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Cai, J.; Yang, Z.; , . Economic Growth and China's Carbon Dioxide Emissions. Encyclopedia. Available online: https://encyclopedia.pub/entry/23123 (accessed on 07 July 2024).
Cai J, Yang Z,  . Economic Growth and China's Carbon Dioxide Emissions. Encyclopedia. Available at: https://encyclopedia.pub/entry/23123. Accessed July 07, 2024.
Cai, Jingjing, Zhoumu Yang,  . "Economic Growth and China's Carbon Dioxide Emissions" Encyclopedia, https://encyclopedia.pub/entry/23123 (accessed July 07, 2024).
Cai, J., Yang, Z., & , . (2022, May 19). Economic Growth and China's Carbon Dioxide Emissions. In Encyclopedia. https://encyclopedia.pub/entry/23123
Cai, Jingjing, et al. "Economic Growth and China's Carbon Dioxide Emissions." Encyclopedia. Web. 19 May, 2022.
Economic Growth and China's Carbon Dioxide Emissions
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This entry is adapted from the peer-reviewed paper 10.3390/su14094884

Carbon emission reduction has become a worldwide concern on account of global sustainability issues. Many existing studies have focused on the various socioeconomic influencing factors of carbon dioxide (CO2) emissions and the corresponding transmission mechanisms, while very few models have unified the scale effect, structure effect, and technique effect in the context of China. 

carbon dioxide emissions economic growth industrial transition energy intensity Environment Kuznets Curve

1. Scale Effect, Structure Effect, and Technique Effect

Many scholars agree that structural change and technological progress are the main factors leading to different EKC modes [1]. Structural change includes the shift of production from high-emission industries to information technology-based services (which are called low-emission industries); technological progress includes technological improvement that leads to the reduction of the factor effect in the production process, or the use of production technology that is beneficial to the reduction of pollution output [2].
As it is shown in Figure 1, during the primary (or agricultural) production stage, the consumption of natural resources and the expansion of production scale cause environmental degradation (which is called the scale effect of production on environmental degradation), and EKC is on the rise. With the transformation of production from agriculture to industrialization, economic growth leads to the development of high-tech industry and tertiary industry, accompanied by the improvement of production technology and clean energy technology, which are called the structure effect and technique effect, respectively. Both of these effects can overcome the scale effect, and make EKC into a downward trend [3].
Sustainability 14 04884 g001 550
Figure 1. The effect of scale, structure, and technique on CO2.
The structure effect is caused by the transformation of the production mode from high-energy-input industries to environmentally friendly industries. The initial CO2 increase is due to a shift in the industrial structure from light industry to heavy industry, but the subsequent shift to low-emission information-based industries and services would drive CO2 emissions down [2].
The technique effect is the result of technological progress. On one hand, technological progress improves the efficiency of factor allocation and drives the factor input of per unit output to decrease. On the other hand, the investment in environmental research and development promotes the development of clean technology, which makes it possible to replace “dirty” or outdated technologies with cleaner technologies. The investment in environmental research also needs to be supported by a certain level of economic development [4].
Technological progress is the main reason for improving environmental quality [5]. By selecting the instrumental variables of structural change and technological progress, Bruyn et al. [6] concluded that the decline in emissions is due to technological progress and structural change, rather than to economic growth. Considering suspended particulate matter (SPM), the variation in pollution level in spatio-temporal dimensions is attributed to the progress of production technology and the evolution of industrial structure [1]. Taking Ecuador as an example, improving the level of fossil fuel technology and optimizing the industrial structure make it possible to control CO2 emissions with the continuous growth of GDP [7]. Studies on Malaysia and OECD members have also reached similar conclusions [8].
However, structural change and technological progress may only have short-term effects on environment [9]. Grossman and Krueger [10] pointed out that the improvement of the environment not only comes from technological innovation, but it also reflects specific external conditions, such as politics, the economy, and technology, within the research time range. EKC may reflect the cycle of internal and external effects caused by technological innovation in the short term. In the long term, nonlinear EKC is a set of economic-environmental relationships corresponding to different technologies [11]. Different countries have heterogeneous characteristics, and there is no definitive evidence that China may follow the evolutionary trajectory of other countries’ EKC.

