Investigating the Determinants of Carbon Emissions Using the Granger Causality Test: Evidence from China’s Main Sectors
DOI:
https://doi.org/10.63385/jemm.v1i1.55Keywords:
Carbon Emission, Economic Growth, Foreign Direct Investment, ARDL, The Granger Causality Test, Carbon Peak and Carbon Neutrality, PolicyAbstract
This study attempts to investigate the key determinants of carbon emissions across China’s major sectors, including transportation, real estate, and industrial sector, throughout the period between 2004 and 2023. Then examine their causal relationship to develop a carbon emission reduction framework. The Auto-Regressive Distributed Lag (ARDL) model and Granger causality test were utilized for analysis. In the long-term, EC and FDI negatively affect CE, while IT positively affects that. In the short-term, CE are positively influenced by FDI and PG, while negatively impacted by EG and EC. Besides, the impacts of these determinants on carbon emissions vary across sectors. Moreover, the analysis reveals bidirectional causality between CE and EG, CE and FDI, and CE and IT, while unidirectional causal relationship is observed with EC driving CE. The finding also reveals that the policies should prioritize low-carbon transitions by integrating sustainability into economic planning and infrastructure development in the “the Five-Year Plans”. This study provides critical policy-relevant insights to guide policymakers in designing effective strategies for carbon emission mitigation. It introduces an innovative sector-specific analysis that identifies key opportunities across different sectors. Additionally, the study proposes a structured policy framework to systematically support China’s carbon goals. By bridging research and practical implementation, this work contributes both theoretically and empirically to the advancement of sustainable development.
References
[1] Gregg, J.S., Andres, R.J., Marland, G., 2008. China: Emissions pattern of the world leader in CO2 emissions from fossil fuel consumption and cement production. Geophysical Research Letters. 35(8), L08806. DOI: https://doi.org/10.1029/2007GL032887
[2] Hao, Y., Chen, H., Wei, Y.M., et al., 2016. The influence of climate change on CO2 (carbon dioxide) emissions: an empirical estimation based on Chinese provincial panel data. Journal of Cleaner Production. 131, 667–677. DOI: https://doi.org/10.1016/j.jclepro.2016.04.117
[3] Lin, B., Sun, C., 2010. Evaluating carbon dioxide emissions in international trade of China. Energy Policy. 38(1), 613–621. DOI: https://doi.org/10.1016/j.enpol.2009.10.014
[4] Zhang, D.Y., Huang, T., 2023. Six Charts That Explain China's Carbon Emissions [in Chinese]. World Resources Institute. Available from: https://wri.org.cn/insights/data-viz-6-graphics-ghg-emissions-china (cited 5 June 2025).
[5] Guan, D., Peters, G.P., Weber, C.L., et al., 2009. Journey to world top emitter: An analysis of the driving forces of China's recent CO2 emissions surge. Geophysical Research Letters. 36(4), L04709. DOI: https://doi.org/10.1029/2008GL036540
[6] Lu, Y., Stegman, A., Cai, Y., 2013. Emissions intensity targeting: from China's 12th Five Year Plan to its Copenhagen commitment. Energy Policy. 61, 1164–1177. DOI: https://doi.org/10.1016/j.enpol.2013.06.075
[7] Zhang, C., Su, B., Zhou, K., et al., 2019. Decomposition analysis of China's CO2 emissions (2000–2016) and scenario analysis of its carbon intensity targets in 2020 and 2030. Science of the Total Environment. 668, 432–442. DOI: https://doi.org/10.1016/j.scitotenv.2019.02.406
[8] Zhou, S., Tong, Q., Pan, X., et al., 2021. Research on low-carbon energy transformation of China necessary to achieve the Paris agreement goals: A global perspective. Energy Economics. 95, 105137. DOI: https://doi.org/10.1016/j.eneco.2021.105137
[9] Liu, X., Wang, X., Meng, X., 2023. Carbon Emission Scenario Prediction and Peak Path Selection in China. Energies. 16(5), 2276. DOI: https://doi.org/10.3390/en16052276
[10] Zheng, J., Mi, Z., Coffman, D.M., et al., 2019. Regional development and carbon emissions in China. Energy Economics. 81, 25–36. DOI: https://doi.org/10.1016/j.eneco.2019.03.003
[11] Zhou, X., Zhang, J., Li, J., 2013. Industrial structural transformation and carbon dioxide emissions in China. Energy Policy. 57, 43–51. DOI: https://doi.org/10.1016/j.enpol.2012.07.017
[12] International Energy Agency, 2023. Greenhouse Gas Emissions from Energy Data Explorer. Available from: https://www.iea.org/data-and-statistics/data-tools/greenhouse-gas-emissions-from-energy-data-explorer (cited 5 June 2025).
