Toward economic growth without emissions growth: the role of urbanization & industrialization in Pakistan

The dynamic relationship between economic activity (economic growth) and environmental impact (carbon dioxide emissions) is the most debated topic in the present world. The global world is intended to curb environmental impact up to a threshold level of the 1990s while maintaining the same pace of economic growth. This study analyzes the decoupling of economic activity from environmental impact and its main driving forces from 1980 to 2018 for Pakistan. The decoupling status is examined using Tapio decoupling elasticity analysis. The cointegration and Impulse Response Function (IRF) are employed to explore the role of main decoupling drivers. The Tapio decoupling results exhibit that Pakistan experienced Expensive Negative Decoupling (END) for multiple years. Similarly, the Johanson Juselius (JJ) Cointegration assures the presence of a long-term relationship between the selected variables. The long-term regression estimates show that carbon intensity and urbanization are the main decoupling drivers. The industrialization and economic growth also weaken the decoupling progress in Pakistan. The value addition of the paper is that it exposes industrialization and urbanization as the two prominent factors of both economic growth and carbon emissions. Further, the industrial sector of Pakistan operates on polluted industrial stock, which needs to be replaced with energy-efficient technological stock. The study also added that renewable energy needs to be indulged in the industrial and urban sectors.