Research On Relationships Among Economy, Trade And Environment In Shanxi Province

Relationship between economic growth and environmental quality has been alwaysan important topic for sustainable development studies. As a typical resource-based areaand a crucial raw material and energy base in China, Shanxi Province has madeimportant contributions to national energy supply and modernization. Nevertheless,economic growth has become remarkably characterized by environmental pollution dueto extensive economic growth pattern of “pollution first and treatment afterwards” whileenvironment has become the major issue that restricts sustainable economicdevelopment in Shanxi Province. During the integration of world economy, tradeimposes increasingly significant impacts on the degree of environmental pollution in allcountries and areas. Therefore, correct understanding of the relationships amongeconomy, trade and environment is critical for selecting proper strategies for economicdevelopment in Shanxi Province.Based on a simultaneous-equation model, this paper discussed the mechanism ofinteractions among economy, trade and environment from the perspectives of economicgrowth, environmental pollution, foreign trade and environmental regulation. TakingShanxi Province as an example, the author conducted an empirical study by three-stageleast squares of econometrics. As to pollution indexes, six categories of indexes wereselected for pollution emissions from1999to2012in Shanxi Province. Besides,composite pollution indexes that reflected overall environmental pollution of ShanxiProvince were estimated by analyzing principal components.There were several findings as follows. Firstly, the composite indices ofenvironmental pollution were increasing year by year in Shanxi Province before2005,whereas it has been decreasing since2006and the environment has been improved tocertain extent. Secondly, the economic growth will be negatively impacted in ShanxiProvince with the deterioration of environmental quality. Meanwhile, environmentalquality isn’t considered to automatically improve with economic development sincethere are no environmental Kuznets curves (EKC) for Shanxi Province. To improveenvironmental quality, it is necessary to transform the mode of economic growth,promote the upgrading of industrial structure and technical advancement, and optimizeimport and export structure. Thirdly, the “pollution haven” hypothesis is rejected inShanxi Province as the optimization of foreign trade structure has positively facilitated the improvement of environmental quality in recent years. Positive effect has beenimposed on trade to certain extent as environmental regulation is enhanced.Regarding interactions and relationships among current economy, trade andenvironment in Shanxi Province, this paper proposed policies and suggestions forsustainable development in the province, such as transforming mode of economicgrowth, promoting upgrading of industrial structure, implementing effectiveenvironmental regulation, encouraging public participation in environmental protection,optimizing import-export structure, attaching importance to quality of foreigninvestment, reinforcing investment in science and technology, and encouragingtechnological innovation.