Testing the agriculture-induced EKC hypothesis: the case of Pakistan

Abstract

This study investigates the long-run equilibrium relationship among carbon dioxide (CO2) emissions, income growth, energy consumption, and agriculture, thus testing the existence of what we call the agriculture-induced environmental Kuznets' curve (EKC) hypothesis in the case of Pakistan for the period of 1971-2014. The long-run equilibrium relationship among the variables in the conducted model is confirmed by Maki's (EM 29(5), 2011-2015, 2012) co-integration test under multiple structural breaks. Toda-Yamamoto's (JE 66(1):225-250, 1995) causality test results reveal bidirectional causal relationships among gross domestic product (GDP), energy use, agriculture, and CO2 emissions. Fully modified ordinary least squares (FMOLS) results suggest that GDP has elastic positive impacts on CO2 emissions, and energy use and agricultural value added have inelastic positive impacts on CO2 emissions, whereas squared GDP has an inelastic and negative effect on CO2 emissions. This finding confirms the existence of the agriculture-induced EKC hypothesis in Pakistan and can be a guideline for other agrarian developing countries for the creation of effective policies around environmental degradation.