Causality between Energy Conservation and Economic Growth in China

Abstract

The relationship between carbon dioxide emissions and economic growth is analyzed and the results show that there exists a long-run equilibrium relationship between carbon dioxide emissions and economic growth to clear some people’s mind of doubts that energy conservation and carbon dioxide emissions reduction policy will hamper the economic development. When GDP increases, the carbon dioxide emission will increase too. Causality analysis shows that the unidirectional causal relationship exists and the direction is from GDP to carbon dioxide emission. The result implies that when a certain technique of carbon dioxide emissions reduction is used, it can not only reduce the carbon dioxide amount but promote the growth of GDP. Energy conservation and carbon dioxide reduction can form a new economic growth industry. To fulfill the promise of carbon dioxide emissions reduction to the world, China should make policies based on the relationship between carbon emissions and economic growth.