A SYSTEM DYNAMICS SIMULATION OF ENERGY CONSUMPTION AND CO₂ EMISSIONS IN PAKISTAN UNDER ENERGY-INTENSITY REDUCTION SCENARIOS

Abstract

This study investigates long-run association among economic growth, energy consumption, and CO₂ emissions, by employing a system dynamics model, via use of energy-intensity reduction policies under different scenarios. The study focused on an energy-deficient developing country, with its energy system characterized by a heavy dependence on fossil fuels, ever rising energy demand, and persistent inefficiencies, and subsequent high greenhouse gas emissions. The model is estimated for a period of 1995 to 2025 and runs through to forecast emissions up to 2040, by using the economic growth rate (i.e. annual figures for GDP), total energy consumption and CO₂ emissions. It is worth mentioning that the system dynamics approach explicitly incorporates feedback processes, stock–flow structures, and time delays, which are either missing or insufficiently represented in traditional econometric methods. Furthermore, we find a strong correspondence between simulated and observed trends for energy consumption and emissions. Moreover, we undertake scenario based analysis to evaluate effects of different pathways for reducing energy intensity. We further find that CO₂ emissions are experiencing a rapid growth and can potentially reach a level of 278 million tons by 2040. Conversely, we observed that sustained improvements in energy intensity offer considerable mitigation and co-benefits. Our findings show, an estimated 5 percent annual improvement in energy intensity can drastically reduce emissions, with projected reduction of around 22.6 and percent 53. 7 percent by 2030 and 2040, respectively, in comparison to the baseline emissions, We also forecast with more ambitious targets, i.e. 10 percent improvement, can reduce emissions by 41.0 percent and almost 79.4 percent, respectively. We can safely assume that energy efficiency enhancements have the potential to substantially decouple the economic growth from carbon emissions. Our study presents energy-intensity reduction as a key policy instrument for delivering long-run environmental sustainability, without compromising economic growth, and it offers a dynamic analytical framework for assessing prospective energy and climate policies in developing countries.