Abstract:
The traditional literature has explored various factors including, but not limited to, trade openness, financial development, energy consumption, foreign direct investment, globalization, and per capita income that significantly contribute to carbon emissions. However, the current study identifies aggregate domestic consumption spending as a novel driver of carbon dioxide, employing the data for the period of 1973-2018 in Pakistan. To this end, we develop the theoretical framework to illustrate the link between aggregate domestic consumption spending and carbon dioxide emissions and deploy autoregressive distributed lag (ARDL), asymmetric ARDL, and the threshold non-linear ARDL (NARDL) techniques. The results of the ARDL method suggest that only in the short run, aggregate domestic consumption spending significantly affects carbon dioxide emissions. Furthermore, the findings of the NARDL approach reveal that the positive and negative shocks significantly deteriorate and ameliorate the environmental quality by increasing and decreasing the pollution, respectively, in the short and long run. Even though the outcome of the threshold NARDL technique supports the results of the aforementioned approaches, the novelty of the current study is to find out the threshold in aggregate domestic consumption spending, which carries a significant role in determining the carbon emissions in both periods. Besides, we infer that fossil fuels energy and trade openness also degrade the Pakistani climate by boosting atmospheric pollution. Additionally, the application of the asymmetric Granger causality test validates the results by asserting the casual relationship between aggregate domestic consumption spending and carbon dioxide emissions. Based on the results, we suggest the authorities to start to promote the deployment of green products publicly to obtain green and sustainable development.
