Electricity conservation policies and sectorial output in Pakistan: An empirical analysis

Government of Pakistan has taken several measures in recent years for conserving electricity to reduce its electricity shortfall. In this context, this study attempts to quantify the impact of different electricity conservation policies on value-added of industrial and services sectors in Pakistan. Results indicate that unanticipated shocks to electricity consumption and technical efficiency form a positive relationship while electricity price has a negative relationship with value-added in industrial and services sectors in the long run. Direct electricity conservation policies and policies that aim at increasing electricity prices will have an adverse impact on value-added of both the sectors. Policies that induce improvements in energy efficiency will have a positive impact on the sectorial output in the long run. Therefore, the government should not pursue direct consumption curtailment polices to mitigate the electricity crisis rather steps should be taken to enhance energy efficiency in the economy. This can be done by setting targets for reducing energy intensity in both the sectors. Moreover, energy efficiency should be incorporated in the mainstream of energy policy and specific laws should be enacted to establish institutions and develop methods to help in effective conservation and efficient consumption of limited energy resources.