Path Dependence in Energy System and Ecological Footprint in Pakistan: Evidence from Time Series Data

Abstract

Path dependence refers to the consumption of fossil fuels in energy production system. This study empirically examines the effect of path dependence in energy systems on ecological footprint of Pakistan from 1981-2014. Unit root test determines the integrated order of variables, while Auto-Regressive Distributed Lag model investigates the existence of a long-run association between variables. The negative and significant speed of adjustment coefficient ensures the adjustment of the model used in long run after unexpected shocks. Fossil fuel consumption significantly increases ecological footprint in Pakistan. If fossil fuel consumption increases by 1 percent, ecological footprint rises by 2.07 percent. Increase in biocapacity increases ecological footprint by 1.1 percent. Urbanization and population density significantly decrease ecological footprint as 1 percent increase in population density decreases ecological footprint by 0.96 percent and one percent rise in urbanization reduces ecological footprint by 3.28 percent. Foreign direct investment does not show any significant association with the ecological footprint. Standard diagnostic tests support the empirical results of the study and confirm that no heteroscedasticity and serial correlation exists. The policy implication is to implement measures to diminish the usage of fossil fuels in energy systems and increased usage of alternative and renewable energy sources. This can abate the burden on environment and biocapacity of Pakistan making it feasible to reduce ecological footprint levels in Pakistan.