Economic progress with better technology, energy security, and ecological sustainability in Pakistan

Energy consumption in different sectors in Pakistan has risen from the last two decades, which has brought immerse ecological risk from carbon dioxide (CO2) emission. This research tried to examine potential substitutability of energy (fossil fuel and electricity) and non-energy (labor and capital) input factors by applying the trans-log production method during 1980-2018. We applied Ridge regression method to test the factors after our data presented multicollinearity. The outcomes show that: (1) all the output elasticities of labor, capital, fossil fuel, and electricity are positive, which shows that all the factors are contributing to economic growth. (2) The substitution of alternative inputs (i.e., capital-electricity, capital-labor, capital-fossil fuel, and labor-fossil fuel) show maximum substitutability among them, and their values are close to unity. Capital and electricity substitution suggests that huge investment in renewable energy, which will remove energy subsidies in supporting capital and labor. (3) The inputs' fossil fuel-labor and electricity-labor are substitutes with their relative technological progress, while other input factors also presenting proof of convergence. This proposes that redirecting resources into the development of technology to clean energy production like electricity will be an achievement over time with CO2 mitigation. Finally, with the increase in 5% and 10% of investment scenarios in fuel reduction and electricity capital, the technologies would reduce CO2 emissions by 22.05, 19.94, 12.44, and 11.25 Mt during 2018. Based on the investigated method, the policy suggestions concerned with the estimated results are discussed below.

Automated summary

This research examines the energy consumption and potential substitutability in different sectors in Pakistan, suggesting policy recommendations on investing in renewable energy and clean production technologies.