Skip to main content

Advertisement

SpringerLink
Log in

Modeling Causal Interactions Between Energy Investment, Pollutant Emissions, and Economic Growth: China Study

Biophysical Economics and Sustainability Aims and scope Submit manuscript

Abstract

This study is an empirical investigation of dynamic causal interactions among energy investment, pollutant emissions, and economic growth in China. Three simultaneous equation models have been estimated by employing ‘one-step system’ as well as ‘one-step difference’ generalized method of moments (GMM) estimator for 30 Chinese provinces from 2005 to 2014. This study contributes by developing a hybrid model of economic growth to incorporate energy investment and pollutant emissions. First, the empirical investigation found bilateral positive causal relationship between energy investment and economic growth. Second, bilateral causality between energy investment and economic growth is found to be existent. Third, bilateral causality has been found between pollutant emissions and energy investment. The results are consistent across all the four study samples. Based on empirics, following implications are extracted, among others. The negative bidirectional causal linkage between energy investment and pollutant emissions implicated that investment in fuel-based energy directed to improve the quality of fuels and energy industry technology is likely to curb pollutant emissions. In turn, high level of pollutant emissions may stimulate policies to reduce investment in fuel-based energy industry. Finally, the positive bidirectional causal linkage between energy investment and economic growth implied that energy investment and economic growth tend to promote each other in China. The prominence of this relationship in eastern economic zone further suggested that energy investment is likely to become strongest driver of economic growth and vice versa in this region, which is followed by intermediate economic zone and western economic zone.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price includes VAT (France)

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1

Source Authors’ own drawing

Fig. 2

References

  • Ahmad M, Zhao ZY (2018a) Empirics on linkages among industrialization, urbanization, energy consumption, CO2 emissions and economic growth: a heterogeneous panel study of China. Environ Sci Pollut Res 25:30617–30632. https://doi.org/10.1007/s11356-018-3054-3

    Article  Google Scholar 

  • Ahmad M, Zhao Z-Y (2018b) Causal linkages between energy investment and economic growth: a panel data modelling analysis of China. Energy Sources B 13(8):363–374. https://doi.org/10.1080/15567249.2018.1495278

    Article  Google Scholar 

  • Ahmad M, Zhao ZY, Li H (2019a) Revealing stylized empirical interactions among construction sector, urbanization, energy consumption, economic growth and CO2 emissions in China. Sci Total Environ 657:1085–1098

    Google Scholar 

  • Ahmad M, Zhao ZY, Irfan M, Mukeshimana MC (2019b) Empirics on influencing mechanisms among energy, finance, trade, environment, and economic growth: a heterogeneous dynamic panel data analysis of China. Environ Sci Pollut Res. https://doi.org/10.1007/s11356-019-04673-6

    Article  Google Scholar 

  • Arellano M, Bond S (1991) Some tests of specification for panel data: monte Carlo evidence and an application to employment equations. Rev Econ Stud 58(2):277–297

    MATH  Google Scholar 

  • Aye GC, Edoja PE (2017) Effect of economic growth on CO 2 emission in developing countries: evidence from a dynamic panel threshold model. Cogent Econ Fin 90(1):1–22. https://doi.org/10.1080/23322039.2017.1379239

    Article  Google Scholar 

  • Benhabib J, Spiegel MM (2005) Human capital and technology diffusion. Handbook Econ Growth 1:935–966

    Google Scholar 

  • Bilan Y, Streimikiene D, Vasylieva T, Lyulyov O, Pimonenko T, Pavlyk A (2019) Linking between renewable energy, CO2 emissions, and economic growth : challenges for candidates and potential candidates for the EU membership. Sustainability 11(1528):1–16. https://doi.org/10.3390/su11061528

    Article  Google Scholar 

  • Blundell R, Bond S (2000) GMM estimation with persistent panel data: an application to production functions. Econom Rev 19(3):321–340

    MATH  Google Scholar 

  • Cetin MA (2017) Investigating the environmental Kuznets Curve and the role of green energy: emerging and developed markets. Int J Green Energy. https://doi.org/10.1080/15435075.2017.1413375

    Article  Google Scholar 

  • Chen JN (2016) Report of the State Council on the Environmental Situation and the Completion Environmental Protection Objectives of the Year 2015. http://www.npc.gov.cn/npc/xinwen/2016-04/25/content1987688.htm. Accessed 12 Dec 2017

