Macroeconomic Drivers Of Growth And Innovative Environmental Solution In China

Global warming and climate change are the most heat debated issues among researchers,public and political leaders around the globe with great concerns.Intergovernmental panel on climate change(IPCC)has pointed out that climatic change is raising sea level,increasing death threats of millions,melting ice from glaciers and rising average temperature around the globe.Researchers have projected economic loss from global warming will be higher than that of World War ? and World War ?.International Energy Agency has reported that energy consumption accounts 80%of CO2 emissions worldwide that is major source of global warming,thus,any effort to reduce pollution emissions will involve energy sector.On the other hand,this energy is life of an economy.China is world second largest economy with rapid economic growth and being industrialize economy,China's growth and development is energy dependent and this high energy consumption causes pollution emissions that is certainly undesirable.China is the highest CO2 emitters in World i.e.approx.29.4%of world CO2 injection is from China.This amount of carbon dioxide emissions is higher than the combination of European Union and United States.It means reduction in pollution emissions from China is not only beneficial for China but for the rest of world.Knowing the sensitivity and need for Chinese economy,an effort has been made in this thesis to find the relation between real GDP,carbon dioxide emissions,foreign direct investment,stock of capital,industrialization,urbanization,energy consumption and tourism to offer policy suggestions for pollution reduction from China.In other words,macroeconomic derivers for growth and pollution have been investigated for policy suggestions.30 Chinese provinces data has been utilized for the period of 2000-2014 according to availability for panel analyses and additionally,time series data for period of 1971-2013 has been used.In the presence of unit roots in panel data,Pedroni heterogeneous as well as Kao tests have been used that confirm co-integration among variables.Fully modified OLS results reveal that industrialization,energy consumption,domestic investment,foreign direct investment,urbanization and tourism are positively contributing to the growth and development of China while pollution emissions was having negative significant impact on the growth and development of China.Later results show that initially increase in economic growth raises pollution emissions,however,in long run,this relation turns to inverse and insignificant that confirm the validity of environmental Kuznets curve and insignificancy gives impression that only growth dependency to overcome pollution will not be an appropriate choice for China but multiple policies are needed.By introducing cubic form in model,results reveal N-shaped relation between pollution emissions and economic growth.Foreign direct investment was not only directly supporting to the growth and development but it was decreasing pollution emissions in long run confirming FDI inflow in China is environmental friendly and investors are bringing environmental friendly technologies.Results depict direct effects of domestic investment on pollution are severe,however,indirectly,domestic investment was supportive to reduce pollution emissions as being the part of real GDP,it was having highly significant role in growth and development where environmental Kuznets curve validity confirm growth and development helps to overcome pollution.Energy consumption was found sourcing pollution emissions that demand to increase renewable energy share to maintain growth and development as well to reduce pollution.Interestingly,tourism industry was not only supportive in the growth and development of China but it was helping to reduce pollution emissions.Causality results show bidirectional causality between energy consumption and economic growth,economic growth and CO2 emissions,bidirectional causality between energy consumption and CO2 emissions,CO2 emissions and FDI.Bi-directional causality between domestic investment and income,foreign investment and income were also found.Regional analyses reveal several interesting facts with variation from western,central and eastern regions.Time series analysis based on ARDL model support panel data results.Each result has been robustify at least in one other method before reaching to conclusion.Policy suggestions are given on the basis of results.