Research on the Relationship between Prices of Agricultural Production Factors, Food Consumption Prices, and Agricultural Carbon Emissions: Evidence from China’s Provincial Panel Data

Abstract

China is a large agricultural country with a high level of agricultural carbon emissions. Whether market prices can be used in agricultural production as a means of agricultural carbon emissions reduction is of great significance to improve the allocation of agricultural production factors and expand large-scale production. This paper applies an autoregressive distributed lag–pooled mean group(ARDL–PMG) model to evaluate the relationship between agricultural production factor prices, food consumption prices, and agricultural carbon emissions, using Chinese provincial panel data from 1994 to 2018. The results show that agricultural carbon emissions and agricultural production factor prices show environmental Kuznets curve (EKC) characteristics; agricultural carbon emissions and food prices show a U-shaped curve; and agricultural production factors are positively correlated with food price in both directions in the long-term. The results of Granger causality tests show that price is the cause of agricultural carbon emissions; the price of agricultural production factors and the price of food consumption are mutually causal. Such results have implications for price, agriculture, and environmental policies. The analysis implies that the market price can be applied to agricultural carbon reduction, which will help policymakers to implement effective price policies in order to reduce agricultural carbon emissions. One implication is that promoting the marketization of agricultural production factors and reducing price distortions will be conducive to carbon emissions reduction in agriculture, which in turn will increase food consumption prices. Therefore, subsidies are needed at the consumption end, which will eventually achieve further carbon emissions reduction at the production and consumption ends.