Alternative Energy and CO 2 Emission in China: Evidence from Bounds Testing and Vector Error Correction Model Approach

Hai Tao, Hailin Mu (), Nan Li and Peng Wang
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Hai Tao: Key Laboratory of Ocean Energy Utilization and Energy Conservation of Ministry of Education, Dalian University of Technology, Dalian 116024, China
Hailin Mu: Key Laboratory of Ocean Energy Utilization and Energy Conservation of Ministry of Education, Dalian University of Technology, Dalian 116024, China
Nan Li: Key Laboratory of Ocean Energy Utilization and Energy Conservation of Ministry of Education, Dalian University of Technology, Dalian 116024, China
Peng Wang: Guangzhou Institute of Energy Conversion, Chinese Academy of Sciences, Guangzhou 510640, China

Energies, 2023, vol. 16, issue 8, 1-19

Abstract: This empirical study investigates the dynamic interconnection between fossil fuel consumption, alternative energy consumption, economic growth and carbon emissions in China over the 1981 to 2020 time period within a multivariate framework. The long-term relationships between the sequences are determined through the application of the Autoregressive Distributed Lag (ARDL) bounds test and augmented by the Johansen maximum likelihood procedure. The causal relationships between the variables are tested with the Granger causality technique based on the Vector Error Correction Model (VECM). Empirical results reveal the existence of a statistically significant negative relationship between alternative energy consumption and carbon emissions in the long-term equilibrium. Furthermore, the VECM results demonstrate that both carbon emissions and fossil fuel consumption have unidirectional effects on economic growth. Additionally, the study highlights a short-term unidirectional causal relationship from economic growth to alternative energy consumption. These findings suggest that a reduction in fossil fuel consumption in the short run may indirectly impede the development of alternative energy. The study proposes that China should expedite the development of alternative energy and control the expansion of fossil fuel consumption to attain its carbon reduction target without hindering economic growth.

Keywords: CO 2 emissions; alternative energy; ARDL bounds test; VECM Granger test; China (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2023
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