Energy capacity, industrial production, and the environment: an empirical analysis from Pakistan

This paper aims to find out relationships among the energy, environment, and the industrial production for a developing country which is in earlier stages of development. It also tests a few contradicting hypotheses to find the possible shape of an environmental Kuznets curve. Using the time series data, the study finds robust long-run relationships between energy, environment, and industrial production for Pakistan. The scale economy is also assumed. It is also found that the capital and labor elasticities of income show increasing returns in the presence of energy and emission variables. It finds evidence of EKC in a quadratic restricted model but not in a cubic function. This analysis implies that the focus of policy authorities should be to persuade environment-friendly energy resources. After an initial stage of economic development, society has to take serious measure to tackle the issues of environmental degradation.