Modeling the relationship between gross capital formation and CO2 (a)symmetrically in the case of Pakistan: an empirical analysis through NARDL approach.

This paper tries to ensure the relationship between gross capital formation (GCF) and carbon dioxide (CO2) emissions in the case of Pakistan for the period 1980-2016 by employing Non-Linear Auto Regressive Distribution Lag (NARDL) model under the expansion of Environmental Kuznets hypothesis (EKC) while controlling for coal and oil consumption variables as a potential factors of CO2 emissions. Our main objective is to check whether or not the effect of changes in GCF on CO2 emissions is asymmetric or symmetric for Pakistan that is among one of the main contributors to CO2 emissions in Asia, as the emissions were grown by 15.6 million tonnes or 8.5% increase in percentage terms in 2016. Our result confirms the existence of an asymmetric effect of GCF shocks on CO2 emissions both in the short and long-terms. Moreover, our empirical finding also suggests that coal and oil consumptions have a significant contribution to CO2 emissions both in the short and long-terms. Further, our results also significantly support the existence of the EKC hypothesis both in the long and short-terms. That confirms the inverted U-shaped connection among per capita growth and CO2 emissions in Pakistan. In the last, our study suggests that the implementation and use of clean energies and technologies are vital for controlling pollution in Pakistan.