Free Trade Agreements and Environmental Nexus in Pakistan

Abstract

This study attempts to examine the relationship between Free Trade Agreements (FTAs) and Carbon Dioxide (CO2) emissions in Pakistan. Panel unit root, panel co-integration, and Fully Modified OLS (FMOLS) estimators were employed to investigate the existence of long-run relationship between Gross Domestic Product (GDP), Trade openness (TO) and energy consumption (EC) with CO2 emissions in Pakistan from 1980 to 2014. The results show that GDP per capita have a significant positive effect on CO2 emissions. This implies that an increase in GDP per capita increases CO2 emissions and show a scale effect. The results also indicate the existence of long run positive relationship of energy consumption on carbon emission and negative relationship with trade openness and FTA. This research is helpful for policy makers to eliminate the negative impact by adopting appropriate policy instruments and promote Pakistan's trade in the international market.