Unravelling the Determinants of Economic and Environmental Sustainability in China: New Insights from Aggregated and Disaggregated Data

Abstract

Though economic growth has been accompanied by massive energy consumption in China, the empirical studies on the determinants of economic and environmental sustainability are still scanty. Hence, our study fills this research gap by unravelling the determinants of economic growth and environmental quality using the time series data of China as well as the panel data of 30 Chinese provinces. It deploys the panel econometric techniques that consider cross-sectional dependence such as Westerlund cointegration test and Augmented Mean Group (AMG). The empirical results show that energy consumption promotes economic growth but also intensifies carbon dioxide (CO2) emissions in the entire China and in most Chinese provinces. CO2 emissions positively influence economic growth in the entire China and in some Chinese provinces. Though innovation enhances economic growth, it has tenuous impact on environmental quality in China. There is no evidence to show that investment in environmental governance can enhance economic and environmental sustainability, which implies that government intervention has not achieved the desired goal of sustainable economic development in China. The analysis of the determinants of economic and environmental sustainability unravels the sustainable development pattern in China. Based on the empirical evidence, this research recommends some policy options.

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