Is China Growing Dirty? A Cointegration Analysis with Structural BreaksMustafa Naimoğlu, Sefa Özbek
Economic growth and development are some of the most important macroeconomic targets for national economies. Many ways exist for achieving these goals, and ensuring sustainability has a very important place. How much economic growth and development need to contribute to increasing human welfare, the quality and characteristics of growth in a national economy become important. This study examines the relationships among energy consumption, trade liberalization, economic growth, and CO2 emissions over the sample period of 1971-2018 in the Chinese economy, which saw a 393.64% per capita increase in energy use, 3,180.01% increase in gross domestic product per capita, and 610.515% increase in CO2 emissions per capita in 2018 compared to 1971. The study first tests the stationarity of the variables using the Zivot and Andrews (1992) unit root tests with structural breaks. The presence of long-term relationships among the variables was investigated using the Gregory and Hansen (1996) cointegration test, which includes structural breaks in the model. The short- and long-term coefficient estimations were analyzed using the Full Modified Ordinary Least Squares (FMOLS) and canonical cointegration regression (CCR) methods. Estimates for the short- and long-term coefficients were analyzed using the FMOLS and CCR methods. The results show that economic growth and energy consumption increase CO2 emissions in the short and long term. Therefore, pollution growth is determined to have taken place in China. This result stands out as an important problem in China. The high level of CO2 emissions in China and the fact that this problem has a significant weight on a global scale removes the problem from being local. Therefore, politicians need to take concrete steps immediately to solve this problem.
Çin Kirli mi Büyüyor? Yapısal Kırılmalı Eşbütünleşme AnaliziMustafa Naimoğlu, Sefa Özbek
Ekonomik büyüme ve kalkınma ülke ekonomilerinin en önemli makroekonomik hedefleri içerisinde yer almaktadır. Bu hedefin gerçekleştirilmesinde birçok yol bulunmakta ve sürdürülebilirliğin sağlanması çok önemli bir yer tutmaktadır. Ekonomik büyüme ve kalkınmanın insan refahının artışına katkı sağlamasının gerekliliği değerlendirildiğinde, ülke ekonomilerinde büyümenin niteliği ve özelliği önem arz etmektedir. Bu çalışmada 1971 yılına göre 2018 yılında kişi başı enerji kullanımını %393.64, kişi başı gayri safi yurt içi hasılasını %3180.01 ve kişi başı karbondioksit emisyonunu ise %610.51 artıran Çin ekonomisinde 1971-2018 örneklem döneminde enerji tüketimi, ticari serbestleşme, ekonomik büyüme ve CO2 emisyonu arasındaki eşbütünleşme ilişkisinin varlığı araştırılmaktadır. Çalışmada ilk olarak yapısal kırılmalı Zivot ve Andrews (1992) birim kök testi aracılığıyla değişkenlerin durağanlığı sınanmaktadır. Değişkenler arasındaki uzun dönemli ilişkinin varlığı ise yapısal kırılmaları modele dahil eden Gregory ve Hansen (1996) eşbütünleşme testi ile araştırılmaktadır. Kısa ve uzun dönem katsayı tahmini ise FMOLS ve CCR yöntemleri ile incelenmektedir. Bulgular; ekonomik büyüme ve enerji tüketiminin karbondioksit emisyonunu kısa ve uzun dönemde artırdığını göstermiştir. Dolayısıyla Çin’de kirli büyümenin gerçekleştiği sonucuna ulaşılmaktadır. Bu sonuç Çin’de önemli bir sorun olarak öne çıkmaktadır. CO2 emisyonunun Çin’de yüksek düzeyde seyretmesi ve küresel ölçekte bu sorunun önemli ağırlığa sahip olması sorunu yerel olmaktan çıkarmaktadır. Dolayısıyla politikacıların bu sorunun çözümü için ivedilikle somut adımlar atması gerekmektedir.
Many theories are found in the economic literature about economic growth. The most important of these are the neoclassical growth model and endogenous growth models. Endogenous growth theory has questioned assumptions such as the need to include technology as an exogenous variable in the neoclassical model, the validity of the convergence hypothesis without active policies, the presence of decreasing returns to scale in production factors, and the presence of constant returns for the production function. The endogenous growth model started occurring in the economics literature with Romer’s (1986) study. Acceptance of the endogenous growth model and its most important difference compared to the neoclassical model involves the technology factor. According to this model, technology is not an external factor, but one that gets internalized through research and development and human capital. In other words, it links economic growth to factors within the system. A qualified workforce is given importance in endogenous growth models. Thus, this emphasizes the need to increase the knowledge and qualifications of the human capital that are able to use technology, and the human capital investment ratio gains importance. Increases in the impacts from globalization have caused countries’ economies to grow; however, whether or not this growth causes environmental pollution is a topic often discussed. Pollution growth occurs alongside economic growth when this economic growth causes air pollution and environmental degradation for whatever reasons. This situation negatively affects the sustainability of the economic growth and development process.
Many studies are found on the relationships between CO2 emissions and other macroeconomic variables. However, these studies are seen to have mostly examined this within the scope of Kuznets curve. The relationship between CO2 emissions and economic growth is seen to have been frequently examined, especially using various forms of the environmental Kuznets curve. These studies are seen to have investigated the validity of the inverse-U relationship using the variables of CO2 emissions, per capita income, and per capita income squared (square form). Another model related to the validity of the environmental Kuznets curve is seen in studies that have investigated the validity of the cube of per capita income. When examining the relationships between environmental quality and other macroeconomic indicators, the variable of CO2 emissions is seen to have been frequently used as an environmental quality indicator (environmental degradation). With regard to environmental variables, variables such as carbon footprint, ecological footprint, biomass, and solid waste are seen to have been frequently used alongside CO2 emissions.
This study empirically discusses the long-term relationships among economic growth, energy consumption, trade liberalization, and CO2 emissions in the Chinese economy during the 1971-2018 period. The model used in the empirical analysis is shown in Eq. 1:
where lnCO2t is the natural log of carbon dioxide emissions in metric tons per capita, lnGDPt is the natural log of GDP per capita, lnEKt is the natural log of energy use in oil equivalent per capita, and lnTSt is the natural log of trade liberalization in percentage of total trade in GDP. Data on energy consumption and CO2 emissions were compiled from the International Energy Agency and World Bank databases. Data on GDP per capita and trade liberalization were obtained from the World Bank database. The study has tested the stability of the variables using the Zivot and Andrews (1992) test, which allows for structural breaks. The cointegration relationship among variables was revealed using the test Gregory and Hansen (1996) proposed. Lastly, the short- and long-term coefficient estimations were made using the FMOLS and CCR methods.
The presence of long-term relationships among the variables was investigated using the Gregory and Hansen (1996) cointegration test. The findings show the presence of a cointegration relationship. FMOLS and CCR estimators were used to estimate the cointegration coefficient, with economic growth and energy use being concluded to have a positive effect on CO2 emissions. Energy use was observed to have a greater effect on CO2 emissions compared to economic growth. This situation shows that China is unable to provide energy efficiency while achieving economic growth. Meanwhile, the highest percentage regarding energy use occurs with fossil fuels; thus, CO2 emissions have been concluded to increase during economic growth and environmental degradation to occur. While this situation poses a significant problem for China in particular, it may also become an important problem globally given that China produces a significant percentage of CO2 emissions worldwide. Great importance is had in having policy makers encourage the use of renewable environmentally friendly energy in place of fossil fuels, both for the future of China and of the rest of the world.