Relationship between CO2 emissions, tourism receipt, energy use and international trade in Pakistan

The current study explores the potential impact of economic growth, tourism receipt, energy consumption and trade openness on CO2 in Pakistan over the period of 1980-2017. The study adopted the Autoregressive Distributed Lagged (ARDL) model to investigate the short and long-run estimates simultaneously. The study further applied Granger causality to find out the direction of causalities. To arrive at long-run robust estimates, the study employed the Dynamic Ordinary Least Squares (DOLS) model. Last but not least, the current study also used an innovative accounting approach i.e. Variance decomposition and Impulse production function. The results found that economic growth has a significant impact on CO2 emission and negative and highly significant impact on tourism receipt while emission, energy consumption and international trade are also the main determinants of tourism in Pakistan. The study found unidirectional causality from GDP, tourism receipt, energy consumption and trade openness towards CO2 emission. The outcomes of ARDL model are also supported by the DOLS results. The innovative accounting approach further strengthens the results of the study. In a nutshell, overall results indicate that tourist receipts, CO2 emission, energy consumption, and trade openness are interlinked. The findings of the current study thus suggest that the government should encourage investment in the industry\u27s services sector to enhance its efficiency. In addition, it will also need to ensure that the services sector contributes far more to the GDP than to the manufacturing sector. The results demonstrate investments should be diverted towards the services sector on a broader range as less-polluting services industries (tourism as one of the main sectors) are more feasible than polluting capital industries to invest in