IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/109672.html
   My bibliography  Save this paper

Vertical financial disparity, energy prices and emission reduction: Empirical insights from Pakistan

Author

Listed:
  • Li, Weiqing
  • Chien, Fengsheng
  • Ngo, Quang-Thanh
  • Nguyen, Tien-Dung
  • Iqbal, Sajid
  • Bilal, Ahmad Raza

Abstract

The economic and environmental aspects of energy production have become important due to the increasing complexity energy sector and environmental pollution, warranting to test the connection between financial imbalances, energy prices and carbon emission. The study aims to test the impact of vertical fiscal imbalances (VFI) on energy prices and carbon emission trends by considering the dual-perspectives of environmental regulation and industrial structure. The empirical outcomes indicated that vertical fiscal imbalances limited the environmental quality of Pakistan. Furthermore, VFI also caused environmental degradation by affecting industrial structure. VFI inhibits the intensity of environmental regulation, promotes the upgrade of industrial structures, both of which cause additional carbon emissions. The study suggest to energy ministries and energy regulation offices to revisit the mechanism of energy prices determination and revised mechanism should provide a user-friendly assessment to understand the actual costs associated with the rising concern of environmental pollution. By this, environmental protection maximization and optimal energy conservation is expected to increase. Based on empirical findings, the study extends the suggestion that vertical fiscal imbalances should be considered an active indicator by the key policy makers and other stakeholders for energy prices determination and environmental quality upgradation.

