Energy Transition and Climate Change Dynamics in Pakistan: Implications for Sustainable Economic Growth

Abstract

This paper analyzes the long-term and short-term impacts of economic complexity, climate susceptibility, information and technology, and labor standards on carbon dioxide (CO2) emissions of some of the Asian economies, i.e. Pakistan, in the case of 1990-2023. Asia is also a booming growth engine in the world, but the region is very susceptible to climate change and the increased emissions are a menace to sustainable development. Current research mainly focuses on energy-based or financial factors on emissions without focusing on the contribution of structural production facilities, resistance to climate, digitalization, and human capital. This research uses the Cross-Sectionally Augmented Autoregressive Distributed Lag (CS-ARDL) approach to take into consideration cross-sectional dependence, slope heterogeneity, and mixed integration orders. The empirical results indicate that the economic complexities positively lower the CO2 emissions in the long-run showing that the economies with high levels of structural sophistication embrace cleaner and efficient production technologies. The process of digitalization also involves the improvement of the environment by improving productivity and minimizing carbon-dense processes. Conversely, climate vulnerability is observed to amplify emissions, which depict low adaptive ability and increased environmental pressure in vulnerable economies. In addition, the quality of labor is a decisive moderating factor, since human capital, being highly skilled, will enable the adoption of technology and other sustainable environmental practices. Short-run outcomes reveal that different countries exhibit different adjustment mechanisms in the short run, which point to structural variations among Asian economies. These results demonstrate that industrial upgrading, climate resiliency, digital infrastructure, and human capital development are essential in long-term environmental sustainability. Climate adaptation policy together with digital and human capital policies should be incorporated by policymakers, especially in developing nations like Pakistan, to assist in pursuing a low-carbon development trajectory.

Keywords: Economic Complexity; Climate Vulnerability; Digitalization; Labor Quality; Carbon Emissions; CS-ARDL.