It is a matter of satisfaction that PML-N Government has initiated a campaign to create awareness among the masses, regarding deadly and unaffordable effects of pollution.
This awareness would be enhanced through newspapers, television, workshops and seminars gradually. Awareness in masses could be very helpful to curtail pollution problems hurriedly. Indian government has done a lot to curtail the pollution and yield very positive results by initiating awareness campaign. A large number of Indian drivers turn their vehicle engines off at traffic signal, not only to save some fuel but also to control pollution generated by fuel.
Forests not only help to reduce the environmental problems but also control temperature.
In Pakistan a large number of trees are being “murdered” without any adequate efforts to plant new plants. This leads to deforestation, which has caused a rise in the pollution levels and distortion of natural order. Government should not only take measures to protect the existing forests but also start growing non-natural jungles like Changa Manga.
I do want to share with you that why I chose the environmental issue at this point in time when the whole world is facing financial constraints. Actually the global recession has provided us an opportunity to increase our exports to the desired levels but to my understanding the environmental issues are coming in the way quite prominently.
To my understanding, the private sector in Pakistan alone cannot handle the environment related issues and neither the government can do it. Both the sides would have to join hands to tackle the situation. Like neighbouring India who sensing the gravity of pollution situation Delhi, converted all its public transport on CNG, we would have to take some solid and sector specific measures to deal with the monster.
We should start “war against pollution” to save not the economy alone but the whole nation as well otherwise our future generation will not forgive us.
In this study we have used an ARDL approach to find the long run nexus between E-E-E and found some robust results after estimating the long run elasticities. The demand elasticity of energy is positive and greater than unity, but the negative externality produced due to the use of energy, may reduce this effect. The elasticities of capital and Labor show that due to negative by-products of energy use, the production function exhibits decreasing return to scale (still, this hypothesis need further investigation). We also estimated the model to test the EKC in the presence of energy demand and find no such evidence. The energy substitution behavior is found as claimed by Siddiqui (2004), particularly industrial/ cement sector has switched from the use of other resources to the coal. In summary we can forward following implications of our analysis
Implications:
It is found that the energy use has positive impact on economy it is a dire need of time to explore more sources of energy which can be helpful in mitigating the increasing demand of energy.
The fuel substitution from costly to cheaper one should be monitored by the government and carbon tax should be imposed on the industries that produce more pollutants. The green technologies can reduce these pollutants.
The EKC is used to support do nothing policy, which unfortunately cannot happen for the case of Pakistan. This also may not be useful due to turning points that loudly need to think of the factors that explain it, before making assessments about the necessary components of environmental policy. After an initial stage of economic development we
have to take serious measure to tackle the issues of environmental degradation (as a result of energy use).
This analysis limits in many ways. For future research the EKC can be tested for the turning points. This would be interesting to find out the income per capita that limits the relationship between E-E-E.
In order to avoid functional specification bias, we follow many authors who turned to nonparametric estimation techniques to model this reduced form function. Most of them made the implicit assumption that every region or country included in the panel shares the same pollution-income relationship, up to some specific fixed temporal and/or individual effects. Our findings show that the temporal poolability assumption holds in the Spanish provinces for three (CH4, CO, CO2) out of four air pollutants when poolability tests robust to functional misspecification are employed. The pooled nonparametric regressions give rise to U-inverted income-pollution relations. However, these hump-shaped functions only reflect relatively short-run cross-sectional regressions for different periods. Our parametric and nonparametric tests reject overwhelmingly the null hypothesis of spatial homogeneity as well as the goodness-of-fit of the time- or individual-fixed effects semiparametric models.
Investigating the reduced form function of the pollution-income relationship for per capita air pollutants emissions with fixed-effects panel data models, be it parametric or semiparametric, failed to account for differences in functional shapes between regions. It is likely that heterogeneity would be even greater when applied to cross-country rather than cross-regional panels.
Having established that spatial heterogeneity matters in panels and blurs the EKC picture, one may consider three avenues of future research when assessing the income pollution reduced form function. From an econometric point of view, the evidence points toward the use of estimation methods which better account for differences between countries/
regions such as non- or parametric quantile regressions, parametric random coefficients estimators, varying smooth coefficients models or country/region specific regressions when large individual series are available. From an economic point of view, the persistent heterogeneity in patterns between regions/countries support the extreme sensitivity of the income-pollution relation to differences in regional/country-specific factors, such as factors endowment, sources of growth, differences in production and abetment technologies or local sensitivity to environmental damages. At the same time, structural stability through time points toward the existence of some stable structural determinants which shape the income-pollution relation. The identification of these determinants certainly would deserve more research effort.
