Does economic growth stimulate energy consumption? New evidence from national and regional levels in China

Abstract

A detailed investigation of the nexus between economic growth and energy use is imperative for formulating sustainable development policies. In this study, we examine panel cointegration and causality relations among economic growth, energy use, capital stock, and labor in 30 Chinese provinces between 2000–2019. We conduct a comprehensive empirical analysis based on panel modeling and a neoclassical production function. The findings of the second-generation panel unit root and co-integration tests reveal that these variables have long-term co-integration linkages. We then perform a panel cointegration estimation using the fully modified ordinary least squares technique and find that total energy consumption, electricity consumption, capital stock, and labor significantly influence economic growth at the national and regional levels in China. Moreover, the outcomes of the Dumitrescu-Hurlin causality test indicate the existence of a two-way causal nexus between economic output and total energy consumption at the national level, but only a causal link from GDP to total energy use in the eastern and central regions. Conversely, a causality from total energy use to economic output is identified in the western region. Finally, we provide policy implications for the sustainable development of both energy and the economy at the national and regional levels.