2. Energy Intensity

Energy is the core of environmental problems, so energy should also be the core of solutions to environmental problems. The key to improve environmental degradation lies in the reduction of energy intensity (which refers to energy consumption per unit GDP) [12][13]. In order to mitigate energy intensity, many policy frameworks have emerged. For example, the EU’s “2050 Energy Route” aims to achieve its reduction target through the implementation of energy efficiency policies, with the intention of mitigating climate change [13]. According to the literature, the impact of energy intensity on CO2 emissions mainly has the following two divergent mechanisms: many studies argue that energy intensity has a reduction effect on CO2, while some scholars support a rebound effect.
The decoupling assessment between economic growth and energy consumption is a core issue in the field of sustainable development [14]. Many studies emphasize the importance of the reduction of energy intensity, the optimization of energy structure, and the improvement of conversion efficiency. The reduction effect can be understood as the following: by reducing energy consumption per unit of GDP, the amount of energy consumption may be lower, hence, CO2 emissions will be lessened [15]. Due to the oil crisis of the 1970s, energy intensity has become a critical issue. Oil-based economic structures must be transformed with new technologies to reduce energy consumption per unit of output, and to strengthen the development of low-polluting services [15].
Most EKC empirical studies state that both CO2 emissions and energy consumption are highly relevant to economic growth. In the long run, industrial growth will affect energy consumption, and then CO2 emissions [16]. The main reason is that economic growth is always accompanied by energy consumption, which is mainly based on fossil fuels that produce CO2 emissions [12][17]. Based on the boundary test method of the ARDL model, Begum et al. [18] tested the dynamic impact of GDP, energy consumption, and population growth on CO2 emissions in Malaysia. Their results confirmed that per capita energy consumption and per capita GDP have long-term positive impacts on per capita CO2 emissions. Empirical studies on India also show that energy consumption is the Granger cause of CO2 emissions and economic growth [19], and similar conclusions have been confirmed in EU member states [20] and sub-Saharan African countries [21].
The evolution of energy intensity depends on a variety of factors, such as energy price and energy structure [22], and many EKC studies focus on this field. Stern [23] believes that the main reason for the decline in energy intensity over time is the shift from the direct use of fossil fuels to higher quality fuels, especially electricity. Fuel structure change is closely related to technological innovation [23][24]. Moreover, energy intensity changes are not uniform in all countries [16][17].
Technological advances can improve energy efficiency, and thereby reduce energy use, which leads to less frequent use of natural resources to produce energy. This consequently improves environmental degradation. It is important to mention that, although over time energy intensity is decreasing, which implies that energy efficiency is increasing [23], many studies have shown that increased energy efficiency may lead to increased energy consumption, which may ultimately lead to increased environmental degradation or increased CO2 emissions [25]. This phenomenon, known as the rebound effect of energy intensity on CO2 emissions, is essential to understanding sustainable development.
Empirical estimations of the rebound effect tend to focus on producer behavior and consumer behavior at the same time [25]. Due to different assumptions, relevant data, and the negotiation power of both parties in the market, the estimated results are quite different [26]. The logic of these studies is that increased energy efficiency leads to lower energy prices, which may lead to increased energy consumption [25]. Thus, in the long run, CO2 reductions resulting from technological advances may be offset by increases in energy consumption [27]. The research framework of sustainable development should not understate the aforementioned scenario.

