Renewable and Nonrenewable Energy Consumption, Real GDP and CO2 Emissions Nexus: A Structural VAR Approach in Pakistan

A rise in real GDP crafts higher energy demand in Pakistan. This short-term rising energy requirement is fulfilled with the help of nonrenewable and renewable energy consumption. The rise in nonrenewable energy consumption lifts real GDP up in short-run. Forecast error variance decomposition illustrates nonrenewable energy consumption alone passes 87% variation in the CO2 emissions. This verifies that fossil fuels are accountable for environmental degradation in Pakistan. The CO2 emissions worsen economic activity, real GDP falls but renewable energy consumption largely grows. This elevation in renewable energy consumption is the proof of stabilizing efforts that are being initiated by official authorities as CO2 emissions reach to an alarming level. The rise in renewable energy consumption boosts economic activity, and real GDP breeds. Most of times, an increase in renewable energy consumption is an effort to substitute it for nonrenewable energy consumption, resulting in lower level of CO2 emissions.