[13] Lamb, W.F., Wiedmann, T., Pongratz, J., et al., 2021. A review of trends and drivers of greenhouse gas emissions by sector from 1990 to 2018. Environmental Research Letters. 16(7), 073005. DOI: https://doi.org/10.1088/1748-9326/abee4e
[14] Bai, J., Chang, I.S., Zhang, C., et al., 2024. Allocation of CO2 emission target in China under the "1+N" policy: Considering natural carbon sinks and wind-solar-hydropower endowments. Environmental Impact Assessment Review. 106, 107472. DOI: https://doi.org/10.1016/j.eiar.2024.107472
[15] Hu, Y.J., Zhang, R., Wang, H., et al., 2024. Synergizing policies for carbon reduction, energy transition and pollution control: Evidence from Chinese power generation industry. Journal of Cleaner Production. 436, 140460. DOI: https://doi.org/10.1016/j.jclepro.2023.140460
[16] National Development and Reform Commission, 2023. The Achievement of The Third Anniversary of Carbon Peak and Carbon Neutrality. Available from: https://www.ndrc.gov.cn/fggz/hjyzy/stwmjs/202308/t20230817_1359890_ext.html (cited 5 June 2025).
[17] The State Council of the People's Republic of China, 2024. Energy Conservation and Carbon Reduction Action Plan for 2024–2025 [in Chinese]. Available from: https://www.gov.cn/zhengce/zhengceku/202405/content_6954323.htm (cited 1 January 2024).
[18] Wang, S., Li, Q., Fang, C., et al., 2016. The relationship between economic growth, energy consumption, and CO2 emissions: Empirical evidence from China. Science of the Total Environment. 542(A), 360–371. DOI: https://doi.org/10.1016/j.scitotenv.2015.10.027
[19] Mardani, A., Streimikiene, D., Cavallaro, F., et al., 2019. Carbon dioxide (CO2) emissions and economic growth: A systematic review of two decades of research from 1995 to 2017. Science of the Total Environment. 649, 31–49. DOI: https://doi.org/10.1016/j.scitotenv.2018.08.229
[20] Wang, S.S., Zhou, D.Q., Zhou, P., et al., 2011. CO2 emissions, energy consumption and economic growth in China: A panel data analysis. Energy Policy. 39(9), 4870–4875. DOI: https://doi.org/10.1016/j.enpol.2011.06.032
[21] Wang, S., Fang, C., Guan, X., et al., 2014. Urbanisation, energy consumption, and carbon dioxide emissions in China: A panel data analysis of China's provinces. Applied Energy. 136, 738–749. DOI: https://doi.org/10.1016/j.apenergy.2014.09.059
[22] Peng, H., Tan, X., Li, Y., et al., 2016. Economic Growth, Foreign Direct Investment and CO2 Emissions in China: A Panel Granger Causality Analysis. Sustainability. 8(3), 233. DOI: https://doi.org/10.3390/su8030233
[23] Pao, H.T., Tsai, C.M., 2011. Multivariate Granger causality between CO2 emissions, energy consumption, FDI (foreign direct investment) and GDP (gross domestic product): Evidence from a panel of BRIC (Brazil, Russian Federation, India, and China) countries. Energy. 36(1), 685–693. DOI: https://doi.org/10.1016/j.energy.2010.09.041
[24] Wang, Q., Zhang, Q., 2022. Foreign direct investment and carbon emission efficiency: The role of direct and indirect channels. Sustainability. 14(20), 13484. DOI: https://doi.org/10.3390/su142013484
[25] Chen, Y., Wang, Z., Zhong, Z., 2019. CO2 emissions, economic growth, renewable and non-renewable energy production and foreign trade in China. Renewable Energy. 131, 208–216. DOI: https://doi.org/10.1016/j.renene.2018.07.047
[26] Rehman, A., Ma, H., Ahmad, M., et al., 2021. Towards environmental Sustainability: Devolving the influence of carbon dioxide emission to population growth, climate change, Forestry, livestock and crops production in Pakistan. Ecological Indicators. 125, 107460. DOI: https://doi.org/10.1016/j.ecolind.2021.107460
[27] Alam, M.M., Murad, M.W., Noman, A.H.M., et al., 2016. Relationships among carbon emissions, economic growth, energy consumption and population growth: Testing Environmental Kuznets Curve hypothesis for Brazil, China, India and Indonesia. Ecological Indicators. 70, 466–479. DOI: https://doi.org/10.1016/j.ecolind.2016.06.043
