An asymmetrical analysis to explore the dynamic impacts of CO2 emission to renewable energy, expenditures, foreign direct investment, and trade in Pakistan

Abstract

Carbon dioxide emission and GHGs are associated with fossil fuels which have adverse effects on the environment. The key intention of this paper was to determine the asymmetric effect of CO₂ emission on expenditures, trade, FDI, and renewable energy consumption in Pakistan. An asymmetrical technique (nonlinear autoregressive distributed lag) was employed to validate the constructive and adverse relation among variables. Furthermore, the Granger causality test was also used to verify the unidirectional association amid variables. Study outcomes revealed that the adverse shocks of renewable energy consumption exposed expressively to upsurge CO₂ emission in the short-run dynamics. Conversely, constructive shocks of renewable energy consumption display an adversative association with CO₂ emission. Furthermore, the decreasing trend in foreign direct investment tends to impede the detrimental effects of CO₂ emission. Additionally, the variable expenditures also create the non-eco-friendly impacts and manifest the positive linkage through CO₂ emission. Trade possesses statistically insignificant linkage with environmental degradation. The results also disclose that positive as well as negative variations in the foreign direct investment expose to degrade the environmental eminence. Long-run results suggest the direct association between downward trend in renewable energy consumption and CO₂ emission signifying that the pollution level decreases, and the upward trend in renewable energy consumption, however, demonstrates insignificantly positive effects. The results also disclose that positive as well as negative variations in the FDI lead to degrade the CO₂ emission. Moreover, it is found that the expenditures soar the issue of pollution again in the long run. Finally, the consequence of trade on CO₂ emission is adverse, as the outcome suggests. In order to improve the environmental policies for sustainable growth, the study provides direction toward a sustainable environment by reducing carbon dioxide emission.

Keywords: CO2 emission; Expenditures; Foreign direct investment; Renewable energy; Trade.