Vertical financial disparity, energy prices and emission reduction: Empirical insights from Pakistan

Weiqing Li, Fengsheng Chien, Thanh Ngo, Tien-Dung Nguyen, Sajid Iqbal and Ahmad Raza Bilal

MPRA Paper from University Library of Munich, Germany

Abstract: The economic and environmental aspects of energy production have become important due to the increasing complexity energy sector and environmental pollution, warranting to test the connection between financial imbalances, energy prices and carbon emission. The study aims to test the impact of vertical fiscal imbalances (VFI) on energy prices and carbon emission trends by considering the dual-perspectives of environmental regulation and industrial structure. The empirical outcomes indicated that vertical fiscal imbalances limited the environmental quality of Pakistan. Furthermore, VFI also caused environmental degradation by affecting industrial structure. VFI inhibits the intensity of environmental regulation, promotes the upgrade of industrial structures, both of which cause additional carbon emissions. The study suggest to energy ministries and energy regulation offices to revisit the mechanism of energy prices determination and revised mechanism should provide a user-friendly assessment to understand the actual costs associated with the rising concern of environmental pollution. By this, environmental protection maximization and optimal energy conservation is expected to increase. Based on empirical findings, the study extends the suggestion that vertical fiscal imbalances should be considered an active indicator by the key policy makers and other stakeholders for energy prices determination and environmental quality upgradation.

Keywords: Vertical financial disparity; Energy prices; Carbon emissions; Environmental regulation; Industrial structure (search for similar items in EconPapers)
JEL-codes: E0 (search for similar items in EconPapers)
Date: 2021-06-18
New Economics Papers: this item is included in nep-ene, nep-env, nep-isf and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (31)

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