An econometric study of CO2 emissions, energy consumption and economic growth in China

This paper investigates the long run Granger causality relationship between economic growth, energy consumption and carbon dioxide emissions in China during the period 1952-2007, controlling for gross fixed capital formation, human capital and labor. To supplement the findings of cointegrating analysis, we test the causal relationships of these three variables by using the relatively new times series technique known as the Toda-Yamamoto (TY) procedure in the long run and dynamic interaction by using generalized impulse response. Empirical results suggest that there exist reciprocal causation between energy consumption, income, and CO₂ emissions in China in the long run. Hence, in order to reduce carbon emission, some policies like reducing energy consumption would confine economic growth for energy-depended country like China.