References

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  2. Panayotou, T. Economic Growth and the Environment. In Economic Survey of Europe; Chapter 2; UNECE: Geneva, Switzerland, 2003; Volume 2.
  3. Dinda, S. Environmental Kuznets Curve hypothesis: A survey. Ecol. Econ. 2004, 49, 431–455.
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  5. Li, W.; Yang, G.; Li, X.; Sun, T.; Wang, J. Cluster analysis of the relationship between carbon dioxide emissions and economic growth. J. Clean. Prod. 2019, 225, 459–471.
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  8. Shafiei, S.; Salim, R.A. Non-renewable and renewable energy consumption and CO2 emissions in OECD countries: A comparative analysis. Energy Policy 2014, 66, 547–556.
  9. Kaika, D.; Zervas, E. The environmental Kuznets curve (EKC) theory. Part B: Critical issues. Energy Policy 2013, 62, 1403–1411.
  10. Grossman, G.W.; Krueger, A.B. Economic Growth and Environment. Q. J. Econ. 1995, 110, 357–378. Available online: https://academic.oup.com/qje/article-abstract/110/2/353/1826336?redirectedFrom=fulltext (accessed on 15 December 2021).
  11. Kaika, D.; Zervas, E. The Environmental Kuznets Curve (EKC) theory-Part A: Concept, causes and the CO2 emissions case. Energy Policy 2013, 62, 1392–1402.
  12. Zhang, S.; Chen, W. China’s energy transition pathway in a carbon neutral vision. Engineering 2021, in press.
  13. López-Menéndez, A.J.; Pérez, R.; Moreno, B. Environmental costs and renewable energy: Re-visiting the Environmental Kuznets Curve. J. Environ. Manag. 2014, 145, 368–373.
  14. Saidi, K.; Hammami, S. The impact of energy consumption and CO2 emissions on economic growth: Fresh evidence from dynamic simultaneous-equations models. Sustain. Cities Soc. 2015, 14, 178–186.
  15. Tol, R.S.J.; Pacala, S.W.; Socolow, R.H. Understanding Long-Term Energy Use and Carbon Dioxide Emissions in the USA. J. Policy Model. 2009, 31, 425–445.
  16. Team, P.; Carbon, P.; Neutrality, C. Analysis of a Peaked Carbon Emission Pathway in China Toward Carbon Neutrality. Engineering 2021, 7, 1673–1677.
  17. The Energy and Climate Intelligence Unit. Net zero Emissions Race. 2021. Available online: https://eciu.net/netzerotrack (accessed on 16 January 2022).
  18. Begum, R.A.; Sohag, K.; Abdullah, S.M.S.; Jaafar, M. CO2 emissions, energy consumption, economic and population growth in Malaysia. Renew. Sustain. Energy Rev. 2015, 41, 594–601.
  19. Yang, Z.; Zhao, Y. Energy consumption, carbon emissions, and economic growth in India: Evidence from directed acyclic graphs. Econ. Model. 2014, 38, 533–540.
  20. Kasman, A.; Duman, Y.S. CO2 emissions, economic growth, energy consumption, trade and urbanization in new EU member and candidate countries: A panel data analysis. Econ. Model. 2015, 44, 97–103.
  21. Shahbaz, M.; Solarin, S.A.; Sbia, R.; Bibi, S. Does energy intensity contribute to CO2 emissions? A trivariate analysis in selected African countries. Ecol. Indic. 2015, 50, 215–224.
  22. Debone, D.; Leite, V.P.; Georges, S.; Khouri, E. Urban Climate Modelling approach for carbon emissions, energy consumption and economic growth: A systematic review. Urban Clim. 2021, 37, 100849.
  23. Stern, D.I. Energy and economic growth. In Encyclopedia of Energy; Cleveland, C.J., Ed.; Academic Press: San Diego, CA, USA, 2004; pp. 35–51.
  24. Tiwari, A.K. The asymmetric Granger-causality analysis between energy consumption and income in the United States. Renew. Sustain. Energy Rev. 2014, 36, 362–369.
  25. Greening, L.A.; Greene, D.L.; Difiglio, C. Energy efficiency and consumption—The rebound effect—A survey. Energy Policy 2000, 28, 389–401.
  26. Hanley, N.; McGregor, P.G.; Swales, J.K.; Turner, K. Do increases in energy efficiency improve environmental quality and sustainability? Ecol. Econ. 2009, 68, 692–709.
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