Cleaner production of Pakistan’s chemical industry: Perspectives of energy conservation and emissions reduction

The chemical industry is one of the highest energy-consuming and CO2 (carbon dioxide) emitting sectors in Pakistan. It is important to understand and identify ways to improve the sustainability features of the input factors. This research has attempted to examine the potential of input factors (capital, labor and energy consumption), output elasticities, and substitution elasticities in Pakistan’s chemical sector by using a translog production function. The ridge regression technique was applied to investigate the parameters of the function during 1980–2018. The results show that the output elasticities between capital, labor and energy consumption are positive; the elasticities of substitution between capital-energy, capital-labor and labor-energy consumption are close to 1, stable, and positive, which shows that these indicators are substitutes for one another. Moreover, based on the analyzed methodology, we estimate the level of energy conservation and CO2 emission reduction in 2018. Policy suggestions related to the given outcomes are presented below. •Potential for inter-fuel substitution in Pakistan chemical sector is investigated.•Trans-log production function is proven to comprise capital, labor and energy use.•The output elasticities between capital, labor and energy consumption are positive.•Elasticities of substitution between K-E, K-L and L-E are close to 1 and stable.•CO2 emissions would reduce by 17.51 Mt during the scenario at maximum energy use.