Do financial development, economic growth, energy consumption, and trade openness contribute to increase carbon emission in Pakistan? An insight based on ARDL bound testing approach

Primarily, the current study seeks to explore the influence of financial development, economic growth, trade openness, non-renewable and renewable energy utilization on carbon dioxide (CO2) emission in Pakistan from 1990 to 2017. The findings of structural break unit root tests indicated that a few variables are stationary at the level and others integrated at the first difference. The bound F-test and Johansen cointegration tests confirmed the evidence that a long-run relationship exists among concerned variables. The long-run results explore that financial development and renewable energy penetration significantly accelerate the environmental quality, while economic growth, non-renewable energy utilization, and trade openness are responsible for deteriorating the environmental quality. The results from the short-run estimate explore that non-renewable energy utilization and trade openness significantly reduce the environmental quality while renewable energy sources are beneficial for environmental quality. Moreover, the current study discovered the unidirectional Granger causality relationship from economic growth, trade openness, non-renewable and renewable energy penetration to carbon emission in Pakistan. The outcomes of this study provide some insightful policy suggestions to overcome the detrimental effect of environmental degradation.