Empirical Study to find the Nexus between Economic Development and Environment Degradation: Evidence from Pakistan

Abstract

This research shows the relationship between environment degradation, economic development, financial development, energy consumption, electricity production and natural resource depletion by using Environmental Kuznets curve hypothesis in Pakistan with yearly data from 1976 to 2013. TheARDL bound test to co-integration and error correction model is applied to check the relationship among the variables. The results conclude that there is long run evidence of environmental Kuznets curve in Pakistan but short run evidence does not exist. Energy consumption and natural resource depletion degrade the environment quality in long run. Electricity production from hydroelectric source improves the environment quality both in long run and short run. Financial development has insignificant positive impact on environment degradation in long run and also in short run. As a policy implication we recommend that the coal power plant should be converted into natural gas power plant because natural gas power plants emit 50% less carbon dioxide (CO2) as compared to coal power plants. The government should create steps to reduce diesel engines because they discharge heavy smoke and deteriorate environment quality. Forest area must be increased in Pakistan because from 1990-2016 there is a huge fall in it because forest clean the environment quality of country and reduce the global warming which is a universal problem.