Modeling the impact of transport energy consumption on CO2 emission in Pakistan: Evidence from ARDL approach

Abstract

The objective of this research is to examine the relationship between transport energy consumption, economic growth, and carbon dioxide emission (CO₂) from transport sector incorporating foreign direct investment and urbanization. This study is carried out in Pakistan by applying autoregressive distributive lag (ARDL) and vector error correction model (VECM) over 1990-2015. The empirical results indicate a strong significant impact of transport energy consumption on CO₂ emissions from the transportation sector. Furthermore, foreign direct investment also contributes to CO₂ emission. Interestingly, the impact of economic growth and urbanization on transport CO₂ emission is statistically insignificant. Overall, transport energy consumption and foreign direct investment are not environmentally friendly. The new empirical evidence from this study provides a complete picture of the determinants of emissions from the transport sector and these novel findings not only help to advance the existing literature but also can be of special interest to the country's policymakers. So, we urge that government needs to focus on promoting the energy efficient means of transportation to improve environmental quality with less adverse influence on economic growth.

Keywords: ARDL; CO2 emission; FDI; Pakistan; Transport energy consumption.