Relationship between energy consumption, economic growth and environmental pollution in China

Highlights

• Effects of both traditional and modern energies was analyzed in this research.

• Some advanced methods of production were discussed that can be used in this era of industry 4.0.

• By proper implementation of such processes, many economic and environmental benefits can be achieved.

Abstract

In recent days, many emerging nations facing severe environmental pollution problems. In order to overcome the environmental problems, many new methods and strategies have been built and some advance sources of energies were also utilized in order to overcome such issues but by using such sources, many challenges were faced. In order to find best possible solutions of such issues, this paper was aimed to minimize the gap of research by examining the effect on economic development of energy expenditure and environmental pollution and by means of finding the casual relationship between them because it has been observed that with development of economy, environmental issues always increase. Effects of both traditional and modern energies was analyzed in this research. Several explanatory variables will be used: Renewable energy consumption, CO₂ emission, economic GDP. Environmental pollution will be taken as the mediating factor that influence this association between energy utilization as well as economic development. Present study was based on the economy of China. ARDL regression model was applied in this research to increase the time series econometrics when non-stationary value demonstrated the co-integration and it is also effective for both stationary and non-stationary time series. At the end, some advanced methods of production were discussed that can be used in this era of industry 4.0. By proper implementation of such processes, many economic and environmental benefits can be achieved.

Introduction

As, economics is the proper allocation of resources (Shuqair, 2014) so economic growth always relies on resources (Ranis and Ramirez, 2000), and According to (Danish et al., 2019); (Jorgenson, 2012) resources use energy ultimately contributes to the pollution of the atmosphere. The world has faced difficulties in recent decades in seeking a solution for balancing sustainable economic growth and environmental harm (Chol, 2020). With the industrial revolution, significant energy use, at least from the perspective of the resource endowment theory, has followed economic growth around the world (Stern, 2010). However, economic growth, in addition to energy use, necessarily brings on different environmental issues (Luo et al., 2020). Greenhouse gas emissions is one of the major problems in developing and emerging countries (ABDOLLAHI, 2020). Most of the industries consume electric energy (Javied et al., 2016); (Duasa, 2007) and main source of electric energy is fossil fuel (ABDOLLAHI, 2020), and output of fossil fuel is CO₂ emission (Rennkamp et al., 2017). There are many challenges, like the scale and economic composition (Khodier and Dallison, 2018), in particular, in comparison to primary industries and manufacturing, the share of services in the gross domestic product (GDP) and technical transition potentials to minimize environmental consequences of output and consumer choices, while driving economic growth (Morgan, 2020), (Aguilar-Hernandez and Tukker, 2020).

For a variety of factors, Capital of Natural resources is separate from other capital forms (Jamel and Derbali, 2016). Many researchers (Lange and Santarius, 2020); (Afonso et al., 2020) agreed that economic growth creates technological change by replacing dirty and obsolete technology with improved and safer technologies that enhance environmental quality. Comprehensive prior researches (Jiang, 2020); (Mrabet, 2017); (Riti et al., 2017); (Zhang et al., 2017) have shown that the results of economic development on environmental contamination can typically be categorized into different relationships: an inverted U-shaped linkage, a monotonically increasing relationship, a U-shaped connection as well as an N-shaped connection. The long-term association among profitable development in addition to the quality of the environment can be direct, reversed, or a combination of both (Zarenejad, 2012). The correspondence between environmental impacts and economic expansion is popular as the environmental Kuznets curve (EKC) in the literature of environmental economics (Bhatt, 2012); (Gill and Hassan, 2018); (Kotosz, 2020). The EKC indicates that with per capita revenue, environmental pollution initially increases (Allard, 2018).