[28] Hao, Y., Liu, Y.M., 2015. Has the development of FDI and foreign trade contributed to China's CO2 emissions? An empirical study with provincial panel data. Natural Hazards. 76(2), 1079–1091. DOI: https://doi.org/10.1007/s11069-014-1534-4
[29] Zhu, Q., Peng, X., 2012. The impacts of population change on carbon emissions in China during 1978–2008. Environmental Impact Assessment Review. 36, 1–8. DOI: https://doi.org/10.1016/j.eiar.2012.03.003
[30] Zhang, X., Lau, C.K.M., Li, R., et al., 2024. Determinants of carbon emissions cycles in the G7 countries. Technological Forecasting and Social Change. 201, 123261. DOI: https://doi.org/10.1016/j.techfore.2024.123261
[31] Chandran Govindaraju, V.G.R., Tang, C.F., 2013. The dynamic links between CO2 emissions, economic growth and coal consumption in China and India. Applied Energy. 104, 310–318. DOI: https://doi.org/10.1016/j.apenergy.2012.10.042
[32] Liu, X., Wahab, S., Hussain, M., et al., 2021. China carbon neutrality target: revisiting FDI-trade-innovation nexus with carbon emissions. Journal of Environmental Management. 294, 113043. DOI: https://doi.org/10.1016/j.jenvman.2021.113043
[33] Wang, B., Sun, Y., Chen, Q., et al., 2018. Determinants analysis of carbon dioxide emissions in passenger and freight transportation sectors in China. Structural Change and Economic Dynamics. 47, 127–132. DOI: https://doi.org/10.1016/j.strueco.2018.08.003
[34] Lin, B., Xu, B., 2018. Growth of industrial CO2 emissions in Shanghai city: Evidence from a dynamic vector autoregression analysis. Energy. 151, 167–177. DOI: https://doi.org/10.1016/j.energy.2018.03.052
[35] He, J., Yue, Q., Li, Y., et al., 2020. Driving force analysis of carbon emissions in China's building industry: 2000–2015. Sustainable Cities and Society. 60, 102268. DOI: https://doi.org/10.1016/j.scs.2020.102268
[36] Beibei, S., Guiyim, Z., Nan, L., 2024. Does economic growth targets setting lead to carbon emissions? An empirical study from China. Journal of Environmental Management. 368, 122084. DOI: https://doi.org/10.1016/j.jenvman.2024.122084
[37] Dickey, D.A., Fuller, W.A., 1979. Distribution of the estimators for autoregressive time series with a unit root. Journal of the American Statistical Association. 74(366a), 427–431. DOI: https://doi.org/10.1080/01621459.1979.10482531
[38] Im, K.S., Pesaran, M.H., Shin, Y., 2003. Testing for unit roots in heterogeneous panels. Journal of Econometrics. 115(1), 53–74. DOI: https://doi.org/10.1016/S0304-4076(03)00092-7
[39] Pedroni, P., 1999. Critical values for cointegration tests in heterogeneous panels with multiple regressors. Oxford Bulletin of Economics and Statistics. 61(S1), 653–670. DOI: http://doi.org/10.1111/1468-0084.0610s1653
[40] Pedroni, P., 2004. Panel cointegration: asymptotic and finite sample properties of pooled time series tests with an application to the PPP hypothesis. Econometric Theory. 20(3), 597–625. DOI: https://doi.org/10.1017/S0266466604203073
[41] Nkoro, E., Uko, A.K., 2016. Autoregressive Distributed Lag (ARDL) cointegration technique: application and interpretation. Journal of Statistical and Econometric Methods. 5(4), 63–91.
[42] Dumitrescu, E.I., Hurlin, C., 2012. Testing for Granger non-causality in heterogeneous panels. Economic Modelling. 29(4), 1450–1460. DOI: https://doi.org/10.1016/j.econmod.2012.02.014
[43] Granger, C.W., 1969. Investigating causal relations by econometric models and cross-spectral methods. Econometrica. 37(3), 424–438. DOI: https://doi.org/10.2307/1912791
Downloads
PDF
License
Copyright (c) 2025 Chuwei Zhang, Paul Anthony MariaDas, Yamunah Vaicondam
This work is licensed under a Creative Commons Attribution 4.0 International License.
