Abstract
Any change in US economic policies will have a big effect on international markets due to the size of the US economy. Therefore, this study's goal is to look at how Pakistan's CO2 emissions are impacted by the U.S. interest rate. The study uses the ARDL testing approach over the period 1985-2014. The results suggested that policymakers should pay more attention to environmental pollution by supporting investment and projects in renewable resources with low interest-rate. The findings suggest that to respond to any external shocks policymakers should keep promoting investments in low- CO2 emission technologies. This study findings further evidence that the U.S interest rate may affect the increase in environmental pollution in emerging countries like Pakistan through energy consumption, economic growth, and local interest rate channels.