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

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  • Muhammad Shahbaz Shabbir

    (University of Illinois at Urbana Champaign, Champaign, USA.)

  • Muhammad Shahbaz

    (COMSATS Institute of Information Technology, Lahore, Pakistan)

  • Muhammad Zeshan

    (Sustainable Development Policy Institute, Pakistan)

Abstract

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.

Suggested Citation

  • Muhammad Shahbaz Shabbir & Muhammad Shahbaz & Muhammad Zeshan, 2014. "Renewable and Nonrenewable Energy Consumption, Real GDP and CO2 Emissions Nexus: A Structural VAR Approach in Pakistan," Bulletin of Energy Economics (BEE), The Economics and Social Development Organization (TESDO), vol. 2(3), pages 91-105, September.
  • Handle: RePEc:ijr:beejor:v:2:y:2014:i:3:p:91-105
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    Cited by:

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    4. Ajide, Kazeem & Ridwan, Ibrahim, 2018. "Energy consumption, environmental contaminants, and economic growth: The G8 experience," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 51, pages 58-83.
    5. Syedah Shan E Ahmad, 2015. "Recognizing Novel Red Sea Conservation Strategies Solving Environmental Issues and CO2 Storage," Bulletin of Energy Economics (BEE), The Economics and Social Development Organization (TESDO), vol. 3(3), pages 156-161, September.

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    More about this item

    Keywords

    Energy consumption; Real GDP; CO2 emissions;
    All these keywords.

    JEL classification:

    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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