Renewable and Nonrenewable Energy Consumption, Real GDP and CO2 Emissions Nexus: A Structural VAR Approach in Pakistan

Muhammad Shahbaz Shabbir, Muhammad Shahbaz and Muhammad Zeshan
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Muhammad Shahbaz Shabbir: University of Illinois at Urbana Champaign, Champaign, USA.
Muhammad Shahbaz: COMSATS Institute of Information Technology, Lahore, Pakistan
Authors registered in the RePEc Author Service: Muhammad Shahbaz

Bulletin of Energy Economics (BEE), 2014, vol. 2, issue 3, 91-105

Abstract: A rise in real GDP crafts higher energy demand in Pakistan. This short-term rising energy requirement is fulfilled with the help of nonrenewable and renewable energy consumption. The rise in nonrenewable energy consumption lifts real GDP up in short-run. Forecast error variance decomposition illustrates nonrenewable energy consumption alone passes 87% variation in the CO2 emissions. This verifies that fossil fuels are accountable for environmental degradation in Pakistan. The CO2 emissions worsen economic activity, real GDP falls but renewable energy consumption largely grows. This elevation in renewable energy consumption is the proof of stabilizing efforts that are being initiated by official authorities as CO2 emissions reach to an alarming level. The rise in renewable energy consumption boosts economic activity, and real GDP breeds. Most of times, an increase in renewable energy consumption is an effort to substitute it for nonrenewable energy consumption, resulting in lower level of CO2 emissions.

Keywords: Energy consumption; Real GDP; CO2 emissions (search for similar items in EconPapers)
JEL-codes: O13 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (8)

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Related works:
Working Paper: Renewable and nonrenewable energy consumption, real GDP and CO2 emissions nexus: a structural VAR approach in Pakistan (2011)
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