Trade openness and urbanization impact on renewable and non-renewable energy consumption in China.

Jiabin Han,Irfan Ullah,Alam Rehman,Fakhr E Alam Afridi,Muhammad Zeeshan

doi:10.1007/s11356-021-18353-x

Abstract

China has witnessed significant growth in trade through vide range trade liberalization strategies and urbanization has also been entered in advanced stage. Based on these dynamics, how much energy consumption of both renewable and none renewable account for energy consumption in whole system is a point of higher attention for the researchers. To understand this salient emerging debatable concern, we investigate the impact of trade openness and urbanization effect on renewable and non-renewable energy consumption in China for the period 1990-2018. We apply the quantile regression technique for the analysis; our results show that trade significantly increases the non-renewable energy consumption in all quintiles while partially increasing renewable energy consumption. This shows that trade activities in production and export commodities heavily rely on non-renewable energy inputs instead of renewable energy inputs. Urbanization affects non-renewable energy consumption only in three quintiles, while its effect is insignificant in most of the quintiles. Similarly, urbanization does not affect renewable energy consumption as in almost all quantiles the coefficients are statistically insignificant. This implies that urbanization is one of the determinants of energy consumption in China. The empirical findings of this study suggest some policy recommendations; first, the government needs to implement certain regulations while expanding trade to minimize the negative effect of non-renewable energy consumption; besides government should provide incentives to industrial units and traders for using renewable energy which may help to attain long term sustainable development goals. The government should also put certain limitations on population moving from rural to urban destinations.

Highlights

China is among the largest energy consumers in the world, and its trade openness, industrialization, and urbanization are the main factors that account for high energy consumption
We apply the Quantile Regression technique for the analysis, our results show that trade significantly increases the non-renewable energy consumption in all quintiles while partially increases renewable energy consumption
Trade and energy consumption have crucial importance for several reasons, such as the inefficient energy policy may lead to lower trade and economic activities, (b)s the energy conservation policies that reduce the energy consumption will counterbalance the trade liberalization policies developed to promote the economic activity (Koengkan, 2018; Sadorsky, 2014b), (c) there is a unidirectional relationship from trade to energy consumption which indicates that trade policy increases energy consumption while conservation policies will not affect the liberalization policies

Summary

Introduction

China is among the largest energy consumers in the world, and its trade openness, industrialization, and urbanization are the main factors that account for high energy consumption. Energy consumption plays an important role in the development of an economy, energy consumption and production contain some externalities, such as pollution and greenhouse gases, which eventually undermine economic sustainability (Shi, 2015). Trade openness and urbanization policies may have potential implications for the energy consumption and sustainable growth of the economy. It is essential to understand the relationship between trade openness and energy consumption. Trade openness may influence the country’s energy consumption due to an increase in economic activities. The export sector especially the industrial export expansion increases the demand for consumption

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