Achieving Synergies of Carbon Emission Reduction, Cost Savings, and Asset Investments in China’s Industrial Sector: Towards Sustainable Practices

Abstract

This study aims to investigate the dynamic correlations among carbon emission reduction, total cost savings, and asset investments in the industrial sector in China. This study uses the panel vector autoregressive (PVAR) model and the generalized method of moments (GMM) model to obtain three conclusions based on Chinese industrial industry data from 2005–2019. (1) The interaction between carbon emission reduction and cost reduction is bidirectional. A carbon emission decrease can result in persistent cost cutting, while measures in shrinking costs lead to reducing carbon emissions with lasting effects. Moreover, carbon emission decline has strong inertia, while cost reduction is softer. (2) Green investment promotes reducing carbon emissions and is efficient and sustainable. Conversely, completing carbon reduction milestones will inhibit asset expansion in the subsequent period. (3) China’s industrial sector has already achieved the “synergy of emission reduction and cost decrease” development model. The transmission chain “asset investment–carbon emission decline–cost decrease–carbon emission abatement” has been established. Nonetheless, a gap remains between the mature cycle of decarbonization, cost saving, and effectiveness. Finally, it is recommended that the government focuses on the synergistic effect of carbon and cost reduction, encourages continuous green investment, and systematically organizes decarbonization actions. This study provides a basis for increasing the interest of companies in transitioning to a low-carbon economy, contributing to the simultaneous realization of green development and economic benefits.