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Modeling the nexus between pollutant emission, energy consumption, foreign direct investment, and economic growth: new insights from China

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Abstract

Most nations are predominately preoccupied with the need to increase economic growth amidst pressure for increased energy consumption. However, higher energy consumption from fossil fuel has its environmental implication(s) especially in a high industrial economy like China. In this context, the current study explores the interaction between pollutant emission, foreign direct investment, energy consumption, tourism arrival, and economic growth for quarterly frequency data from 1995Q1 to 2016Q4 for econometrics analysis. Pesaran’s autoregressive distributed lag–bound test traces long-run relationship between all outlined variables over the investigated period. Empirical results show positive relationship between pollutant emissions with all other variables with the exception of economic growth. This further exposes the environmental degradation in China with the curtailing strength from the GDP. The Granger causality analysis detects that CO2 emissions and energy consumption show a two-way causality observed. Also, one-way causality existing between growth and foreign direct investment is seen running to pollutant emission. Furthermore, one-way causality is observed among foreign direct investment, energy consumption, pollutant emission, and tourism arrivals with economic growth, and this established their impact on the economic growth which will be a guide to the policy implication on how to ameliorate environmental degradation from the effect of consumption of fossil energy sources and foreign direct investment–induced pollutant emission.

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Notes

  1. The current study converts all outlined variables into quarterly form. The study uses the quadratic match-sum approach after the studies of Shahbaz et al. (2017) and Emir and Bekun (2019).

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Authors and Affiliations

  1. Faculty of Economics Administrative and Social sciences, Istanbul Gelisim University, Istanbul, Turkey

    Edmund Ntom Udemba & Festus Victor Bekun

  2. Department of Political Sciences, Roma Tre University, Rome, Italy

    Cosimo Magazzino

  3. Department of Accounting, Analysis and Audit, School of Economics and Management, South Ural State University, 76, Lenin Aven., Chelyabinsk, Russia, 454080

    Festus Victor Bekun

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  1. Edmund Ntom Udemba
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  2. Cosimo Magazzino
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  3. Festus Victor Bekun
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Correspondence to Edmund Ntom Udemba.

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Responsible editor: Muhammad Shahbaz

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Highlights

• Investigation of determinant of environmental degradation in China.

• Long- and short-run pollutant emissions decomposition in China.

• Economic growth–pollutant emission directional causality has a feedback.

• Foreign direct investment and energy consumption influence pollutant emission.

• Energy portfolio diversification in China is more urgently necessary than ever.

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Fig. 3
figure 3

CO2 emissions, energy use, FDI, and tourism arrival for China (1995q1–2017q4, log scale). Sources: WB data

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Udemba, E.N., Magazzino, C. & Bekun, F.V. Modeling the nexus between pollutant emission, energy consumption, foreign direct investment, and economic growth: new insights from China. Environ Sci Pollut Res 27, 17831–17842 (2020). https://doi.org/10.1007/s11356-020-08180-x

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