The Relationship Research On Economic Growth, International Trade And Carbon Emissions In China

A broad consensus exists that global warming is caused by increasement ofhumanity’s greenhouse gas emissions, which poses a serious threat to sustainabledevelopment of economic, social and environment. With continuously push forward thereform and opening up, China has achieved economy and international trade rapiddevelopment, and now become the world’s second-largest economy and the largestgoods trade country. But at the same time, we should pay attention to the negativeeffects: resource scarcity, destruction of ecological environment, etc. In the case of CO2emissions, China surpassed the US in2005and became the world’s largest carbonemitter. In2011, Chinese CO2emissions accounted for approximately25.380%ofworld’s total emissions. In this context, this paper attempts to do deep analysis on thelinks between economic growth, international trade and CO2emissions. The main worksas follows:Firstly, this paper develops a neoclassical growth model and two endogenousgrowth models, which incorporate natural resources and environmental pollution factors.In general equilibrium framework, we investigate whether optimal balanced growthpath exists and its existing conditions, as well as the effects of output elasticity, humancapital efficiency coefficient, consumer preference parameters and the index ofpollution control degree on optimal balanced growth path.Second, we explore the bidirectional relationship between economic growth andCO2emissions, and test and the EKC hypothesis for China’s CO2emissions byeconometric methods. Since the test results for EKC hypothesis is much susceptible tothe data, model and methods’ selection, so in this paper, the above problems have beenanalyzed from various aspects. Such as different data types (national level time seriesdata from1960to2011,30provincial panel data from1995to2011), differenteconometric model (single equation model, simultaneous equation model), differentlevel (national level, grouping level based on the results of panel threshold regression),different quantitative methods (bounds test, auto regressive distributed lag model, threestage least squares estimation, fixed effects model and random effects model).Finally, the paper empirically analyzes the links between international trade andCO2emissions. This work is based on Grossman and Krueger, who analyze theenvironmental effect decomposition framework of trade. Then by building the simultaneous equation model and taking joining WTO as critical point, wecomparatively analyze the effect differences of international trade on CO2emissions fortwo stages by introduce the time dummy variable. Then we calculate the value of scaleeffect, composition effect and technological effect. Based on the analysis ofsimultaneous equation model, this paper develops a new econometric model to test thefactor endowment hypothesis (FEH) and pollution heaven hypothesis (PHH) at the sametime. The main findings can be summarized as follows:First, the sustainable development can not be achieved in neoclassical growthmodel. However, when satisfying some conditions it is possible to achieve sustainabledevelopment between economy and environment in human capital model as well as inendogenous growth model which including human capital and R&D factors.Second, based on the estimation results for economic growth and CO2emissionsby using national level time series data, we can get that there exists long-run stablecointegration relationship both in output equation and pollution equation. There is aninverted N-shaped relationship between Chinese CO2emissions and income both inlong-run and short-run. Moreover, since the income level corresponding to the firstturning point is very low and all samples are far larger than this value, therefore therelationship between CO2emissions and income is inverted U shape, namely that theresults support the EKC hypothesis for carbon emissions in China.Third, based on the estimation results for economic growth and CO2emissions byusing national level panel data, we can get that there is still an inverted N-shapedrelationship between economic growth and CO2emissions. But at present there has abidirectional interaction between them, i.e., economic growth have negative effect oncarbon emissions, at the same time, carbon emissions reduction will have adverseimpact on economic growth. The industrial structure, trade openness and urbanizationlevel have negative impact on carbon emissions, but the effect of energy intensity,primary energy consumption structure and environmental regulation are just theopposite.Forth, based on grouping level the results for EKC study show that: According tothe threshold regression result Chinese provinces can be divided into seven groupswhen using urbanization level and industrialization level as the grouping variables. Foreach group CO2emissions and income are all inverted N-shape, but for each group, theper capita income level and the year for reaching the turning point both have significantdifferences, and the effect on CO2emissions for the same variable exists difference also. The economic development path for China can be divided into4stages: initial stage,transitional stage one, transitional stage two and late stage. Among four stages ofeconomic development path, the transitional stage one has serious environmentalproblems, and at present17provinces are at this stage. Therefore, on the whole Chinafaces the severe problem of CO2emissions.Fifth, the results for research on the relationship between international trade andCO2emissions suggest that: After joining WTO, the scale effect and the absolute valueof technological effect have increased, while composition effect has decreased.However, the adverse impact of international trade on CO2emissions has increased. Thereason is that environmental deteriorations result from scale effect is larger than the sumof beneficial impacts from composition effect and technological effect. The FEH andPHH have both passed the test, but environmental regulation plays the leading role, sothe compositon effect has negative impact on CO2emissions.For the conclusions from theoretical and empirical analysis, this paper putsforward the policy suggestions regarding China’s carbon emission reduction from theperspective of industrial structure, energy intensity, primary energy consumptionstructure, urbanization, environmental regulation and international trade.