China’s Effect on World Energy-Growth Nexus: Spillovers Evidence from Financial Development and CO2 Emissions

Luís Miguel Marques,António Cardoso Marques,José Alberto Fuinhas

doi:10.3390/economies9040136

Luís Miguel Marques, António Cardoso Marques + Show 1 more

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https://doi.org/10.3390/economies9040136

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Journal: Economies	Publication Date: Sep 24, 2021
Citations: 3	License type: CC BY 4.0

Affiliation: University of Beira Interior, University of Coimbra

Abstract

This paper aims to extend the literature on the impacts of China’s policies on the world energy-growth nexus by analyzing the spillover effects of financial development and CO2 emissions. An autoregressive distributed lag approach was applied to annual series data from 1977 to 2016. Models for four world regions were developed, as well as a global model. The results reveal the traditional feedback hypothesis on the whole, both in the short- and long-run. Additionally, the results support that China’s CO2 emission and financial development promote world energy consumption. In regard to the four world regions, heterogeneous results were observed. Overall, China’s financial development and CO2 emissions also have heterogenous worldwide impacts with distinct magnitudes. Accordingly, no country should be indifferent to China’s policies, and independence should be promoted for Europe, Central Asia and Asia Pacific aggregates.

Highlights

IntroductionChina is the second-largest economy globally with the largest growth market for energy for more than fifteen consecutive years
The results show that LY and LE variables for America, Asia Pacific, Africa and the Middle East and the LCO2 and LM3 variables are I(1) by rejecting the null hypothesis of nonstationarity of their respective first differences
Mean the Asia Pacific, Y-CO2 will represent the growth model with CO2 emissions resulting from Equation (3), Y-LM3 will represent the growth model with Financial Development resulting from Equation (4), E-CO2 will represent the energy consumption model with CO2 emissions resulting from Equation (5) and E-LM3 will represent the energy consumption model with Financial Development resulting from Equation (6)

Summary

Introduction

China is the second-largest economy globally with the largest growth market for energy for more than fifteen consecutive years. China’s primary energy consumption has still been increasing in recent years, it aims to adjust its economy to a more sustainable growth pattern by changing from coal to clean energy, reducing its CO2 emissions. In 2020, as part of Nationally Determined Contribution under the Paris Climate Change Agreement adopted by the European Union and 195 more countries, China announced that it would aim to achieve carbon neutrality by 2060. Following the Agreement that incentivized the decarbonization of energy markets, China aims to peak their carbon emissions before 2030, accompanied by the official target of an 18% reduction in carbon emissions per unit of Gross Domestic Product (GDP). China’s energy consumption transition will contribute to its sustainable development, promoting diversification and requiring efficient energy resources

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