The Effect of Gross Domestic Product, Urbanization, Trade Openness, Financial Development and Renewable energy on CO2 Emission

Abstract

Pakistan is among those countries where the standards for environment-friendly energy sources have not complied as they should be. This investigation aims that CO2 Emission is a dilemma for the modern world. It harms the climate and other aspects like the ozone layer, so we have incorporated certain variables to figure out a way to reduce CO2 emissions. The analysis is performed on E-views, and the World Bank's website is used for data extraction. The data incorporated is from the year 1985 till 2018. Different statistical tools are applied in this research to overcome biases in data results. Further, all such methods are applied, with common reliability in their results. The stationary test is applied to check the stationary level, and the results are satisfied on leg II of the stationary test. Another most commonly used method is regression applied. The regression results are also satisfied with the hypothesis of the study. Cointegration results found long-term relationships among variables, and granger causality is applied for cause and effect measurement. The study results revealed that Renewable Energy has a significant and negative effect on Carbon dioxide emissions. At the same time, Gross Domestic Product (growth) builds an insignificant and negative relationship with Carbon dioxide emissions. Meanwhile, Financial Development (private sector), Trade Openness, and Urban Population have a significant and positive relation with Carbon Dioxide. This research contains an insight for government officials that reveals what CO2 emissions are derived from and how it could be reduced.