As sustainable as well as traditional energy use has an optimistic impact on the growth of economy, therefore all forms of energy sources are important for the growth of economy (Armeanu, 2019). Adams et al. found that a 10 percent increase in non-renewable energy usage would lead to a 2.11 percent increase in growth, while a 10 percent rise in renewable energy usage would determine a 0.27 percent increase in growth (Adams and Klobodu, 2018). But non-renewable energy has negative impacts on environment (Chen et al., 2019) therefore, the production and use of renewable energy resources is especially important for resolving environmental issues and achieving sustainable growth (Hao, 2020). Decades of rapid economic growth have enlarged China's energy needs dramatically (Wang et al., 2018). China is also the world's largest electricity user (Tahir et al., 2020), the largest coal producer and consumer (Guo et al., 2020), and the main carbon dioxide emitter. As Huang (2020) pointed out as China's improvement and opening up, the pattern of industrial development in addition to urbanisation has been progressing gradually, and the wealth has been raising at a ‘miracle’ pace.

According to (Jiang, 2019), by facing with the challenge of saving electricity and reducing greenhouse emissions, China is aggressively pursuing an innovation-driven growth plan. The impact of technical progress on energy savings and the elimination of carbon emissions in China are also worth exploring (Zhang and Yin, 2020). (Gao et al., 2002) research increase the energy consumption and its influence in environment for the economic development of shanghai. The increase in mass production will increase the energy consumption and improves the quality of human lifelines. The pollution problem mainly caused due to coal and petroleum burning so the carbon emission is reduced to control the air pollution in shanghai, china.

However according Salahuddin et al. (2018), from so many years, the international demographic shifts from rural to urban centres have begun to grow from 39.1% in 1980 to 52.2% in 2011. The urbanisation transforms the city therefore into a centre for commercial, skilled and rapid economic growth (Rjoub, 2020). As Abdollahi suggested in 2020, the situation is made more complicated by considering the association amony the degree of lucrative growth as well as the dysfunctional environment of greenhouse gas releases in developing countries. Thus, all countries should be mindful of these relations in order to bear witness to sustainable growth and climate issues (Morgan, 2020). The goal of the following paper is therefore to examine the association amongst energy usage and the unstable environment in developed countries. Kareem et al. highlighted that solutions of the issues related energy and environmental deprivation would require the use in the development and use of energy-saving and sustainable activities, as well as the advent of technological developments that will reduce energy demand per unit of yield (reducing power strength or increasing energy competence).

In many countries, observational researches on the causality of energy use, CO₂ pollution and lucrative development have produced contradictory outcomes. Ke et al. said that the higher the technical development, the greater will be the amount of pollution of the atmosphere in regions with more sophisticated economic growth. The ecological environment level is well below average in central and eastern China. The rapid demographic and economic growth in China has resulted in a noteworthy rise in energy and carbon utilization between 1978 and 2012 (Mortazavi and Yousefi, 2019). In order to reuduce carbon footprints from environment, many countries are using some other energy sources in production but still these sources cannot be used on large scale because of some challenges. It has been observed that they are not so efficient at the moment, lead time is also increased by using such sources and other pollutants are also found in environment i.e. by using NH₃ (Ammonia), emissions of NO (Nitrogen oxide) are observed which is also a poisonous gas and impacts on human health (Zhou and Ge, 2018). It can be said that by reducing the carbon emission is not only solution to get clean environment, there is need to reduce the impacts of other pollutants as well.

Some othere issues are also faced by using renewable energy sources like high production costs and laed times that negatively impacts on GDP. Sometimes supply of some renewable energy sources like hydrogen is also an issue, which is also a challenge in some aspects of economics as well as environment. There is need to critically analyze such issues and find a feasible solution. The ARDL model is simple ordinary least square (OLS) model, with a missed order of integration for both time series analysis and non-stationary time series analysis. It also used as the important model for dynamic single equation regressions.

Environmental pollution problem is the serious issue faced by all over the nation. Several methods and strategies are built and the advanace sources of energy are utilized but still so many challenges were faced. In order to overcome the above mentioned problems, main contribution of this paper is to minimize the gap of research by examining the consequence on lucrative development of energy usage as well as environmental effluence and by finding the casual relationship between them because it has been observed that with development of economy, environmental issues always increase. Effects of both traditional and modern energies will be analyzed in this research. Several explanatory variables will be used: Renewable energy consumption, CO₂ emission, economic GDP. Environmental pollution will be taken as the mediating factor that influence this connection amongst energy utilization and economic development. Following study would be based on the economy of China. We discussed some advanced methods of production which were used in the era of industry 4.0 to achieve economic and environmental benefits.