The nexus between carbon emission, economic growth, and energy transition in nepal: An empirical investigation of decarbonization pathways

• No EKC turning point found; Nepal’s income level is still low for emissions decline. • Biofuels in Nepal emit CO₂ due to traditional use and incomplete combustion. • Fossil fuel and biofuel increase emissions; renewables and electricity reduce them. • Policy should boost renewables, carbon pricing, and energy efficiency incentives. • Sustainable urban development and public transport needed to curb population emissions. Although extensive studies have explored the links between economic growth, energy use, and carbon emissions, limited research has examined how the distinct energy mix and socioeconomic context of Nepal shape these relationships. Existing studies rarely disaggregate fossil fuels, biofuels, and electricity in Nepal's context, overlooking their differential impacts on emissions. This study addresses these gaps by empirically testing the EKC hypothesis and assessing the relationship between energy transition and carbon emissions using time series data from 1990 to 2022. The autoregressive distributed lag (ARDL) bound testing approach is applied to analyse short-run and long-run dynamics. The empirical findings of this study suggest that while an inverted U-shaped relationship between economic growth and carbon emission is observed in some countries, such a relationship does not exist in Nepal, likely due to the low-income level and energy mix. Unlike many other countries, biofuels are not entirely a clean alternative in Nepal, as their traditional use and incomplete combustion still contribute significantly to CO₂ emissions, which is further compounded by limited access to cleaner technologies. In the long run, CO₂ emissions are positively influenced by fossil fuel consumption (2.26%) and biofuel consumption (1.08%). In comparison, a negative coefficient of electricity consumption (0.986%) highlights the need for a renewable energy transition to ensure sustainable development. Based on these results, policymakers are encouraged to expand renewable energy infrastructure, integrate clean electricity with sustainable urban development, and ensure inclusive access to low-carbon energy, thereby supporting Nepal's sustainable and equitable energy transition.