Putrefaction Analysis of Environmental Impacts of Trade in Pakistan : Scale, Composition, and Technique Effects

In this study, the dynamic nexus between environmental pollutants and trade openness has been analyzed. The impact of economic growth, energy consumption, foreign trade, and institutional quality on carbon dioxide (CO2), nitrous oxide (N2O), and greenhouse gasses (GHGs) emissions has been examined using time series data for Pakistan over the period 1970-2013. The integration properties of the variables have been investigated using ADF, PP, and DF-GLS unit root tests. Autoregressive-Distributed Lag (ARDL) Bounds testing approach to co-integration is used for short-run and long-run associations among the series. We find the substantiation of Environmental Kuznets Curve (EKC) hypothesis in the long-run, in case of CO2 emissions. In case of CO2 emissions, the composition and technique effects are found to have beneficial impact while the scale, trade, and energy consumption have devastating environmental effect. Trade openness has adverse effect on the environment through N2O emissions. The study suggests that energy efficiency should be improved across all sectors by introducing technically improved and green technologies