Carbon Emissions, Renewable Energy Transition, and Economic Growth in Pakistan: Evidence from a Nonlinear ARDL Approach

Abstract

Climate change and rising carbon emissions have emerged as major challenges to sustainable development, particularly in developing economies such as Pakistan. This study investigates the asymmetric effects of renewable energy transition and economic growth on carbon emissions in Pakistan using annual time-series data covering the period 1990–2024. Carbon emissions are used as the environmental indicator, while renewable energy consumption and economic growth serve as the primary explanatory variables. Trade openness, urbanization, and financial development are included as control variables. To capture potential nonlinearities and asymmetries, the study employs the Nonlinear Autoregressive Distributed Lag (NARDL) approach following stationarity and cointegration analysis. The empirical results confirm the existence of a stable long-run relationship among the variables. The findings reveal that positive shocks in renewable energy consumption significantly reduce carbon emissions, whereas negative shocks increase environmental degradation. Similarly, positive economic growth shocks increase carbon emissions, while negative growth shocks reduce environmental pressure. Trade openness, urbanization, and financial development are also found to contribute positively to carbon emissions. Furthermore, the Wald asymmetry test confirms that positive and negative changes in renewable energy consumption and economic growth exert significantly different effects on environmental quality, validating the application of the NARDL framework. The error correction mechanism indicates a relatively rapid adjustment toward long-run equilibrium following short-run disturbances. The study concludes that renewable energy transition is essential for reducing carbon emissions and promoting environmental sustainability in Pakistan. The findings suggest that policymakers should accelerate investment in renewable energy infrastructure, encourage green technological innovation, and integrate environmental considerations into economic development strategies. Such measures are crucial for achieving Pakistan’s climate commitments and long-term sustainable development goals.

Keywords

Carbon Emissions, Renewable Energy Transition, Economic Growth, NARDL, Environmental Sustainability, Climate Change, Pakistan.