References
Akarca, A.T., Long, T.V., 1980. On the relationship between energy and GNP: a reexamination. Journal of Energy and Development 5, 326–331.
Altinay, G. 2007.Short-run and long-run elasticities of import demand for crude oil in Turkey. Energy Policy, 35: 5829–5835
Asafu-Adjaye, J., 2000. The relationship between energy consumption, energy prices and economic growth: time series evidence from Asian developing countries. Energy Economics 22, 615–625.
Abler, D.G., Rodriguez, A.G., Shortle, J.S., 1999. Trade liberalization and the environment in Costa Rica. Environment and Development Economics 4, 357–373.
Akbostanci, E., Turut-Asik, S., Tunc, G.I., 2009. The relationship between income and environment in Turkey: Is there an environmental CUSUM of Squares 5% Significance 10 Khalid Ahmed and Wei Long / Procedia Economics and Finance 1 ( 2012 ) 4 – 13 Kuznets curve? Energy Policy 37 (3), 861–867.
AkbostancI, E., Türüt-AsIk, S and Ipek., T. G. The relationship between income and environment in Turkey: is there an environmental Kuznets curve? Energy Policy 2009;
37: 861-867.
Ansuategi, A., Barbier, E., Perrings, C., 1998. The Environmental Kuznets Curve. In: van den Bergh, J.C.J.M., Hofkes, M.W. (Eds.), Theory and Implementation of Sustainable Development Modelling. Kluwer Academic, Dordrecht.
Antweiler, W., Copeland, B.R., Taylor, M.S., 2001. Is free trade good for the environment? American Economic Review 91 (4), 877–908.
Aqeel, A., Butt, M.S., 2001. The relationship between energy consumption and economic growth in Pakistan. Asia Pacific Development Journal 8 (2), 101–110.
Barbier, E., 1997. Introduction to the Environmental Kuznets curve special issue.
Environment and Development Economics 2 (4), 369–381.
Beghin, J., Bowland, B., Dessus, S., Roland-Holst, D., Van-der-Mensbrugghe, D., 1999.
Trade integration, environmental degradation, and public health in Chile: Assessing the linkages’’, trade, global policy and the environment. The World Bank, Washington, DC.
Birdsall, N., Wheeler, D., 1993. Trade policy and industrial pollution in Latin America:
Where are the pollution havens? Journal of Environment and Development 2, 137–149.
Brandoford, D.F., Schlieckert, R., Shore, S.H., 2000. The Environmental Kuznets Curve:
Exploring a fresh specification. NBER.Working paper 8001.
Brock,W.A., Taylor, M.S., 2005. Economic growth and the environment: a review of theory and empirics. In: Aghion, P., Durlauf, S.N. (Eds.), Handbook of Economic Growth, vol. 1B, pp. 1749–1821.
Canas, A., Ferrao, P., Conceicao, P., 2003. A new environmental Kuznets curve?
Relationship between direct material input and income per capita: evidence from industrialized countries. Ecological Economics 46, 217–229.
Coondoo, D., Dinda, S., 2002. Causality between income and emission: a country group-specific econometric analysis. Ecological Economics 40, 351–367.
Chaudhuri, S and Pfaff, A. Economic Growth and the Environment: What Can We Learn from Household Data? Working Paper 2002, Columbia University, USA.
Cole, M.A., Elliott, R.J.R., Azhar, A.K., 2000. The determinants of trade in pollution intensive industries: North–South evidence. University of Birmingham, UK. Mimeo.
Coondoo, D., Dinda, S., 2008. The carbon dioxide emission and income: A temporal analysis of cross-country distributional patterns. Ecological Economics 65, 375–385.
Copeland, B and Taylor, M. S. International trade and the environment: a framework for analysis, NBER Working Paper 2001, No. 8540, Washington.
