Testing Non-Linear Nexus between Service Sector and CO<sub>2</sub> Emissions in Pakistan
Our pioneer study is aimed at investigating the role of the service sector in affecting sustainable environment in Pakistan. Using time series data over 1971−2014 and applying an autoregressive distributive lag (ARDL) model with structural break analysis, we establish a long-term equilibri...
| Main Authors: | , , , |
|---|---|
| Format: | Article |
| Language: | English |
| Published: |
MDPI AG
2020-01-01
|
| Series: | Energies |
| Subjects: | |
| Online Access: | https://www.mdpi.com/1996-1073/13/3/526 |
| _version_ | 1828147179203592192 |
|---|---|
| author | Shujahat Haider Hashmi Fan Hongzhong Zeeshan Fareed Roksana Bannya |
| author_facet | Shujahat Haider Hashmi Fan Hongzhong Zeeshan Fareed Roksana Bannya |
| author_sort | Shujahat Haider Hashmi |
| collection | DOAJ |
| description | Our pioneer study is aimed at investigating the role of the service sector in affecting sustainable environment in Pakistan. Using time series data over 1971−2014 and applying an autoregressive distributive lag (ARDL) model with structural break analysis, we establish a long-term equilibrium relationship of carbon dioxide (CO<sub>2</sub>) emissions with energy consumption, income level, services and trade openness. Our findings support a service-induced environmental Kuznets curve (EKC) hypothesis in Pakistan. The income level sharply raises environmental degradation at the early stage; however, after reaching a certain threshold, it improves environmental quality but at a lower rate. There exists an inverted U-shaped nexus between services and CO<sub>2</sub> emissions, which implies that the service sector is less energy-intensive in terms of mitigating pollution in Pakistan. Moreover, the energy consumption has an inverted U-shaped effect on carbon emissions, which implies energy efficiencies and adoption of renewable energy has reduced pollution in the long run. The trade openness increases CO<sub>2</sub> emissions in both the short term and long term. The quadratic term of income level has a negatively inelastic impact on CO<sub>2</sub> emissions, which implies a very slow rate of improvement in environmental quality. On the other hand, the quadratic term of services shows a highly elastic impact on pollution, which induces the EKC hypothesis. Our robustness checks such as fully modified ordinary least squares (FMOLS), dynamic ordinary least squares (OLS), and Toda and Yamamoto (TY) causality tests further confirm the existence of the service-induced EKC hypothesis in Pakistan. Moreover, there exists a unidirectional causality from energy consumption to CO<sub>2</sub> emissions, a bidirectional causal relationship between economic growth and CO<sub>2</sub> emissions, and a unidirectional causal linkage between services and CO<sub>2</sub> emissions. Lastly, we discuss certain policy implications for designing appropriate environmental and energy policies to mitigate the pollution in Pakistan. |
| first_indexed | 2024-04-11T20:57:15Z |
| format | Article |
| id | doaj.art-4401f41d1e7646b1b4b3a6337c949bab |
| institution | Directory Open Access Journal |
| issn | 1996-1073 |
| language | English |
| last_indexed | 2024-04-11T20:57:15Z |
| publishDate | 2020-01-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | Energies |
| spelling | doaj.art-4401f41d1e7646b1b4b3a6337c949bab2022-12-22T04:03:38ZengMDPI AGEnergies1996-10732020-01-0113352610.3390/en13030526en13030526Testing Non-Linear Nexus between Service Sector and CO<sub>2</sub> Emissions in PakistanShujahat Haider Hashmi0Fan Hongzhong1Zeeshan Fareed2Roksana Bannya3School of Economics, Huazhong University of Science and Technology, Wuhan 430074, ChinaSchool of Economics, Huazhong University of Science and Technology, Wuhan 430074, ChinaSchool of Business, Huzhou University, Huzhou 313000, ChinaDepartment of Environmental Science and Resource Management, Mawlana Bhashani Science and Technology University, Santosh, Tangail 1902, BangladeshOur pioneer study is aimed at investigating the role of the service sector in affecting sustainable environment in Pakistan. Using time series data over 1971−2014 and applying an autoregressive distributive lag (ARDL) model with structural break analysis, we establish a long-term equilibrium relationship of carbon dioxide (CO<sub>2</sub>) emissions with energy consumption, income level, services and trade openness. Our findings support a service-induced environmental Kuznets curve (EKC) hypothesis in Pakistan. The income level sharply raises environmental degradation at the early stage; however, after reaching a certain threshold, it improves environmental quality but at a lower rate. There exists an inverted U-shaped nexus between services and CO<sub>2</sub> emissions, which implies that the service sector is less energy-intensive in terms of mitigating pollution in Pakistan. Moreover, the energy consumption has an inverted U-shaped effect on carbon emissions, which implies energy efficiencies and adoption of renewable energy has reduced pollution in the long run. The trade openness increases CO<sub>2</sub> emissions in both the short term and long term. The quadratic term of income level has a negatively inelastic impact on CO<sub>2</sub> emissions, which implies a very slow rate of improvement in environmental quality. On the other hand, the quadratic term of services shows a highly elastic impact on pollution, which induces the EKC hypothesis. Our robustness checks such as fully modified ordinary least squares (FMOLS), dynamic ordinary least squares (OLS), and Toda and Yamamoto (TY) causality tests further confirm the existence of the service-induced EKC hypothesis in Pakistan. Moreover, there exists a unidirectional causality from energy consumption to CO<sub>2</sub> emissions, a bidirectional causal relationship between economic growth and CO<sub>2</sub> emissions, and a unidirectional causal linkage between services and CO<sub>2</sub> emissions. Lastly, we discuss certain policy implications for designing appropriate environmental and energy policies to mitigate the pollution in Pakistan.https://www.mdpi.com/1996-1073/13/3/526co<sub>2</sub> emissionseconomic growthekc hypothesisservice sectorstructural change hypothesis |
| spellingShingle | Shujahat Haider Hashmi Fan Hongzhong Zeeshan Fareed Roksana Bannya Testing Non-Linear Nexus between Service Sector and CO<sub>2</sub> Emissions in Pakistan Energies co<sub>2</sub> emissions economic growth ekc hypothesis service sector structural change hypothesis |
| title | Testing Non-Linear Nexus between Service Sector and CO<sub>2</sub> Emissions in Pakistan |
| title_full | Testing Non-Linear Nexus between Service Sector and CO<sub>2</sub> Emissions in Pakistan |
| title_fullStr | Testing Non-Linear Nexus between Service Sector and CO<sub>2</sub> Emissions in Pakistan |
| title_full_unstemmed | Testing Non-Linear Nexus between Service Sector and CO<sub>2</sub> Emissions in Pakistan |
| title_short | Testing Non-Linear Nexus between Service Sector and CO<sub>2</sub> Emissions in Pakistan |
| title_sort | testing non linear nexus between service sector and co sub 2 sub emissions in pakistan |
| topic | co<sub>2</sub> emissions economic growth ekc hypothesis service sector structural change hypothesis |
| url | https://www.mdpi.com/1996-1073/13/3/526 |
| work_keys_str_mv | AT shujahathaiderhashmi testingnonlinearnexusbetweenservicesectorandcosub2subemissionsinpakistan AT fanhongzhong testingnonlinearnexusbetweenservicesectorandcosub2subemissionsinpakistan AT zeeshanfareed testingnonlinearnexusbetweenservicesectorandcosub2subemissionsinpakistan AT roksanabannya testingnonlinearnexusbetweenservicesectorandcosub2subemissionsinpakistan |