This study examined the impact of reduction in energy poverty on environment. Energy poverty is defined in several ways. For example, percentage of household expenditure on energy use or alternatively in terms of access to clean energy products and services such as electricity, natural gas and LPG etc. Pakistan Social and Living Standard Measurement (PSLM) data for 2013-14 is utilized to compute Multidimensional Energy Poverty Index. The index, based on data for different fuels heating, lightening and cooking, is computed to assess incidence of energy poverty. The list of fuel includes firewood, coal, kerosene oil, Gas (Cylinder), Gas (Pipeline), electricity from regular distribution system of WAPDA and from Generators. Multidimensional Energy Poverty Index (MEPI) is showing that 69.67 percent households are deprived of clean fuel for cooking and 47.11 percent are deprived of clean fuel for heating. However, for lighting only 9.04 percent households do not have access to clean source. The results show that per capita income is the major determinant of demand for firewood, coal, kerosene oil, electricity, gas and generator. Findings show that as households move from low income to high income group per capita consumption for firewood, coal and kerosene oil reduces, while per capita consumption for Gas (Cylinder), Gas (Pipeline) and electricity increases. Income is positively related with consumption of clean energy sources. Income is negatively related with consumption of firewood, coal and kerosene oil. Furthermore, study finds that CO2emission can be reduced significantly through improving access (Access through subsidization, regulation and increasing supply) of low income group to the energy mix of high income group. If highest income group‟s energy mix is available to poor, for cooking and heating purposes, the emission will decline to 755.869 metric ton (per month) from current emission of 2039.520 metric ton (Per month). Per household emission will also decline by 44.69 kgCo/kwh if highest income group energy mix is available to all households. Supervisor:- Dr. Rehana Siddiqui