Renewable Energy, Financial Growth and Technological Progress: Analyzing the Dynamics of Sectoral Emissions in Pakistan

Abstract

The study examined the role of renewable energy, financial growth, and technical progress in Pakistan's industrial, manufacturing, and service sector emissions. The study collected consistent time series data from 1975 to 2022 and employed the ARDL-Bounds testing approach to estimate the short- and long-term parameter estimates. The study assessed three broad models. The first model linked renewable energy to carbon emissions in the cement industry. Carbon emissions and renewable energy were negatively related. Further, a negative relationship exists between information and communication technologies (ICTs) and carbon emissions, with a one-unit increase in ICT reducing CO2 emissions by 0.135 units. A substantial and positive association was found between GDP per capita and CO2 emissions in Pakistan. At the same time, the square term decreases carbon emissions, supporting a country's environmental Kuznets curve (EKC) hypothesis. In the second model, high technology exports were positively connected with manufacturing CO2 emissions, while energy use's interaction term had a significant negative impact. Manufacturing CO2 emissions were positively correlated with renewable energy in the short and medium term. Financial development is assessed by money supply, which directly affects carbon emissions to support financial-led emissions in a country. The third model used GHG emissions as the dependent variable and focused on the service sector. The interaction term between energy consumption and clean fuel technology (CFT) was negative and significant, although GHG emissions and CFT were positively correlated. Non-renewable energy raised GHG emissions, while renewable energy decreased them.