Nexus between trade, CO2 emissions, renewable energy, and health expenditure in Pakistan

Abstract

As a result of the recent energy crisis and rapid industrialization in Pakistan, significant attention has turned toward alternative energy resources, CO₂ emissions, and health-related issues. The adoption of renewable energies will not only accomplish the energy demand in the economy but will also provide a healthy environment. Therefore, it is essential to understand the linkages between trade, renewable energy, CO₂ emissions, and health expenditures with a special focus on an emerging economy like Pakistan. This study used time series data from the 1998-2017 period and adopted the simultaneous equation approach for empirical analysis. The results show that an increase in trade volume positively contributes to the amount of CO₂ emissions and, as a result, CO₂ increases health expenditures. Conversely, renewable energy has a negative association with health expenditures and CO₂ emission, signifying the importance of renewable energy in enhancing environmental quality and reducing health expenditures, which are adversely affected due to CO₂ emissions. The empirical findings suggest that the government of Pakistan needs proper policy guidelines for renewable energy adoption in the industrial sector and that such guidelines can be further accommodated and adjusted in other determinants of the economy.

Keywords: CO2; Pakistan; health expenditure; renewable energy; trade.