Energy–Economy–Carbon Emissions: Impacts of Energy Infrastructure Investments in Pakistan Under the China–Pakistan Economic Corridor

Energy–economy–environment sustainability is critical in shaping energy policies, especially in developing countries facing energy shortages. Investment in energy infrastructure, such as under the China–Pakistan Economic Corridor (CPEC), provides an opportunity to explore how such investments impact economic growth, environmental quality, and energy security. This study examines the energy, economic, and environmental effects of CPEC’s energy investments in Pakistan, covering a range of power sources, including coal, hydro, solar, wind, and nuclear energy. Utilizing data from 31 CPEC energy projects and employing the GTAP-E-Power model, this research assesses these impacts through seven scenarios, comprehensively analyzing the heterogeneity of different power sources. Our findings reveal that while all types of CPEC energy infrastructure investments contribute to increasing the share of zero-emissions electricity to 49.1% and reducing CO2 emissions by 18.61 million tons, the economic impacts vary significantly by energy source. The study suggests that it is crucial to prioritize renewable energy investments while addressing immediate power shortages to balance economic growth with environmental sustainability. Policymakers should also consider the potential inter-sectoral substitution effects when applying significant shocks to specific sectors. This analysis informs future energy investment decisions under CPEC and offers insights for other Belt and Road Initiative (BRI) countries aiming to optimize their energy strategies for sustainable development.