Carbon Dioxide Emissions Reduction Efficiency and Growth Potential (A Case of Pakistan and China)

The current study undertakes an empirical investigation aiming to find out how ecological, economic and environmental factors, such as energy consumption, GDP growth rate, and ecological footprint per person, influence CO2 emission in the CPEC region. The study relies on the panel data series for Pakistan and China over the period of 1980-2030, because the year 2030 is the most probable time of the CPEC project completion. The forecasted values of the respective factors with possible influence of CPEC projects assisted the authors in gaining a clearer picture of their interrelationship. According to regression results, energy consumption and production have been significant positive determinants of CO2 emission, while energy intensity has had a considerable negative impact on this emission. Among economic factors, the dynamics of GDP, GPI, per capita income, HDI, unemployment rate, and GINI coefficient are found to have made a positive impact on CO2 emission; as to GDP growth, the regression unexpectedly showed its insignificant negative impact. Among ecological factors, the expenditures on environmental protection appear to be negative determinants of CO2 emission, while environmental footprint and costs of elimination of natural disasters positively impact the CO2 emission. The mediation analysis showed that the population growth would be the key factor of influence on CO2 emission. It is therefore recommended that, being a developing economy, Pakistan should reconsider its strategies towards CPEC projects, especially those involving coal energy production which may accelerate the CO2 emission in the country and lead to additional costs in terms of natural hazards and climate change.