A Cross-Sectoral Investigation of the Energy–Environment–Economy Causal Nexus in Pakistan: Policy Suggestions for Improved Energy Management

Rizwan Fazal, Syed Aziz Ur Rehman, Muhammad Bhatti, Atiq Rehman, Fariha Arooj and Umar Hayat
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Rizwan Fazal: Pakistan Institute of Development Economics (PIDE), Quaid-e-Azam University, Islamabad 44000, Pakistan
Syed Aziz Ur Rehman: Department of Environmental Sciences, University of Veterinary and Animal Sciences, Lahore 54000, Punjab, Pakistan
Fariha Arooj: Department of Environmental Sciences, University of Veterinary and Animal Sciences, Lahore 54000, Punjab, Pakistan
Umar Hayat: Department of Economics and Development Studies, University of Swat, Saidu Sharif 19200, Swat, KPK, Pakistan

Energies, 2021, vol. 14, issue 17, 1-22

Abstract: This paper explored the energy–environment–economy (EEE) causal nexus of Pakistan, thereby reporting the causal determinants of the EEE nexus by employing the newly developed modified Peter and Clark (PC) algorithm. The modified PC algorithm was employed to investigate the causal ordering of energy consumption, CO 2 emissions and economic growth across Pakistan’s domestic, industrial, transportation and agricultural sectors. An empirical comparison, i.e., following Monte Carlo simulation experiments demonstrates that the proposed modified PC algorithm is superior to the original PC proposition and can differentiate between true and spurious nexus causalities. Our results show that significant causality is running from energy consumption in industrial and agricultural sectors towards economic growth. There is no causal association between energy consumption and economic growth in the domestic and transportation sectors. On the other hand, causality runs from energy consumption in the transportation, domestic and industrial sectors towards CO 2 emissions. It is concluded that energy consumption in industrial and agricultural sectors leads to economic growth alongside the associated CO 2 emissions. On the other hand, the contribution of domestic and transportation sectors in economic growth is trivial with significant CO 2 emissions. This paper provides novel empirical evidence of impacts of energy mismanagement at sectoral levels, economic output and environmental consequences; alongside policy recommendations for sustainable energy-based development on the national scale.

Keywords: CO 2 emissions; economic growth; energy–environment–economy; Graph Theoretic Approach; Monte Carlo simulations; nexus (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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