Economic growth and carbon emissions: Estimation of a panel threshold model for the transition process in China

Abstract

In recent years, the correlation between economic growth and environmental pollution has become noticeably contentious in China, which is experiencing the process of transitions in various social and economic sectors, for example, slowing economic growth, reformations to industrial and capital structure, ongoing urbanization, aggravated aging population and a series of environmental challenges, which are also known as a “New Normal” era in the 2010s. In the present study, a test is conducted on the non-linear relationship between economy and environment, which are represented as real GDP (Gross Domestic Product) per capita and carbon emissions per capita, respectively. Based on the data of a non-dynamic panel that covers 30 Chinese provinces from 2001 to 2016, the threshold regression model is applied with fixed effects to understand how the mentioned transitions impact on such relationship as structural breaks, in particular since its “New Normal” era. In brief, according to the estimation results, economic growth with a sustained high level of investment in technology (e.g., Northwest and Southwest China) and environmental protection activities are of empirical significance to cutting down on carbon emissions in China. Moreover, given the emissions reduction during China’s economic growth, “Economically significant provinces” concentrated in East China (e.g., Beijing, Tianjin, Shanghai, Jiangsu and Shandong in the present study) ought to develop and transfer their energy structure in a more renewable manner. In the meantime, “Energy abundant provinces” located in inland China are supposed to develop clean mining technology and strengthen their construction of energy delivery channel, which complies with an efficient market mechanism for cross-regional transaction in renewable energy from the perspective of sustainability.