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.