Energy Consumption and Greening: Strategic Directions for Pakistan

Abstract

We compare Pakistan's energy consumption structures to selected East Asian economies with a view towards ensuring an adequate supply of power for economic catch-up and, at the same time, meeting the greening goals envisioned by the United Nations Framework Convention for Climate Change. The evidence shows that Pakistan relies significantly less on non-renewable energy to meet its energy demands compared to China, Japan, South Korea, Malaysia, and Thailand, while its dependence on fossil fuels has been rising rapidly. Using data for Pakistan from 1960 to 2015, we deployed panel co-integration and Granger causality tests to analyse selected East and Southeast Asian countries before exploring what it will take for Pakistan to develop its renewable energy (RE) sector. The evidence shows that catching up economically with these countries through rapid GDP per capita growth will exacerbate Pakistan’s current energy imbalance, thereby aggravating greenhouse gas (GHG) and carbon dioxide (CO2) emissions. We argue that Pakistan enjoys strong endowments to avert this problem, and hence, it should strategically focus on the development of RE resources, especially solar and wind energy, but only after taking account the relevant costs.