Green energy investment, renewable energy consumption, and carbon neutrality in China

Abstract

This study investigates the dynamic impact of green energy investment and energy consumption on carbon emissions in China from 1995 to 2020. It employed the Bootstrap Autoregressive Distributed Lag method to examine the short and long-run relationship. The long-run findings indicate that green energy investment and renewable energy consumption decrease carbon emissions, whereas non-renewable energy consumption and economic growth increase carbon emissions in shorter and longer periods. The long-term reduction in carbon emissions may imply the transition toward carbon neutrality. However, the marginal contribution of renewable energy towards carbon neutrality is significantly higher than green energy investment due to investment lag effects. Moreover, the Error Correction Term (ECT) is significantly negative, authorizing the convergence towards steady-state equilibrium in case of any deviation with a 25% adjustment rate. The empirical results suggest that China should encourage green energy investment and increase the share of renewable energy sources to ensure carbon neutrality in the long run.