Environmental Protection Investment and Economic Growth in China: An Empirical Study Based on Panel Data from 31 Provinces

Abstract

With the rapid economic growth and deteriorated ecological environment in last decades, China is attaching great importance to sustainable development and environmental protection investment. The relationship between environmental protection investment and economic growth in China has been studied empirically based on panel data from 31 provinces in this paper. According to the official statistics in China, the environmental protection investment is indicated as total investment in treatment of environmental pollution (EI), which mainly comes down to three categories, i.e. investment in urban environment infrastructure facilities (I1), investment in treatment of industrial pollution sources (I2) and investments in environment components for new construction projects (I3). The problem that how EI and I1, I2, I3 contribute to GDP in the East, Middle and West China respectively is discussed with econometric and statistic methods. The findings mainly include: 1) The environmental investment (EI) and economic growth (GDP) have positive correlation significantly, and every 1% increase in EI will be accompanied by almost 0.7% growth in GDP(0.855% for the East region, 0.608% for the Middle region and 0.666% for the West region). More supportive policies should be made to promote environmental investment. 2) Different parts of EI (i.e. I1, I2, I3) contribute to GDP distinctively in the East, Middle and West China. I3 contributes to GDP growth most in the East China, I1 contributes most in the Middle, and I2 contributes most in the West. It is advisable to invest more in environment components for new construction projects in eastern provinces, more in urban environment infrastructure facilities in the Middle China, and more in treatment of industrial pollution sources in Western China.