Nuclear Energy, Industrial Development, and Economic Growth: Asymmetric Effects on Carbon Emissions in South Asia

Abstract

The South Asian economies face a two-fold challenge of achieving economic growth and reducing carbon emissions. In this regard, nuclear power has become a potential source of low-carbon energy, but its environmental impact remains controversial. The paper examines the asymmetric effects of nuclear energy, economic growth, and industrial value added on carbon emissions in the nuclear-active South Asian countries using annual data from 1990 to 2024. The panel nonlinear autoregressive distributed lag (NARDL) model is applied to the analysis to capture long-run and short-run asymmetric relationships. Additional diagnostic tests are used to verify that the results are not misleading, including stationarity, causality, and cointegration tests, including panel ARDL estimation, bounds testing, PMG cointegration testing, CUSUM stability tests, and others. The results confirm a long-run stable relationship between the carbon emissions, nuclear energy, economic growth, and industrial value added. The carbon emissions during the positive and negative shocks are seen to increase faster as the economy grows, indicating that the economy is still clinging to fossil-fuel-powered growth. In contrast, the industrial value added reduces the emissions in the long run, which presupposes the role of cleaner production and technological progress. The findings also reveal that nuclear energy has large asymmetric effects: an increase in nuclear energy leads to a decrease in emissions, whereas a shock in nuclear energy leads to an increase in emissions. Overall, the study concludes that nuclear energy can become a potentially efficient source of long-term decarbonization in South Asia if it is accompanied by modernizing the industry and by adherence to policy. The study recommends greater investment in nuclear energy, transitioning industrial processes to low-carbon, and regional energy cooperation to encourage cleaner development in the region.