Renewable Energy Transition in Pakistan: The Roles of Economic Growth, Trade Openness, Industrialization, Inflation and Governance Quality

Abstract

This research study examines renewable energy output determinants by focusing on economic growth, trade openness, industrial value added, inflation, and government effectiveness in Pakistan by using 35 years of data from 1990 to 2024. Using the Autoregressive Distributed Lag (ARDL) model, the study finds R² = 0.948 showing strong explanatory power. ARDL finds here short and long-run dynamics with mixed orders of integration among the variables. Results showed that economic growth and government effectiveness both had positive influence on renewable energy output. Trade openness facilitates technology transfer and investment. Inflation negatively affects renewable energy output as increase in price discourages the adoption. Industrial value added shows a mixed impact due to more reliance on fossil fuels. The research study also confirms model robustness by diagnostic and stability tests. The policy recommendations put focus on the importance of macroeconomic stability, trade liberalization, and effective governance in accelerating Pakistan’s renewable energy transition.