The effect of geopolitical risk on carbon emissions: influence mechanisms and heterogeneity analyzed using evidence from China.

Abstract

To meet the goals of reducing adverse effects, continuing economic transformation, and achieving sustainable development, it is necessary to understand the impact mechanism and heterogeneous effects of geopolitical risk on carbon emissions. Using panel data from 30 provinces in China gathered between 2003 and 2019, we show that (1) geopolitical risk significantly contributes to the growth of carbon emissions, as does non-renewable energy consumption, trade, and economic growth, but that technological progress, industrial structure upgrading, and marketization inhibit the growth of carbon emissions; (2) geopolitical risk inhibits carbon emissions by suppressing non-renewable energy consumption and trade, and promoting technological progress; and (3) geopolitical risk has heterogeneous effects on carbon emissions in different quartiles. In the lower quartiles (i.e., groups with lower emission levels), geopolitical risk suppresses carbon emissions, while in higher quartiles (i.e., groups with higher emission levels), geopolitical risk promotes carbon emissions. As growing geopolitical risk and carbon emissions are now common problems for all countries, this study serves as a valuable reference not only for China, but for every member of the global community seeking to mitigate geopolitical risk shocks and achieve carbon emission reduction targets.