Energy consumption-economic growth relationship and carbon dioxide emissions in China

This paper applies the panel unit root, heterogeneous panel cointegration and panel-based dynamic OLS to re-investigate the co-movement and relationship between energy consumption and economic growth for 30 provinces in mainland China from 1985 to 2007. The empirical results show that there is a positive long-run cointegrated relationship between real GDP per capita and energy consumption variables. Furthermore, we investigate two cross-regional groups, namely the east China and west China groups, and get more important results and implications. In the long-term, a 1% increase in real GDP per capita increases the consumption of energy by approximately 0.48-0.50% and accordingly increases the carbon dioxide emissions by about 0.41-0.43% in China. The economic growth in east China is energy-dependent to a great extent, and the income elasticity of energy consumption in east China is over 2 times that of the west China. At present, China is subject to tremendous pressures for mitigating climate change issues. It is possible that the GDP per capita elasticity of carbon dioxide emissions would be controlled in a range from 0.2 to 0.3 by the great effort.

[1]  Peter Pedroni,et al.  Purchasing Power Parity Tests in Cointegrated Panels , 2001, Review of Economics and Statistics.

[2]  Kihoon Lee,et al.  CAUSAL RELATIONSHIP BETWEEN ENERGY CONSUMPTION AND GDP REVISITED: THE CASE OF KOREA 1970-1999 , 2004 .

[3]  P. Phillips,et al.  Linear Regression Limit Theory for Nonstationary Panel Data , 1999 .

[4]  Jaruwan Chontanawat,et al.  Does energy consumption cause economic growth?: Evidence from a systematic study of over 100 countries , 2008 .

[5]  A. M. Masih,et al.  A multivariate cointegrated modelling approach in testing temporal causality between energy consumption, real income and prices with an application to two Asian LDCs , 1998 .

[6]  Y. Wolde‐Rufael.  Energy consumption and economic growth: The experience of African countries revisited , 2009 .

[7]  J. Kraft,et al.  Relationship between energy and GNP , 1978 .

[8]  Clive W. J. Granger,et al.  Merging short-and long-run forecasts: An application of seasonal cointegration to monthly electricity sales forecasting , 1989 .

[9]  C. Granger,et al.  Co-integration and error correction: representation, estimation and testing , 1987 .

[10]  J. Squalli.  Electricity consumption and economic growth: Bounds and causality analyses of OPEC members , 2007 .

[11]  Russell Smyth,et al.  Energy consumption and real GDP in G7 countries: New evidence from panel cointegration with structural breaks , 2008 .

[12]  David I. Stern,et al.  Energy and economic growth in the USA: A multivariate approach , 1993 .

[13]  Perry Sadorsky.  Renewable energy consumption, CO2 emissions and oil prices in the G7 countries , 2009 .

[14]  Wang Hai-peng.  The Study of the Relationship Between China's Energy Consumption and Economic Growth Based on Time Varying Parameter Model , 2006 .

[15]  YI Xia-jun.  The Empirical Study on the Impact of GDP and Energy Structure on Energy Consumption in Guangzhou , 2007 .

[16]  Sara Barcenilla-Visús,et al.  International R&D spillovers and manufacturing productivity: A panel data analysis , 2008 .

[17]  Chihwa Kao,et al.  Spurious Regression and Residual-Based Tests for Cointegration in Panel Data When the Cross-Section and Time-Series Dimensions are Comparable , 1996 .

[18]  Chien‐Chiang Lee,et al.  Energy consumption and economic growth in Asian economies: A more comprehensive analysis using panel data , 2008 .

[19]  G. Maddala,et al.  A Comparative Study of Unit Root Tests with Panel Data and a New Simple Test , 1999 .

[20]  In Choi,et al.  Unit root tests for panel data , 2001 .

[21]  Chun-Ping Chang,et al.  Energy consumption and GDP revisited: A panel analysis of developed and developing countries , 2007 .

[22]  F. Diebold,et al.  Forecasting and empirical methods in finance and macroeconomics , 1999 .

[23]  Kihoon Lee,et al.  Energy consumption and economic growth in Korea: testing the causality relation , 2004 .

[24]  M. Pesaran,et al.  Testing for unit roots in heterogeneous panels , 2003 .

[25]  Chien-Chiang Lee,et al.  Energy consumption and GDP in developing countries: A cointegrated panel analysis , 2005 .

[26]  Russell Smyth,et al.  Multivariate granger causality between electricity consumption, exports and GDP : Evidence from a panel of Middle Eastern countries , 2009 .

[27]  John Thornton,et al.  International capital mobility: Evidence from panel cointegration tests , 2008 .

[28]  Donggyu Sul,et al.  Nominal exchange rates and monetary fundamentals , 2001 .

[29]  Bernard C. Beaudreau,et al.  Engineering and economic growth , 2005 .

[30]  Chi-Chung Chen,et al.  The relationship between GDP and electricity consumption in 10 Asian countries , 2007 .

[31]  A. Akinlo,et al.  Energy consumption and economic growth: Evidence from 11 Sub-Sahara African countries , 2008 .

[32]  Chin W. Yang,et al.  Causal Relationship between Energy Consumption and GDP Growth Revisited: A Dynamic Panel Data Approach , 2008 .

[33]  David I. Stern,et al.  A multivariate cointegration analysis of the role of energy in the US macroeconomy , 2000 .

[34]  Yong U. Glasure.  Energy and national income in Korea: further evidence on the role of omitted variables , 2002 .

[35]  Pei-Fen Chen,et al.  Energy-income causality in OECD countries revisited : The key role of capital stock , 2008 .

[36]  Wang Zheng,et al.  Simulation on China's Economy and Prediction on Energy Consumption and Carbon Emission under Optimal Growth Path , 2009 .

[37]  R. Mahadevan,et al.  Energy consumption, economic growth and prices: A reassessment using panel VECM for developed and developing countries , 2007 .

[38]  Russell Smyth,et al.  Electricity consumption in G7 countries: A panel cointegration analysis of residential demand elasticities , 2007 .

[39]  Williams O. Olatubi,et al.  A Dynamic Estimation of Total Energy Demand for the Southern States , 2003 .

[40]  Umit Erol,et al.  Time series analysis of the causal relationships between U.S. energy and employment , 1987 .

[41]  Elias Tzavalis,et al.  Inference for unit roots in dynamic panels where the time dimension is fixed , 1999 .

[42]  Nicholas Apergis,et al.  Energy consumption and economic growth in Central America: Evidence from a panel cointegration and error correction model , 2009 .

[43]  Zhang Jiu-tian,et al.  On the Cointegration and Causality between Chinese GDP and Energy Consumption , 2004 .

[44]  Min-Hsien Chiang,et al.  On the Estimation and Inference of a Cointegrated Regression in Panel Data , 1997 .

[45]  Andrew T. Levin,et al.  Unit root tests in panel data: asymptotic and finite-sample properties , 2002 .

[46]  R. Engle,et al.  COINTEGRATION AND ERROR CORRECTION: REPRESENTATION , 1987 .

[47]  Khalifa H. Ghali,et al.  Energy use and output growth in Canada: a multivariate cointegration analysis , 2004 .

[48]  Russell Smyth,et al.  A panel cointegration analysis of the demand for oil in the Middle East , 2007 .

[49]  P. Pedroni.  PANEL COINTEGRATION: ASYMPTOTIC AND FINITE SAMPLE PROPERTIES OF POOLED TIME SERIES TESTS WITH AN APPLICATION TO THE PPP HYPOTHESIS , 2004, Econometric Theory.

[50]  Energy and employment , 1980 .