FFA Working Papers 2:003 (2020)608

The impact of renewable energy and technology innovation on Chinese carbon dioxide emissions

Janda Karel, Binyi Zhang

Understanding the influencing factors of carbon dioxide emissions is an essential prerequisite for policy makers to maintain sustainable low-carbon economic growth. Based on the Autoregressive Distributed Lag Model (ARDL) and Vector Error Correction Model (VECM), we investigate the relationships among economic growth, carbon emission, financial development, renewable energy consumption and technology innovation for China for the period 1965-2018. Our empirical results confirm the presence of a long run relationship among the underlying variables. Our long run estimates show that financial development has negatively significant impacts on carbon emissions, whereas renewable energy and technology innovation have limited impacts on carbon mitigations. In addition, the short run Granger causality analysis reveals that renewable energy consumption has a bidirectional Granger causality with carbon emissions and technology innovations. In the short run, we find that financial development can positively effect China’s carbon mitigation indirectly, via the channels of renewable energy sources and technology innovations. Our results have a number of public policy implications for Chinese policy makers to maintain sustainable low carbon economic development: (i) establish a green finance market to mobilize the social capital into green industry; (ii) continue the environmental law enforcement to control for carbon emissions among energy-intensive industries; (iii) provide government fiscal incentives to promote renewable energy sources on both supply and demand sides of the market.

Keywords: Financial development, Carbon emissions, ARDL, China
JEL classification: K32, O13, P28

Received: January 1, 2020; Revised: January 1, 2020; Accepted: January 1, 2020; Published online: January 1, 2020  Show citation

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Karel, J., & Zhang, B. (2020). The impact of renewable energy and technology innovation on Chinese carbon dioxide emissions. FFA Working Papers, 2, Article 2020.003. https://doi.org/10.XXXX/xxx.2020.004
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