Suggested Citation

  • Li, Weiqing & Chien, Fengsheng & Ngo, Quang-Thanh & Nguyen, Tien-Dung & Iqbal, Sajid & Bilal, Ahmad Raza, 2021. "Vertical financial disparity, energy prices and emission reduction: Empirical insights from Pakistan," MPRA Paper 109672, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:109672
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/109672/1/MPRA_paper_109672.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Muhammad Khalid Anser & Zhihe Zhang & Lubna Kanwal, 2018. "Moderating effect of innovation on corporate social responsibility and firm performance in realm of sustainable development," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 25(5), pages 799-806, September.
    2. Harijan, Khanji & Uqaili, Mohammad A. & Memon, Mujeebuddin & Mirza, Umar K., 2011. "Forecasting the diffusion of wind power in Pakistan," Energy, Elsevier, vol. 36(10), pages 6068-6073.
    3. Lin, Boqiang & Xu, Mengmeng, 2018. "Regional differences on CO2 emission efficiency in metallurgical industry of China," Energy Policy, Elsevier, vol. 120(C), pages 302-311.
    4. Atilgan, Burcin & Azapagic, Adisa, 2016. "An integrated life cycle sustainability assessment of electricity generation in Turkey," Energy Policy, Elsevier, vol. 93(C), pages 168-186.
    5. Ren, Shenggang & Yuan, Baolong & Ma, Xie & Chen, Xiaohong, 2014. "The impact of international trade on China׳s industrial carbon emissions since its entry into WTO," Energy Policy, Elsevier, vol. 69(C), pages 624-634.
    6. Nieto, Jaime & Carpintero, Óscar & Miguel, Luis J., 2018. "Less than 2°C? An Economic-Environmental Evaluation of the Paris Agreement," Ecological Economics, Elsevier, vol. 146(C), pages 69-84.
    7. Taghizadeh-Hesary, Farhad & Yoshino, Naoyuki & Inagaki, Yugo, 2018. "Empirical Analysis of Factors Influencing Price of Solar Modules," ADBI Working Papers 836, Asian Development Bank Institute.
    8. Taghizadeh-Hesary, Farhad & Yoshino, Naoyuki, 2019. "The way to induce private participation in green finance and investment," Finance Research Letters, Elsevier, vol. 31(C), pages 98-103.
    9. Shahbaz, Muhammad & Gozgor, Giray & Hammoudeh, Shawkat, 2019. "Human capital and export diversification as new determinants of energy demand in the United States," Energy Economics, Elsevier, vol. 78(C), pages 335-349.
    10. Editorial, 2020. "Covid-19 and Climate Change," Journal, Review of Agrarian Studies, vol. 10(1), pages 5-6, January-J.
    11. García-Álvarez, María Teresa & Cabeza-García, Laura & Soares, Isabel, 2017. "Analysis of the promotion of onshore wind energy in the EU: Feed-in tariff or renewable portfolio standard?," Renewable Energy, Elsevier, vol. 111(C), pages 256-264.
    12. Dupor, Bill & Guerrero, Rodrigo, 2017. "Local and aggregate fiscal policy multipliers," Journal of Monetary Economics, Elsevier, vol. 92(C), pages 16-30.
    13. Yoshino, Naoyuki & Taghizadeh–Hesary, Farhad & Nakahigashi, Masaki, 2019. "Modelling the social funding and spill-over tax for addressing the green energy financing gap," Economic Modelling, Elsevier, vol. 77(C), pages 34-41.
    14. Demircioglu, Mehmet Akif & Audretsch, David B., 2017. "Conditions for innovation in public sector organizations," Research Policy, Elsevier, vol. 46(9), pages 1681-1691.
    15. Doljak, Dejan & Stanojević, Gorica, 2017. "Evaluation of natural conditions for site selection of ground-mounted photovoltaic power plants in Serbia," Energy, Elsevier, vol. 127(C), pages 291-300.
    16. Hannes Winner, 2012. "Fiscal Competition and the Composition of Public Expenditure: An Empirical Study," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 6(3), September.
    17. Lepitzki, Justin & Axsen, Jonn, 2018. "The role of a low carbon fuel standard in achieving long-term GHG reduction targets," Energy Policy, Elsevier, vol. 119(C), pages 423-440.
    18. Karatas, Mumtaz & Sulukan, Egemen & Karacan, Ilknur, 2018. "Assessment of Turkey's energy management performance via a hybrid multi-criteria decision-making methodology," Energy, Elsevier, vol. 153(C), pages 890-912.
    19. Cameron Hepburn & Brian O’Callaghan & Nicholas Stern & Joseph Stiglitz & Dimitri Zenghelis, 2020. "Will COVID-19 fiscal recovery packages accelerate or retard progress on climate change?," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 36(Supplemen), pages 359-381.
    20. Mohsin, M. & Zhou, P. & Iqbal, N. & Shah, S.A.A., 2018. "Assessing oil supply security of South Asia," Energy, Elsevier, vol. 155(C), pages 438-447.
    21. Taghizadeh-Hesary, Farhad & Yoshino, Naoyuki & Inagaki, Yugo & Morgan, Peter J., 2021. "Analyzing the factors influencing the demand and supply of solar modules in Japan – Does financing matter," International Review of Economics & Finance, Elsevier, vol. 74(C), pages 1-12.
    22. Cameron Hepburn & Brian O’Callaghan & Nicholas Stern & Joseph Stiglitz & Dimitri Zenghelis, 0. "Will COVID-19 fiscal recovery packages accelerate or retard progress on climate change?," Oxford Review of Economic Policy, Oxford University Press, vol. 36(Supplemen), pages 359-381.
    23. Li, Weiqing & Chien, Fengsheng & Hsu, Ching-Chi & Zhang, YunQian & Nawaz, Muhammad Atif & Iqbal, Sajid & Mohsin, Muhammad, 2021. "Nexus between energy poverty and energy efficiency: Estimating the long-run dynamics," Resources Policy, Elsevier, vol. 72(C).
