Decomposing factors affecting CO2 emissions in Pakistan: insights from LMDI decomposition approach

Carbon emissions have turned out to be one of the key alarming and complex issues which drive a long-lasting debate over climate change. The increasing trend in the usage of fossil fuels for the curse of economic development and at the same time reducing carbon emissions has become a significant phenomenon worldwide. In this study, we evaluate carbon emissions (CO2) during 1972-2016 by employing logarithmic mean Divisia index (LMDI) method. The results from decomposition using LMDI method indicate that the economic development factor is the main driving force for the increase of per capita carbon emissions in the country; the energy structure and energy efficiency are the restraining factor for per capita carbon emissions. Therefore, Pakistan should continue to upgrade energy structure from traditional sources to renewable energy sources to curb the increase of carbon emissions, and also, improve the efficiency of energy use and save energy to cope with environmental challenges. Finally, the study concludes with some policy suggestions.