Impact of Fossil Fuel Energy Consumption on CO2 Emissions: Evidence from Pakistan (1980-2010)

This present study empiricallyanalyzes the impact of fossil fuel energy consumption on CO2 emission for Pakistan using data from 1980-2010. Our broad objective is to test the environmental Kuznets curve (EKC) hypothesis and factors that affect the energy consumption. We have used Johansen Cointegrationapproach and a Vector Error Correction Model (VECM) to test the long run as well as short run relationship b/w variables. A log linear quadratic equation is specified to test the EKC hypothesis. Results support the existence of inverted U hypothesis.Industrial value added and trade openness positively affect the CO2 emission while financial development reduces the CO2 emission.Results of the energy consumption equation show that income, investment, population and manufacture export positively affect the energy consumption while manufacture import negatively affect the energy consumption.