The impact of economic uncertainty on carbon emission: Evidence from China

Abstract

Economic uncertainty (EU) has received greater attention in recent years Based on media data, this research applies the Latent Dirichlet Allocation method to create a new provincial EU index and from panel data of provinces in China examines how EU impacts carbon emissions. The calculations illustrate that province-level EU in the country exerts a significantly positive influence on province-level carbon emissions. A mechanism test indicates that EU raises carbon emissions by harming green technology innovation, enterprise profits, and carbon emission efficiency. Companies hesitantly make decisions, put off innovations, and use cheaper, environmentally-unfriendly materials, and so a moderating test shows that a province's economic level suppresses the impact of EU on carbon emissions whereas foreign direct investment enhances it. Developed areas are more capable of bearing the negative effect from high EU, while foreign companies tend to focus on short-term profit instead of environment protection. Central and northeast regions of China suffer a significant impact from EU on carbon emissions, but the east and west regions incur no obvious change when undergoing EU. The west region is too backwards to see any impact from EU, while the east region is the opposite. Carbon emissions from transportation and industrial production incur a significant impact from EU, but not from daily life activities. Spatial analysis describes that carbon emissions see a significant impact of EU from other provinces. Governments and decision makers should thus give carbon emissions a higher priority, and the case of China is rather applicable to other regions and countries.