Dinda, S., Coondoo, D., 2006. Income and emission: A panel data-based cointegration analysis. Ecological Economics 57, 167–181.
de Bruyn, S.M., van den Bergh, J.C.J.M., Opschoor, J.B., 1998. Economic growth and emissions: reconsidering the empirical basis of environmental Kuznets curves. Ecological Economics 25, 161–175.
Dickey, D.A., Fuller, W.A., 1979. Distribution of the estimators for autoregressive time series with a unit root. Journal of the American Statistical Society 75, 427–431.
Dinda, S., 2004. Environmental Kuznets curve hypothesis: a survey. Ecological Economics 49, 431–455.
Dudek, D., Golub, A., Strukova, E., 2003. Ancillary benefits of reducing greenhouse gas emissions in transitional economies. World Development 31 (10), 1759–1769.
Erol, U., Yu, E.S.H., 1987. On the causal relationship between energy and income for industrialized countries. Journal of Energy and Development 13, 113–122.
Engle,R.F., and Granger, C.W.J. 1987. Co-integration and error-correction:
representation, estimation and testing. Econometrica, 55, 255-276.
Ferrantino, M.J., 1997. International trade, environmental quality and public policy. The World Economy 20, 43–72.
Friedl, B.,Getzner,M.,2003.Determinantsof CO2 emissions in a small open economy.
Ecological Economics 45(1),133–148
Ghali, K.H., El-Sakka, M.I.T., 2004. Energy use and output growth in Canada: a multivariate cointegration analysis. Energy Economics 26 (2), 225–238.
Glasure, Y., Lee, A.R., 1997. Cointegration, error-correction, and the relationship between GDP and energy: the case of South Korea and Singapore. Resource and Energy Economics 20, 17–25.
Grossman, G., Krueger, A., 1991. Environmental impacts of a North American free trade agreement. National Bureau of Economics Research Working Paper, no. 3194, NBER, Cambridge.
Ghali, K.H., El-Sakka, M.I.T., 2004. Energy use and output growth in Canada: A multivariate cointegration analysis. Energy Economics 26, 225–238.
Glasure, Y.U., 2002. Energy and national income in Korea: Further evidence on the role of omitted variables. Energy Economics 24, 355–365.
Grossman, G., Krueger, A., 1995. Economic environment and the economic growth.
Quarterly Journal of Economics 110, 353–377.
Heil, M.T., Selden, T.M., 1999. Panel stationarity with structural breaks: Carbon emissions and GDP. Applied Economic Letters 6, 223–225.
Helpman, E. Explaining the structure of foreign trade: where do we stand? Review of World Economics 1998; 134: 573-589.
Horvath, R.J., 1997. Energy Consumption and The Environmental Kuznets Curve debate.
Department of Geography. University of Sydney, Australia. Mimeo.
Hwang, D., Gum, B., 1991. The causal relationship between energy and GNP: The case of Taiwan. Journal of Energy Development 16, 219–226.
Heil, M.T., Selden, T.M., 1999. Panel stationarity with structural breaks: carbon emissions and GDP. Applied Economics Letters 6, 223–225.
Hwang, D.B.K., Gum, B., 1992. The causal relationship between energy and GNP: the case of Taiwan. The Journal of Energy and Development 16, 219–226.
IPCC, 2007. Climate change 2007: the physical science basis. Contribution of Working Group I to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change, Paris.
Indonesia: The Role of Energy Consumption and Foreign Trade. International Journal of Economics and Finance, Vol-4, No. 2.
Johansen, S. and Juselius, K., 1990, Maximum Likelihood Estimation and Inference on Cointegration – with Applications to the Demand for Money, Oxford Bulletin of Economics and Statistics 52, 169-210.
Jorgenson, D.W., Wilcoxen, P.J., 1993. Energy, the environment, and economic growth.
In: Kneese, A.V., Sweeney, J.L. (Eds.), Handbook of Natural Resource and Energy Economics, vol. 3, pp. 1267–1349.
Jaeger, W., Patel, S., Pinckney, T., 1995. Smallholder wood production and population pressure in East Africa: Evidence of an Environmental Kuznets Curve? Land Economics 71, 1–21 November.
Jalil, A.,Mahmud,S.F.,2009.Environment Kuznets curve for CO emissions: A Cointegration analysis for china. EnergyP olicy37,5167–5172.
Jayanthakumara.K, Reetu.V, and Ying Liu, 2011. CO Emission, energy consumption, trade and income: A comparative analysis of China and India. Energy Policy 42, 450-460.
