Heliyon (Nov 2023)
Does the causality between environmental sustainability, non-renewable energy consumption, geopolitical risks, and trade liberalization matter for Pakistan? Evidence from VECM analysis
Abstract
Geopolitical threats have increased dramatically globally in recent years, adversely affecting the environment tremendously. On the other hand, there is a growing gap between the use of non-renewable energy, trade liberalization, and environmental sustainability. Due to this, the current work simulates the links between geopolitical threats, non-renewable energy use, trade liberalization, and environmental sustainability using a vector error correction model (VECM) and Granger causality test. The analysis includes data spanning from 1980 to 2021. Research outcomes indicated that geopolitical risks (GPR), Non-renewable energy consumption (NRE), Natural Resource (NR) and industrialization (IND) have a negative and statistically significant influence i.e., 0.234, 0.052, 0.028, and 0.070 units respectively on environmental sustainability (ES) while natural resource (NR) have also negative but insignificant impact on environmental sustainability. Alongside, trade liberalization (TR) and urbanization (UB) posed a positive and statistically significant influence i.e., 0.040 and 0.437 units respectively on ES. Further, causality analysis validates the feedback effect among GPR, NRE, TR, and ES. GPR, NRE, and TR granger cause environmental sustainability. The government can prepare for potential environmental disasters such as floods, droughts, and earthquakes by investing in early warning systems, emergency response teams, and disaster relief supplies. This can help mitigate the impact of geopolitical risks that can result in natural disasters. Pakistan should prioritize investing large resources in diplomatic endeavours to improve regional dynamics and ties with neighboring nations. Pakistan should place a high emphasis on developing methods targeted at reducing its non-renewable energy use to mitigate the negative effects. This might entail offering financial incentives, implementing efficient feed-in tariff schemes, and developing a thorough strategy for boosting the capacity of renewable energy sources.
