UNRAVELLING THE NEXUS OF ENERGY CONSUMPTION, FOREIGN DIRECT INVESTMENT, AND NATURAL RESOURCES RENT WITH ENVIRONMENTAL DEGRADATION AND ECONOMIC GROWTH

Abstract

This study examines the relationship between economic growth, foreign direct investment, energy consumption (both renewable and non-renewable), total natural resource rent, and environmental degradation in the context of Pakistan from 1970 to 2023. Using the Auto Regressive Distributed Lag Model, findings confirm the Environmental Kuznets Curve hypothesis, indicating that economic growth initially worsens environmental degradation but later improves environmental quality. Foreign direct investment significantly contributes to CO2 emissions, whereas renewable  energy consumption and natural resource rent have a mitigating effect. The research provides critical policy recommendations for balancing economic progress with environmental sustainability. The study highlights the necessity of policy measures promoting renewable energy. The study emphasizes the need for sustainable policies, including regulating environmentally harmful foreign direct investment and implementing stringent environmental laws. Furthermore, adopting cleaner technologies and efficient resource management can help achieve economic growth while mitigating environmental degradation.