Jha, S.K., 1996. The Kuznets Curve: A reassessment. World Development 24 (4), 773–
780.
Jobert, T., Karanfil, F., 2007. Sectoral energy consumption by source and economic growth in Turkey. Energy Policy 35, 5447–5456.
Johansen, S.,Juselius,K.,1990.Maximum likelihood estimation and inference on cointegration—with application to the demand for money. Oxford Bulliton of Economics 52,169–210.
Kolstad, C.D., Krautkraemer, J.A., 1993. Natural resource use and the environment. In:
Kneese, A.V., Sweeney, J.L. (Eds.), Handbook of Natural Resource and Energy Economics, vol. 3, pp. 1219–1265.
Kraft, J., Kraft, A., 1978. On the relationship between energy and GNP. Journal of Energy and Development 3, 401–403.
Lean.H.H, Shahbaz.M.S, 2011, Environmental Kuznets Curve and the Role of Energy Consumption in Pakistan. MPRA papers No. 34929 online link.http://mpra.ub.uni-muenchen.de/34929/
Lindmark, M., 2002. An EKC-pattern in historical perspective: carbon dioxide emissions, technology, fuel prices and growth in Sweden 1870–1997. Ecological Economics 42 (1–
2), 333–347.
List, J.A., Gallet, C.A., 1999. The Environmental Kuznets Curve: Does one size fit all?
Ecological Economics 31, 409–423.
Lopez, R., 1994. The environment as a factor of production: The effects of economic growth and trade liberalization. Journal of Environmental Economics and Management 27, 163–184.
Lucas, R.E.B., Wheeler, D.,, Hettige, H., 1992. Economic development, environ- mental regulation and the international migration of toxic industrial pollu- tion: 1960–1988. In:
Low, P. (Ed.), International Trade and the Environment, World Bank discussion, pp. 67–
87 paper 159.
Lee, C.-C., 2006. The causality relationship between energy consumption and GDP in G-11 countries revisited. Energy Policy 34, 1086–1093.
Managi, S., Jena, P.R., 2008. Environmental productivity and Kuznets curve in India.
Ecological Economics 65, 432–440.
Masih, A.M.M., Masih, R., 1996. Energy consumption, real income and temporal causality results from a multi-country study based on cointegration and error correction modeling techniques. Energy Economics 18, 165–183.
Narayan, P.K., Singh, B., 2007. The electricity consumption and GDP nexus for the Fiji Islands. Energy Economics 29, 1141–1150.
Narayan, P.K., Narayan, S., Prasad, A., 2008. A structural VAR analysis of electricity consumption and real GDP: Evidence from the G7 countries. Energy Policy 36, 2765–
2769.
Nasir, M., Rehman, F-U. 2011. Environmental Kuznets curve for carbon emissions in Pakistan: An empirical investigation. Energy Policy 2011; 39: 1857-1864.
Narayan, P.K. 2004. Reformulating critical values for the bounds F-statistics approach to cointegration: anapplication to the tourism demand model for Fiji. Department of Economics Discussion Papers no.02/04. Monash University, Melbourne, Australia.
Ozturk, I., Acaravci, A. CO2 emissions, energy consumption and economic growth in Turkey. Renewable and Sustainable Energy Reviews 2010; 14: 3220-3225.
Pesaran, MH., Y Shin, RJ Smith (2001), Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics 16 (3), 289-326
Pesaran, M.H., Shin, Y., 1998. Generalized impulse response analysis in linear multivariate models. Economics Letters 58, 17–29.
Panayotou, T., 1997. Demystifying the environmental Kuznets curve: turning a black box into a policy tool. Environment and Development Economics 2 (4), 465–484.
Panayotou, T., 1993. Empirical Tests and Policy Analysis of Environmental Degradation at Different Stages of Economic Development.
Ricci, F., 2007. Channels of transmission of environmental policy to economic growth: a survey of the theory. Ecological Economics 60, 688–699.
Richmond A.K., and Robert K. Kaufmann, 2006. "Energy Prices and Turning Points: The Relationship between Income and Energy Use/Carbon Emissions," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 157-180.
Roberts, J.T., Grimes, P.E., 1997. Carbon intensity and economic development 1962–
1991: a brief exploration of the environmental Kuznets curve. World Development 25, 191–198.
