic growth: panel data evidence from developing countries. Energy Policy 2010; 38: 661-666.
. Runge, C. F. 1994. Freer trade, protected environment: balancing trade liberalization with environmental interests. Council on Foreign Relations Books.
. Helpman, E. Explaining the structure of foreign trade: where do we stand? Review of World Economics 1998; 134: 573-589.
. Schmalensee, R., Stoker, T. M and Judson, R. A., World carbon dioxide emissions: 1950-2050. The Review of Economics and Statistics 1998; 80: 15-27.
. Copeland, B and Taylor, M. S. International trade and the environment: a framework for analysis, NBER Working Paper 2001, No. 8540, Washington.
. Chaudhuri, S and Pfaff, A. Economic Growth and the Environment: What Can We Learn from Household Data? Working Paper 2002, Columbia University, USA.
. Machado, G. V., Energy use, CO2 emissions and foreign trade: an IO approach applied to the Brazilian case. Thirteenth International Conference on Input–Output Techniques, Macerata, Italy (2000) 21-25 Aug.
. Mongelli, I., Tassielli, G and Notarnicola, B. Global warming agreements, international trade and energy/carbon embodiments: an input-output approach to the Italian case. Energy Policy 2006; 34: 88–100.
. Shiyi, C. Energy consumption, CO2 emission and sustainable development in Chinese industry. Economic Research Journal 2009; 4: 1-5.
. Ozturk, I., Acaravci, A. CO2 emissions, energy consumption and economic growth in Turkey. Renewable and Sustainable Energy Reviews 2010; 14: 3220-3225.
. Nasir, M., Rehman, F-U. 2011. Environmental Kuznets curve for carbon emissions in Pakistan: An empirical investigation. Energy Policy 2011; 39: 1857-1864.
. Johansen, S., Juselius, K. Maximum likelihood estimation and inference on cointegration with applications to the demand for money. Oxford Bulletin of Economics and Statistics 1990; 52: 169-210.
. Jorgenson, D. W and Wilcoxen, P. J. Reducing U.S. carbon dioxide emissions: an assessment of different instruments. Journal of Policy Modeling 1993; 15: 491-520.
. Xepapadeas, A., Regulation and evolution of compliance in common pool resources. Scandinavian Journal of Economics 2005; 107: 583-599.
. Hoffmann R., Lee, C.-G., Ramasamy, B and Yeung, B. FDI and pollution: a granger causality test using panel data. Journal of International Development 2005; 17: 311-317.
. Soytas, U., Sari, U and Ewing, B. T. Energy consumption, income and carbon emissions in the United States. Ecological Economics 2007; 62: 482-489.
. Cameron, S. A review of the econometric evidence on the effects of capital punishment. Journal of Socio-economics 1994; 23: 197-214.
. Ehrlich, I. The deterrent effect of capital punishment – a question of life and death. American Economic Review 1975; 65: 397-417.
. Ehrlich, I. Crime, punishment and the market for offences. Journal of Economic Perspectives 1996; 10: 43-67.
.Grossman, G. M., Helpman, E. The politics of free-trade agreements. American Economic Review 1995; 85: 667-690.
. Pesaran, M. H., Shin, Y., Smith, R. J. Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics 2001; 16: 289-326.
. Pesaran, M. H and Pesaran, B., Working with Microfit 4.0: Interactive Econometric Analysis, Oxford University Press 1997. Chapter 7, “Multiple Equation Options”.
. Haug, A. Temporal aggregation and the power of cointegration tests: a monte carlo study. Oxford Bulletin of Economics and Statistics 2002; 64: 399-412.
. Engle, R. F and Granger, C. W. J. Cointegration and error correction representation: estimation and testing. Econometrica 1987; 55: 251-276.
. Phillips, P. C. B and Hansen, B. E. Statistical inference in instrumental variables regression with I(1) processes. Review of Economic Studies 1990; 57: 99-125.
. Laurenceson, J and Chai, J. C. H. Financial reforms and economic development in China. Cheltenham 2003, UK, Edward Elgar.
. Pesaran, M. H and Shin, Y. An autoregressive distributed lag modeling approach to cointegration analysis. Chapter 11 in Econometrics and Economic Theory in the 20th Century: The Ragnar Frisch Centennial Symposium, Strom S (ed.) 1999. Cambridge University Press: Cambridge.
. World Development Indicators, World Bank 2010.
. Dickey, D. A and Fuller, W. A. Distribution of the estimators or autoregressive time series with a unit root. Journal of the American Statistical Association 1979; 74: 427-31.
. Phillips, P.C.B and Perron, P. Testing for a unit root in time series regression. Biometrika 1988; 75: 335-346.
. Elliott, G., Rothenberg, T. J and Stock, J. H. Efficient tests for an autoregressive unit root. Econometrica 1996; 64: 813-836.
. Kwiatkowski, D., Phillips, P., Schmidt, P and Shin, Y., Testing the null hypothesis of stationary against the alternative of a unit root: how sure are we that economic time series have a unit root? Journal of Econometrics 1992; 54: 159-178.
. Ng, S and Perron, P. Lag selection and the construction of unit root tests with good size and power. Econometrica 2001; 69: 1519-1554.
. Baum, C. F. A review of Stata 8.1 and its time series capabilities. International Journal of Forecasting 2004; 20: 151-161.
. Clemente, K., Marx, R., Guzman, R., Ikeda, S and Katz, M. Prevalence of HIV infection in transgendered individuals in San Francisco. Poster session presented at the XII International Conference on AIDS 1998, Geneva Switzerland.
. Turner, P. Response surfaces for an F-test for cointegration. Applied Economics Letters 2006; 13: 479-482.
. Hamilton, C and Turton, H. 2002. Determinants of emissions growth in OECD countries. Energy Policy 2002; 30: 63-71.
. Liu, Q. Impacts of oil price fluctuation to China economy. Quantitative and Technical Economics 2005; 3: 17-28.
. Ang, B. W and Liu, F. L. A new energy decomposition method: perfect in decomposition and consistent in Aggregation. Energy 2001; 26: 537-548.
. Say, N.P and Yucel, M. Energy consumption and CO2 emissions in Turkey: empirical analysis and future projection based on an economic growth. Energy Policy 2006; 34: 3870-3876.
. He, J. China's industrial SO2 emissions and its economic determinants: EKC's reduced vs. structural model and the role of international trade. Environment and Development Economics 2008; 14: 227-262.
. Lee, C-Cand Lee, J-D. Income and CO2 emissions: evidence from panel unit root and cointegration tests. Energy Policy 2009; 37: 413-423.
. Maddison, D., Rehdanz, K. Carbon emissions and economic growth: homogeneous causality in heterogeneous panels. Kiel Working Papers 2008, No: 1437, Kiel Institute for the World Economy.
. Narayan, P. K. The saving and investment nexus for China: evidence from co-integration tests. Applied Economics 2005; 37: 1979-1990.