  • Chandio, A. A., Rauf, A., Jiang, Y., & Ozturk, I. (2019). Cointegration and Causality Analysis of Dynamic Linkage between Industrial Energy Consumption and Economic Growth in Pakistan sustainability Cointegration and Causality Analysis of Dynamic Linkage between Industrial Energy Consumption and Economic Growth in Pakistan, (August). https://doi.org/10.3390/su11174546

  • Court V (2018) Energy capture, technological change, and economic growth: an evolutionary perspective and maintained by the use of the primary input of energy. Biophys Econ Resour Qual 3:1–27. https://doi.org/10.1007/s41247-018-0046-3

    Article  Google Scholar 

  • Cuaresma JC, Lutz W, Sanderon W (2014) Is the demographic dividend an education dividend? Demography 51(1):299–315

    Google Scholar 

  • Empora N, Mamuneas T (2011) The effect of emissions on US state total factor productivity growth. Rev Econ Anal 3(2):149–172

    Google Scholar 

  • Ganesan P, Thirugnanasambandam M, Rajakarunakaran S, Devaraj D (2015) Specific energy consumption and Co2 emission reduction analysis in a textile industry. Int J Green Energy 12(7):685–693

    Google Scholar 

  • Hall RE, Jones CI (1999) Why do some countries produce so much more output per worker than others? Q J Econ 114(1):83–116

    Google Scholar 

  • Hansen, L. P. 1982. Large sample properties of generalized method of moments estimators. Econometrica: Journal of the Econometric Society: 1029-1054

  • Huo H, Zhang Q, Guan D, Su X, Zhao H, He K (2014) Examining air pollution in China using production- and consumption -based emissions accounting approaches. Environ Sci Technol 48:14139–14147

    Google Scholar 

  • Jebli MB, Youssef SB, Ozturk I (2016) Testing environmental Kuznets curve hypothesis: the role of renewable and non-renewable energy consumption and trade in OECD countries. Ecol Ind 60:824–831

    Google Scholar 

  • Joo Y-J, Kim CS, Yoo S-H (2015) Energy consumption, CO2 emission, and economic growth: evidence from Chile. Int J Green Energy 12(5):543–550

    Google Scholar 

  • Kahouli B (2019) Does static and dynamic relationship between economic growth and energy consumption exist in OECD countries? Energy Reports 5:104–116. https://doi.org/10.1016/j.egyr.2018.12.006

    Article  Google Scholar 

  • Kais, S., & Mbarek, M. Ben. (2015). Dynamic relationship between CO 2 emissions, energy consumption and economic growth in three North African countries, 6451(October). https://doi.org/10.1080/14786451.2015.1102910

  • Kasman A, Duman YS (2015) CO2 emissions, economic growth, energy consumption, trade and urbanization in new EU member and candidate countries: a panel data analysis. Econ Model 44:97–103

    Google Scholar 

  • Katırcıoğlu S, Fethi S, Kalmaz DB, Çağlar D (2016) Interactions between energy consumption, international trade, and real income in Canada: an empirical investigation from a new version of the solow growth model. Int J Green Energy. https://doi.org/10.1080/15435075.2016.1175348

    Article  Google Scholar 

  • Khobai H, Roux P Le (2017) The relationship between energy consumption, economic growth and carbon dioxide emission: the case of South Africa. Int J Energy Econ Policy 7(3):102–109

    Google Scholar 

  • Li Y, Chiu Y, Lu LC (2019) New energy development and pollution emissions in China. Int J Environ Res Public Health 16(1764)

  • Lindenberger D, Weiser F, Winkler T, Kümmel R (2017) Economic Growth in the USA and Germany 1960–2013: the Underestimated Role of Energy. Biophys Econ Resour Qual 2:1–23. https://doi.org/10.1007/s41247-017-0027-y

    Article  Google Scholar 

  • Lu, M.-J., Lawell, C.-Y. C., and Chen, S. 2017 February. The effects of energy policies in China on GDP, industrial output, and new energy profits. Working Paper

  • Mankiw NG, Romer D, Weil DN (1992) A contribution to the empirics of economic growth. Q J Econ 107(2):407–437

    MATH  Google Scholar 

  • National Bureau of Statistics. 2017. China Statistical Yearbook 2017. http://www.stats.gov.cn/tjsj/ndsj/2017/indexeh.htm. Accessed 12 Aug 2017

  • Omri A, Kahouli B (2014) Causal relationships between energy consumption, foreign direct investment and economic growth: fresh evidence from dynamic simultaneous equations models. Energy Policy 67:913–922