Rothman, D.S., de Bruyn, S.M., 1998. Probing into the environmental Kuznets curve hypothesis. Ecological Economics 25, 143–145.
Roca, J., 2003. Do individual preferences explain Environmental Kuznets Curve?
Ecological Economics 45 (1), 3–10.
Runge, C. F. 1994. Freer trade, protected environment: balancing trade liberalization with environmental interests. Council on Foreign Relations Books.
Sari, R., Soytas, U., 2004. Disaggregate energy consumption, employment, and income in Turkey. Energy Economics 26, 335–344.
Shafik, N., 1994. Economic development and environmental quality: an econometric analysis. Oxford Economic Papers 46, 757–773.
Siddiqui, R., 2004, Energy and Economic Growth, Pakistan Development Review, (Summer) v. 43, # 2, pp: 175-200.
Soytas, U., Sari, R., 2003. Energy consumption and GDP: causality relationship in G-7 countries and emerging markets. Energy Economics 25, 33–37.
Soytas, U., Sari, R., 2006. Energy consumption and income in G-7 countries. Journal of Policy Modeling 28 (7), 739–750.
Soytas, U., Sari, R., Ewing, B.T., 2007. Energy consumption, income, and carbon emissions in the United States. Ecological Economics 62, 482–489.
Stern, D.I., 1993. Energy use and economic growth in the USA: a multivariate approach.
Energy Economics 15, 137–150.
Stern, D.I., 2000. A multivariate cointegration analysis of the role of energy in the US macro-economy. Energy Economics 22, 267–283.
Stern, D.I., 2004. The rise and fall of the environmental Kuznets curve. World Development 32, 1419–1439.
Schmalensee, R., Stoker, T. M and Judson, R. A., World carbon dioxide emissions: 1950-2050. The Review of Economics and Statistics 1998; 80: 15-27.
Selden, T. M. and Song, D., 1994. Environmental quality and development: Is there a Kuznets curve for air pollution? Journal of Environmental Economics and Environmental Management, 27: 147-162.
Shafik, N., Bandyopadhyay, S., 1992. Economic Growth and Environmental Quality:
Time Series and Cross-Country Evidence. Background Paper for the World Development Report. The World Bank, Washington, DC.
Shafik, N., 1994. Economic Development and Environmental Quality: An Econo- metric Analysis, 46. Oxford Economic Papers 757–773.
Shukla, V., Parikh, K., 1992. The environmental consequences of urban growth: Cross-national perspectives on economic development, air pollution, and city size. Urban Geography 12, 422–449.
Selden, T., Song, D., 1995. Neoclassical growth, the J curve for abatement, and the inverted U curve for pollution. Journal of Environmental Economics and Management 29, 162–168.
Stern, D.I., 1993. Energy and economic growth in the USA. A multivariate approach.
Energy Economics 15, 137–150.
Stern, D.I., 2000. A multivariate cointegration analysis of the role of energy in the US macroeconomy. Energy Economics 22, 267–283.
Stern, D.I., Common, M.S., 2001. Is there an environmental Kuznets curve for sulphur?
Journal of Environmental Economics and Management 41, 162–178.
Suri, V., Chapman, D., 1998. Economic growth, trade and the environment: Implications for the environmental Kuznets curve. Ecological Economics 25, 195–208.
Tucker, M., 1995. Carbon dioxide emissions and global GDP. Ecological Economics 15, 215–223.
Vincent, J.R., 1997. Testing for environmental Kuznets curves within a developing country. Environment and Development Economics 2 (4), 417–431.
Working Paper WP238, Technology and Employment Programme, International Labour Office, Geneva.
Xepapadeas, A., 2005. Economic growth and the environment. In: Mäler, K.-G., Vincent, J.R. (Eds.), Handbook of Environmental Economics, vol. 3, pp. 1219–1271.
Yang, H.Y., 2000. A note on the causal relationship between energy and GDP in Taiwan.
Energy Economics 22, 309–317.
Yu, E.S.H., Hwang, B.K., 1984. The relationship between energy and GNP: further results. Energy Economics 6, 186–190.
Yu, E.S.H., Jin, J.C., 1992. Cointegration tests of energy consumption, income, and employment. Resources and Energy 14, 259–266.
Annexure