Evaluating the Impact of Energy Price and Energy Consumption on Environmental Sustainability in Case of Pakistan

Abstract

Energy prices and energy consumption are pivotal factors influencing environmental sustainability. Fluctuations in energy prices can significantly affect consumer and industrial behavior, impacting the choice of energy sources and overall energy demand. Using annual time series data from 1990 to 2023, this study aims to assess, by Energy Price and Energy Consumption, Environmental Sustainability in Case of Pakistan.   For stationary of the variables, the study applied Augmented Dickey - Fuller (ADF) test using unit root.  Furthermore, used in order to observe the long-run co-integration between the variables was the Autoregressive Distributed Lag (ARDL) Model, ARDL Bound test and Error Correction Method.   The results show that consumption of renewable energy and energy price help to lower CO2 emissions.  Conversely, trade and foreign direct investment as well as non-renewable energy consumption raise CO2 emissions in Pakistan.  Moreover, research confirms that EKC exists in Pakistan.  The ARD Bound Test results show long run relationships between the variables.  The Error Correction Model indicates that, on average, 73.40 percent error will be corrected from short run to long run equilibrium annually.  In order to investigate the stability of the projected coefficients, the last study used Cumulative Sum (CUSUM) of Recursive Residuals & Cumulative Sum (CUSUMQ) of Recursive Residual Square.  The result shows that it is stable as CUSUM is within 5% level of significance and CUSUMSQ is also within boundaries of 5% significance level. The study recommends that, engage with global initiatives and partnerships focused on sustainable energy practices. Sharing knowledge and resources can help Pakistan adopt best practices and technologies that enhance environmental sustainability.