THE IMPACT OF GLOBALIZATION ON CO2 EMISSIONS IN CHINA

Abstract

This paper examines the environmental kuznets curve (EKC) hypothesis for China in the presence of globalization. We have applied Bayer and Hanck combined cointegration test as well as the auto regressive distributed lag (ARDL) bounds testing approach to cointegration by accommodating structural breaks in the series. The causal relationship among the variables is investigated by applying the vector error correction method (VECM) causality framework. The study covers the period of 1970–2012. The results confirm the presence of cointegration among the variables. Furthermore, the EKC hypothesis is valid in China both in short and long runs. Coal consumption increases carbon dioxide (CO2) emissions significantly. The overall index and sub-indices of globalization indicate that globalization in China is decreasing CO2 emissions. The causality results reveal that economic growth causes CO2 emissions confirming the existence of the EKC hypothesis. The feedback effect exists between coal consumption and CO2 emissions. CO2 emissions Granger causes globalization (social, economic and political).