A Panel Data Study of Energy Consumption and Economic Growth in China

This study examines the relationship between energy consumption and economic growth for 29 provinces of China during the period of 1995-2007. Panel unit root, panel cointegration and Granger causality are employed to infer the causal relationship. The results show there is a panel cointegration relationship between energy consumption and economic growth. The Granger causality results indicate the presence of bi-directional causality running from energy consumption to economic growth with feedback effect. The policy implications are that Chinese government should ensure energy supply safety, improve energy efficiency, definitely put forward the strategy of low Carbon economy. China should build up the low-carbon innovation system, and carry out institution innovation of energy-saving and low-carbon economy. Firms are required to undertake social responsibility and encouraged to take measures to low energy consumption and carbon emission.