Exploring the asymmetric effects of urbanization and trade on CO₂ emissions: fresh evidence from Pakistan

Over the past few decades, rapid or unplanned urbanization has been a major problem for developing countries, affecting the environment very badly. Pakistan is also the fifth most vulnerable country in terms of environmental impact from socio-economic activities. Mostly, this type of research has been conducted across countries. So, this study intends to analyze the role of urbanization in energy consumption, economic growth, trade, and technology in carbon emissions by evaluating data from 1985 to 2021 in the context of Pakistan. Autoregressive distributed lag (ARDL) and non-linear autoregressive distributed lag (NARDL) with Granger causality assessment are employed to experimentally examine the variables' short and long-term associations. The ARDL result demonstrates that carbon dioxide (LCO₂) emissions are increased by energy consumption (LEC) and technology (LTech), while they are decreased by economic growth (LEG) and trade (LT). In NARDL, rising and falling urbanization (LU) lead to increased carbon emissions, but insignificantly. Ascending LEC leads to increased emissions, whereas descending LEC leads to reduced emissions in the context of short and long-term asymmetry. Yet, the opposite is true in the case of trade: a rise in LT decreases emissions significantly, whereas a fall in LT increases emissions insignificantly. This paper highlights the importance of international trade for a country facing these challenges. This means that LT is at the forefront of emission-reducing technology. A Granger causality analysis results show that LU and LTech are two critical determinants of LCO₂ emissions. Diagnostic tests ensure the model's reliability, ensuring that it could potentially be used without adverse intent. The research concludes that in order to minimize carbon dioxide emissions, the government should encourage the adoption of low-carbon technology through international trade (the exchange or import of low-carbon products) and implement policies tailored to urbanization and energy demand.