Investigating the Impact of Capacity Utilization on Carbon Dioxide Emission: Evidence from China’s Iron and Steel Industry

Ya Chen,Haoxiang Liu,Xintian Zhang

doi:10.21078/jssi-2021-681-23

Ya Chen, Haoxiang Liu + Show 1 more

Open Access

https://doi.org/10.21078/jssi-2021-681-23

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Abstract

Abstract In recent years, China’s industrialization and urbanization have deepened, and the economy has grown considerably. But at the same time, they have also brought about many environmental problems. As a pillar of the national economy, the iron and steel (IS) industry is one of the most emitting and energy-consuming sub-sectors of the industrial sector. It is also one of the industries with the most severe overcapacity problem in China. In this paper, we explore the impact of capacity utilization on carbon dioxide emission based on panel data of China’s iron and steel industry from 2005 to 2014. We also tested the heterogeneity in different regions and different sub-samples. Results show that capacity utilization and carbon dioxide emission are positively correlated. However, the impact of capacity utilization on carbon dioxide emission differs when considering regional heterogeneity. Results in all three regions show a positive relationship between capacity utilization and carbon dioxide emission, but the impact intensity is strongest in the western region, followed by the eastern and central regions. Moreover, capacity utilization impacts carbon dioxide emission by influencing firm numbers in the iron and steel industry and energy consumption. Further analysis shows that there exists a threshold effect in different stages of energy consumption and energy structure. Finally, some findings and practical policy recommendations are provided.

Highlights

China now is the biggest carbon dioxide emitter in the world
We introduce a mechanism of capacity utilization influencing carbon dioxide emission in the iron and steel industry with two main channels by our mechanism analysis
We consider heterogeneity to see the different impacts in different regions and different capacity utilization levels to get more subtle results

Summary

Introduction

China now is the biggest carbon dioxide emitter in the world. The industry sector is highly energy-intensive, so the industry sector accounts for a large proportion of carbon dioxide emission. Investigating the main factors that influence the carbon dioxide emission of the industry sector is of great importance. The iron and steel industry is the pillar industry of the industry sector and is the main source of energy consumption. Among the iron and steel, chemicals, and cement industries in China, the iron and steel industry emits the most greenhouse gases (2.015 GtCO2e/year) and has the most abatement potential by 2030 (1.516 GtCO2e/year). Greenhouse gas emissions within the iron and steel industry are linked directly to the traditional iron reduction process, which releases CO2 as a byproduct of iron ore and coking coal inputs

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