    24. Zhang, Lifeng & Ru, Yucong & Li, Jingkui, 2016. "Optimal tax structure and public expenditure composition in a simple model of endogenous growth," Economic Modelling, Elsevier, vol. 59(C), pages 352-360.
    25. Zhou, Xiaoyan & Zhang, Jie & Li, Junpeng, 2013. "Industrial structural transformation and carbon dioxide emissions in China," Energy Policy, Elsevier, vol. 57(C), pages 43-51.
    26. Jing Xing & Clemens Fuest, 2018. "Central-local government fiscal relations and cyclicality of public spending: evidence from China," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 25(4), pages 946-980, August.
    27. Rodriguez-Gonzalez, Pablo T. & Rico-Martinez, Ramiro & Rico-Ramirez, Vicente, 2018. "An integrated stochastic economic-ecological-social model with stratified-population," Ecological Modelling, Elsevier, vol. 368(C), pages 15-26.
    28. Tiep, Nguyen Cong & Wang, Mengqi & Mohsin, Muhammad & Kamran, Hafiz Waqas & Yazdi, Farzaneh Ahmadian, 2021. "An assessment of power sector reforms and utility performance to strengthen consumer self-confidence towards private investment," Economic Analysis and Policy, Elsevier, vol. 69(C), pages 676-689.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Chang, Lei & Shi, Fanglan & Taghizadeh-Hesary, Farhad & Saydaliev, Hayot Berk, 2023. "Information and communication technologies development and the resource curse," Resources Policy, Elsevier, vol. 80(C).
    2. Puxin Liu, 2023. "An assessment of financial mechanisms for green financial recovery and climate change mitigation: the case of China," Economic Change and Restructuring, Springer, vol. 56(3), pages 1567-1584, June.
    3. Chen, Baohua & Zhang, Chunlian & Saydaliev, Hayot Berk, 2022. "Does bank complexity during the COVID-19 crisis alter the financing mechanism for small and medium-sized enterprises?," Economic Analysis and Policy, Elsevier, vol. 75(C), pages 705-715.
    4. Yang, Yang & Liu, Zhen & Saydaliev, Hayot Berk & Iqbal, Sajid, 2022. "Economic impact of crude oil supply disruption on social welfare losses and strategic petroleum reserves," Resources Policy, Elsevier, vol. 77(C).
    5. Chang, Lei & Gan, Xiaojun & Mohsin, Muhammad, 2022. "Studying corporate liquidity and regulatory responses for economic recovery in COVID-19 crises," Economic Analysis and Policy, Elsevier, vol. 76(C), pages 211-225.
    6. Zheng, Xiaotian & Zhou, Youcheng & Iqbal, Sajid, 2022. "Working capital management of SMEs in COVID-19: role of managerial personality traits and overconfidence behavior," Economic Analysis and Policy, Elsevier, vol. 76(C), pages 439-451.
    7. Peipei, Wang & Eyvazov, Elchin & Giyasova, Zeynab & Kazimova, Asli, 2023. "The nexus between natural resource rents and financial wealth on economic recovery: Evidence from European Union economies," Resources Policy, Elsevier, vol. 82(C).
    8. Chang, Lei & Iqbal, Sajid & Chen, Huangen, 2023. "Does financial inclusion index and energy performance index co-move?," Energy Policy, Elsevier, vol. 174(C).
    9. Sun, Lingyun & Yin, Jiemin & Bilal, Ahmad Raza, 2023. "Green financing and wind power energy generation: Empirical insights from China," Renewable Energy, Elsevier, vol. 206(C), pages 820-827.
    10. Liu, Fang & Umair, Muhammad & Gao, Junjun, 2023. "Assessing oil price volatility co-movement with stock market volatility through quantile regression approach," Resources Policy, Elsevier, vol. 81(C).
    11. Wang, Jiangbo & Xue, Yefei & Han, Mingyang, 2023. "Impact of carbon emission price and natural resources development on the green economic recovery: Fresh insights from China," Resources Policy, Elsevier, vol. 81(C).
    12. Chien, Fengsheng & Ananzeh, Mohammed & Mirza, Farhan & Bakar, Abou & Vu, Hieu Minh & Ngo, Thanh Quang, 2021. "The effects of green growth, environmental-related tax, and eco-innovation towards carbon neutrality target in the US economy," MPRA Paper 109664, University Library of Munich, Germany.
    13. Yingjie Hu & Yunhong Hao & Ali Raza, 2023. "Association between the stock market and green economic growth: green recovery from BRICS economics," Economic Change and Restructuring, Springer, vol. 56(6), pages 3861-3884, December.
    14. Yang, Junhua & Li, Ying & Sui, Anna, 2023. "From black gold to green: Analyzing the consequences of oil price volatility on oil industry finances and carbon footprint," Resources Policy, Elsevier, vol. 83(C).
    15. Tianchu Feng & Meijuan Liu & Chaozhu Li, 2022. "How Does Vertical Fiscal Imbalance Affect CO 2 Emissions? The Role of Capital Mismatch," Sustainability, MDPI, vol. 14(17), pages 1-15, August.
    16. Wang, Shuguang & Sun, Luang & Iqbal, Sajid, 2022. "Green financing role on renewable energy dependence and energy transition in E7 economies," Renewable Energy, Elsevier, vol. 200(C), pages 1561-1572.
    17. Liu, Ying, 2023. "How does economic recovery impact green finance and renewable energy in Asian economies," Renewable Energy, Elsevier, vol. 208(C), pages 538-545.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Li, Weiqing & Chien, Fengsheng & Hsu, Ching-Chi & Zhang, YunQian & Nawaz, Muhammad Atif & Iqbal, Sajid & Mohsin, Muhammad, 2021. "Nexus between energy poverty and energy efficiency: Estimating the long-run dynamics," Resources Policy, Elsevier, vol. 72(C).
