Economic policy uncertainty and carbon neutrality in China: Do sustainable energy and eco‐innovation make a difference?

Abstract

AbstractSimilar to many other developing and developed countries, China grapples with the challenge of balancing economic growth and environmental preservation. This study, anchored in Sustainable Development Goals (SDGs) 7, 11, 12, and 13, investigates the impact of eco‐innovation and sustainable energy on CO2 emissions (CE) in China from 1980 to 2020, using the STIRPAT model. Employing the autoregressive distributed lag (ARDL) model with bootstrap rolling window causality analysis, we uncover causal relationships between CE and its determinants, assessing them in sub‐sample periods. ARDL estimates reveal that economic policy uncertainty, economic growth, and urbanization increase CE, while eco‐innovation and sustainable energy decrease it. Time‐varying causality analysis demonstrates predictive capabilities of all independent variables at various sub‐periods. The study recommends substantial increases in subsidies and tax incentives for renewable energy, emphasizing stable ecological policies, irrespective of economic conditions, for lasting benefits.