The nexus between environmental degradation and industrial development in Pakistan and roles of financial development and fossil fuel

The swift escalation in the emission of greenhouse gases (GHG) has gained universal concern and on the global scale it has gotten the attention of research scholars and policy advisers. The use of fossil fuel in industrial and domestic activities has been labeled as a key cause for the production of GHG in the environment; in the meantime, researches focusing on the impact of fossil fuel on the emission of GHG for developing countries like Pakistan are very rare. The current study applied auto regressive distributed lag model techniques with structural breaks co‐integration technique for investigating the validity of a dynamic link among CO2 and industrial development and capturing the impact of fossil fuel consumption and economic development on Carbon emission. All variables have been discovered to be co‐integrated and the long‐term and short‐term dynamics have indicated the validity of inverted U‐shaped of the Environmental Kuznets Curve hypothesis where there has been inverted U‐shaped association among industrial development and CO2 which had also been established by Lind and Mehlum test. The Granger causality indicated unidirectional causality running from fossil fuel to CO2, and bidirectional causalities link between industrial growth and fossil oil and financial development and fossil fuel. For policy drives, current study advises for the use of low carbon emission, green and efficient technologies.