Abstract
More recently, the COVID-19 pandemic outbreak has created massive economic policy uncertainty (EPU). EPU and its economic fallout have been a hot topic of study; however, the impact of EPU on CO2 emissions has been seldom addressed to date. This paper investigates the effects of the EPU on CO2 emissions. It elucidates the role of EPU in moderating the environmental regulation-CO2 emissions nexus at the national and regional levels using the panel data model and provincial panel data from 2003 to 2017 in China. The main empirical results are as follows. The EPU has a negative impact on carbon emissions; however, this relationship is non-significant even at the 10% level in the central and western region datasets. Environmental regulation positively increases the CO2 emissions implying that the green paradox occurs in the whole and western regions datasets. From the perspective of the moderating effect of uncertainty, EPU exerts a positive impact upon the environmental regulation-CO2 emissions nexus in the whole and western region datasets. The moderating effect is not significant in the eastern and central regions. The results demonstrate that the re-examination of the EKC hypothesis is inconclusive. Kuznets relationship between economic growth and CO2 emissions for the national, eastern, and central samples was confirmed. In contrast, CO2 emissions monotonically rise as GDP grows for western datasets. Based on the overall findings, some policy implications were put forward. We recommend that the local government should consider EPU to improve the institutional environment. Further, different regions should implement various environmental policies according to regional conditions maximizing the emission reduction potential.
Highlights
Climate change due to global warming is one of the defining issues of our time
The symbols of the interactive term are positive and statistically significant, implying that economic policy uncertainty (EPU) exerts a positive impact upon the environmental regulation-CO2 emissions nexus
Our panel estimation results yield several interesting conclusions: (1) The EPU has a negative impact on carbon emissions; this relationship is non-significant even at the 10% level in the central and western regions datasets
Summary
Climate change due to global warming is one of the defining issues of our time. Its well-known reason is the steady climb of greenhouse gas (GHG) emissions, carbon dioxide (CO2), which is 50% higher than preindustrial levels. The United Nations member states have agreed to limit the increase in the global average temperature to 1.5°C, which requires substantial worldwide commitments to achieve these goals. China has already committed to the Paris climate pact that China would cut its carbon emissions per unit of GDP by 60–65 per cent by 2030 from 2005 levels, increase nonfossil fuel sources in primary energy consumption to about 20 per cent, and peak its carbon emissions by 2030. Based on the above background, clarifying the mechanism behind carbon emissions is significant for China to achieve these goals
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