URBANIZATION AS A TRANSMISSION CHANNEL IN THE ELECTRICITY GROWTH AND ENVIRONMENT NEXUS: A TIME-SERIES EVIDENCE FROM PAKISTAN

Abstract

This paper focuses on the dynamic connection between the economic growth, electricity consumption, urbanization and environmental degradation in Pakistan with a focus on urbanization as a channel of transmission in the electricity-growth-environment nexus. The bounds testing method, Autoregressive Distributed Lag (ARDL), is used to investigate the equilibrium relationship in the long run and short-run corrections using annual time-series data between 1990 and 2024. The CO 2 emissions are used as a proxy of environmental degradation, and the urban population is used as a proxy of urbanization. The empirical findings show that there is a long-run cointegrating relationship between the variables. The use of electricity as a source of energy plays a major role in improving the growth of the economy but also contributes to the destruction of the environment. Notably, urbanization enhances the mechanism of transmission that ensures the impact of electricity consumption on environmental quality by augmenting the energy demand that is related to urban growth, industrialization, and development of infrastructure. The short-term dynamics show interrelationship of electricity consumption and economic growth as well as the reinforcing effect of urbanization on the emission. The results are partial as they support the Environmental Kuznets Curve hypothesis and highlight the importance of combining sustainable urban planning and clean energy policies to reduce the environmental pressures and preserve the economic growth in Pakistan.