Fossil fuels will still dominate energy in twenty years despite green power rising. The aim of the study is to analyze the factor substitution, emission mitigation, and technological progress among energy and non-energy inputs in Pakistan. The trans-log production method is employed to analyze the viability of energy substitution and then measure the CO2 emission reduction possibility that comes from such adoption. The results suggest the following: (1) the influence of renewable energy and nonrenewable energy on economic growth is optimistic and is increasing return to scale. However, it has the potential to contribute a 7% growth-share if capital investment is doubled beyond the present levels. (2) Output elasticity between renewable and nonrenewable energy factors is elastic and, on average, is estimated by 0.096 and 1.007. (3) Energy substitution is possible with an average of 0.852, which presents that Pakistan has the capability of moving from nonrenewable energy to renewable energy. (4) Two investment scenarios show significant results and suggest that nonrenewable energy substitution for renewable energy has the potential to lessen CO2 emissions without reducing the economy. Finally, energy substitution is possible from technical perspectives and inputs show strong convergence differences in technical progress. Comprehensive capital growth, technological progress, and low-carbon technological efforts can be a better fit for attaining carbon-reduction and sustainable economic growth.
Keywords: Economic development; Non-renewable energy; Pakistan; Renewable energy; Translog production function.
© 2024. The Author(s), under exclusive licence to Springer-Verlag GmbH Germany, part of Springer Nature.