Casual relationship among GDP, coal consumption and coal production in China

The purpose of this paper is to investigate the granger causality relationship between GDP and coal consumption or coal production in China during the period of 1978-2008, after the policy of economics reform and opening was implemented in China. Results of the cointegration and Granger causality tests show that there exists a unidirectional causality between GDP and coal consumption or coal production in the long run. Evidence suggests that neither coal consumption nor coal production leads to economic growth. China is the largest coal consumer and also the largest producer of coal and CO₂ emissions in the world. Our empirical findings have very important policy implications for decision makers in the field of energy and economic planning. Based on the empirical results, we suggest that China should keep a balance between economic growth and environment protection to reach sustainable development, which may help reduce coal consumption to decrease CO₂ emissions.