A Study on Time-Varying Synergy of Energy Consumption, Economic Growth, and CO2 Emissions in China

Abstract

Since its reform and opening, the Chinese economy has witnessed unprecedented development. This long-term high-speed development has significantly impacted the environment. In the process of energy development and consumption, the environment has been severely polluted, and greenhouse emissions have increased. This has resulted in environmental imbalances such as global climate change, rising sea levels, and extreme weather. Using annual energy consumption (EC), economic growth (GDP), and carbon dioxide (CO2) emissions in China from 1981 to 2021, this study employed the maximum likelihood estimation method to estimate the parameters of the nonlinear MS-VAR model. Cointegration tests, regimes analysis methods, and impulse response function analysis methods were adopted to explore the differences or similarities in the dynamics of the three under various regimes. The research results are as following. (i) The cointegration test findings demonstrate a long-term equilibrium relationship among EC, economic growth, and CO2 emissions. (ii) Regime analyses exhibit that there are three regimes: “low-level regime,” “medium-level regime,” and “high-level regime.” The three regimes have a mutual transfer transmission mechanism that exhibits nonlinear properties. (iii) Impulse response function analyses show that external EC and GDP shocks favorably impact the other two variables in all three regimes. EC in all three regimes is negatively impacted by external CO2 shocks. Moreover, in the “low-level regime,” the relationship between CO2 and GDP has an inverted U-curve, whereas in the other two regimes, the relationship has a negative association. This study can help China formulate reasonable and effective CO2 emissions reduction and energy policies and successfully achieve the emissions reduction goal of the 14th Five Year Plan as well as dual carbon goals.