    Google Scholar 

  • Palamalai S, Siddanth I, Prakasam K (2015) Relationship between energy consumption, CO2 emissions, economic growth and trade in India. J Econ Fin Stud 03(02):1–17

    Google Scholar 

  • Rehman A, Rauf A, Ahmad M, Chandio AA, Deyuan Z (2019) The effect of carbon dioxide emission and the consumption of electrical energy, fossil fuel energy, and renewable energy, on economic performance: evidence from Pakistan. Environ Sci Pollut Res 26(21760):21760–21773

    Google Scholar 

  • Rusiawan W, Tjiptoherijanto P, Suganda E, Darmajanti L (2015) Assessment of green total factor productivity impact on sustainable indonesia productivity growth. Proc Environ Sci 28:493–501

    Google Scholar 

  • Stern D. I. 2004. The rise and fall of environmental kuznets curve. World Dev 32(8):-1439

  • Sun J, Su C-W, Shao Gl (2016) Is carbon dioxide emission convergence in the ten largest economies? Int J Green Energy 13(5):454–461

    Google Scholar 

  • Tanaka, S., Yin, W., and Jefferson, G. H. 2014. Environmental regulation and industrial performance: Evidence from China. Working paper

  • Wang Y, Lai N, Mao G, Zuo J, Crittenden J, Jin Y, Cruz JM (2017) Air pollutant emissions from economic sectors in China: a linkage analysis. Ecol Ind 77:250–260

    Google Scholar 

  • Xu T (2018) Investigating Environmental Kuznets Curve in China—Aggregation bias and policy implications. Energy Pol 114:315–322. https://doi.org/10.1016/j.enpol.2017.12.027

    Article  Google Scholar 

  • Yang N, Zhang Z, Xue B (2018) Economic growth and pollution emission in China: structural path analysis. Sustainability 10(2569):1–15. https://doi.org/10.3390/su10072569

    Article  Google Scholar 

  • Yorucu V, Mehmet O (2014) Modelling energy consumption for growth in an open economy: aRDL and causality analysis for Turkey. Int J Green Energy. https://doi.org/10.1080/15435075.2014.893437

    Article  Google Scholar 

  • Zhang J, Broadstock DC (2016) The causality between energy consumption and Economic growth in China in time-varying framework. Energy J 37(1):29–53

    Google Scholar 

  • Zhao YH, Liu Y, Wang S, Zhang ZH, Li JC (2016) Inter-regional linkage analysis of industrial CO2 emissions in China: an application of a hypothetical extraction method. Ecol Indic 61:428–437

    Google Scholar 

Download references

Acknowledgements

Authors are thankful to the editor and anonymous reviewers as their suggestions have made valuable improvement in this research.

Author information

Authors and Affiliations

  1. School of Economics, Zhejiang University, Hangzhou, 310027, China

    Munir Ahmad

  2. School of Economics and Management, North China Electric Power University, Beijing, 102206, China

    Gul Jabeen

  3. Beijing Key Laboratory of New Energy and Low-Carbon Development, School of Economics and Management, North China Electric Power University, Beijing, 102206, China

    Muhammad Irfan & Marie Claire Mukeshimana

  4. Pioneer College of Commerce, Virtual University of Pakistan, Bhakkar, 30000, Pakistan

    Naseer Ahmed

  5. Institute of Management Sciences, Bahauddin Zakariya University, Bosan Rd, Multan, 60000, Pakistan

    Maria Jabeen

Authors
  1. Munir Ahmad
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Gul Jabeen
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Muhammad Irfan
    View author publications

    You can also search for this author in PubMed Google Scholar

  4. Marie Claire Mukeshimana
    View author publications

    You can also search for this author in PubMed Google Scholar

  5. Naseer Ahmed
    View author publications

    You can also search for this author in PubMed Google Scholar

  6. Maria Jabeen
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Munir Ahmad.

Ethics declarations

Conflict of interest

The authors have no conflict of interest to disclose.

Additional information

Publisher's Note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Ahmad, M., Jabeen, G., Irfan, M. et al. Modeling Causal Interactions Between Energy Investment, Pollutant Emissions, and Economic Growth: China Study. Biophys Econ Sust 5, 1 (2020). https://doi.org/10.1007/s41247-019-0066-7

Download citation

  • Received:

  • Revised:

  • Accepted:

  • Published:

  • DOI: https://doi.org/10.1007/s41247-019-0066-7

Keywords

Search

Navigation