    2. Zhang, Dongyang & Mohsin, Muhammad & Rasheed, Abdul Khaliq & Chang, Youngho & Taghizadeh-Hesary, Farhad, 2021. "Public spending and green economic growth in BRI region: Mediating role of green finance," Energy Policy, Elsevier, vol. 153(C).
    3. Mohsin, Muhammad & Ullah, Hafeez & Iqbal, Nadeem & Iqbal, Wasim & Taghizadeh-Hesary, Farhad, 2021. "How external debt led to economic growth in South Asia: A policy perspective analysis from quantile regression," Economic Analysis and Policy, Elsevier, vol. 72(C), pages 423-437.
    4. Patrycja Klusak & Matthew Agarwala & Matt Burke & Moritz Kraemer & Kamiar Mohaddes, 2023. "Rising Temperatures, Falling Ratings: The Effect of Climate Change on Sovereign Creditworthiness," Management Science, INFORMS, vol. 69(12), pages 7468-7491, December.
    5. David Klenert & Franziska Funke & Linus Mattauch & Brian O’Callaghan, 2020. "Five Lessons from COVID-19 for Advancing Climate Change Mitigation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 76(4), pages 751-778, August.
    6. Agarwala, Matthew & Burke, Matt & Klusak, Patrycja & Mohaddes, Kamiar & Volz, Ulrich & Zenghelis, Dimitri, 2021. "Climate Change And Fiscal Sustainability: Risks And Opportunities," National Institute Economic Review, National Institute of Economic and Social Research, vol. 258, pages 28-46, November.
    7. Paul Malliet & Frédéric Reynès & Gissela Landa & Meriem Hamdi-Cherif & Aurélien Saussay, 2020. "Assessing Short-Term and Long-Term Economic and Environmental Effects of the COVID-19 Crisis in France," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 76(4), pages 867-883, August.
    8. Kong, Qunxi & Shen, Chenrong & Li, Rongrong & Wong, Zoey, 2021. "High-speed railway opening and urban green productivity in the post-COVID-19: Evidence from green finance," Global Finance Journal, Elsevier, vol. 49(C).
    9. Shaikh Eskander & Sam Fankhauser & Joana Setzer, 2021. "Global Lessons from Climate Change Legislation and Litigation," Environmental and Energy Policy and the Economy, University of Chicago Press, vol. 2(1), pages 44-82.
    10. Bai, Xiao & Wang, Kuan-Ting & Tran, Trung Kien & Sadiq, Muhammad & Trung, Lam Minh & Khudoykulov, Khurshid, 2022. "Measuring China’s green economic recovery and energy environment sustainability: Econometric analysis of sustainable development goals," Economic Analysis and Policy, Elsevier, vol. 75(C), pages 768-779.
    11. Anand, Paul & Blanchflower, Danny & Bovens, Luc & De Neve, Jan-Emmanuel & Graham, Carol & Nolan, Brian & Krekel, Christian & Thoma, Johanna, 2020. "Post-Covid 19 economic development and policy: submitted as recommendations to the Scottish economic recovery group," LSE Research Online Documents on Economics 105023, London School of Economics and Political Science, LSE Library.
    12. Rolando Fuentes & Marzio Galeotti & Alessandro Lanza & Baltasar Manzano, 2020. "COVID-19 and Climate Change: A Tale of Two Global Problems," Sustainability, MDPI, vol. 12(20), pages 1-14, October.
    13. Karmellos, M. & Kosmadakis, V. & Dimas, P. & Tsakanikas, A. & Fylaktos, N. & Taliotis, C. & Zachariadis, T., 2021. "A decomposition and decoupling analysis of carbon dioxide emissions from electricity generation: Evidence from the EU-27 and the UK," Energy, Elsevier, vol. 231(C).
    14. Blackaby, David H. & Drinkwater, Stephen & Robinson, Catherine, 2020. "Regional Variations in the Brexit Vote: Causes and Potential Consequences," IZA Discussion Papers 13579, Institute of Labor Economics (IZA).
    15. Kraemer-Eis, Helmut & Botsari, Antonia & Gvetadze, Salome & Lang, Frank & Torfs, Wouter, 2020. "European Small Business Finance Outlook 2020: The impact of COVID-19 on SME financing markets," EIF Working Paper Series 2020/67, European Investment Fund (EIF).
    16. Maruf Rahman Maxim & Kerstin K. Zander, 2020. "Green Tax Reform in Australia in the Presence of Improved Environment-Induced Productivity Gain: Does It Offer Sustainable Recovery from a Post-COVID-19 Recession?," Sustainability, MDPI, vol. 12(16), pages 1-18, August.
    17. Srivastav, Sugandha & Rafaty, Ryan, 2021. "Five Worlds of Political Strategy in the Climate Movement," INET Oxford Working Papers 2021-07, Institute for New Economic Thinking at the Oxford Martin School, University of Oxford.
    18. Tilsted, Joachim Peter & Bjørn, Anders & Majeau-Bettez, Guillaume & Lund, Jens Friis, 2021. "Accounting matters: Revisiting claims of decoupling and genuine green growth in Nordic countries," Ecological Economics, Elsevier, vol. 187(C).
    19. Tan, Hua & Iqbal, Nadeem & Wu, Zhengzhong, 2022. "Evaluating the impact of stakeholder engagement for renewable energy sources and economic growth for CO2 emission," Renewable Energy, Elsevier, vol. 198(C), pages 999-1007.
    20. Polzin, Friedemann & Sanders, Mark, 2020. "How to finance the transition to low-carbon energy in Europe?," Energy Policy, Elsevier, vol. 147(C).

    More about this item

    Keywords

    Vertical financial disparity; Energy prices; Carbon emissions; Environmental regulation; Industrial structure;
    All these keywords.

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:109672. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.