Gas- and Coal-based Power Generation to Spur Economic Growth in Pakistan?

Abstract

Energy consumption—in all its forms (traditional, transitional, and modern)—is the lifeline of an economy as well as of a society. Electrical energy (power) is the modern form of energy that is produced from hydel, thermal, nuclear, and other sources. Gas, oil, and coal are the thermal sources of electricity generation. Literature has validated the coal and natural gas consumption-led growth hypothesis for Pakistan. Based on time series data taken for the period 1987-2019, the present study attempts to explore the economic growth implications of oil-, gas-, and coal-consumption in power sector in Pakistan. The data was obtained from World Development Indicators (WDI) and from the Pakistan Economic Survey (PES). Three econometric models were specified to check the short-run and long-run effects of energy consumption (in the form of oil, gas and coal) in power sector on economic growth. Auto-regressive Distributed Lag Model (ARDL) was used for empirical analysis. The results show that the consumption of gas and coal in the power sector have a positive and statistically significant effects on the economic growth of Pakistan. The study advocates for more reliance on gas and coal in power generation as compared to oil for economic growth in Pakistan.