The dynamic links between CO2 emissions, economic growth and coal consumption in China and India

Abstract

In this study, we employ recent and robust estimation techniques of cointegration to provide more conclusive evidence on the nexus of CO2 emissions, economic growth and coal consumption in China and India. Furthermore, the causal relationships among the variables are further examined using the Granger causality test. Our empirical results suggest that the variables are cointegrated in the case of China but not India. In other words, there is a long-run relationship between CO2 emissions, economic growth and coal consumption in China. Granger causality test for China reveal a strong evidence of uni-directional causality running from economic growth to CO2 emissions. Moreover, there is a bi-directional causality between economic growth and coal consumption as well as CO2 emissions and coal consumption in the short and long run. In the case of India, only a short-run causality is detected. Causality between economic growth and CO2 emissions as well as CO2 emissions and coal consumption are bi-directional. Nonetheless, there is only a uni-directional Granger causality running from economic growth to coal consumption in India. The implications of the results are further discussed.