An Econometric Investigation of Dynamic Linkages Between CO2 Emissions, Energy Consumption, and Economic Growth: A Case of India and China

Abstract

The article investigates the co-integrating relationship between economic growth, energy, and environment for India and China for the period 1970–2014 (using log transformed yearly data). Whereas gross domestic product per capita is taken as the growth proxy, CO2 emissions per capita represents environmental degradation and fossil fuel consumption is the proxy for energy consumption. The methodology adapted is autoregressive distributed lag “F” Bounds test with single structural break. The results of the study showed that co-integrating relation was established among all the variables except when CO2 (China) is taken as dependent variable. The “error correction model” term was negative and significant in all the cases (except for CO2 China again). Further the speed of adjustment toward equilibrium was highest at 16% per annum (p.a.) for CO2 in India while it was between 3% and 8% p.a. for rest of the variables. Chow breakpoint test even confirmed that India CO2 emissions had a break in 1996.