The Relationship between Carbon Dioxide Emission Intensity and Economic Growth in China: Cointegration,Linear and Nonlinear Granger Causality

This study is to use cointegration, linear and non-linear Granger causality test to investigate the relationship between carbon dioxide (CO₂) emissionand economic growth (GDP) in China for the period 1961-2010. Our analysis shows that CO₂ emission and GDP are balanced in the long-run. The results suggest that there is evidence that economic development can improve environmental degradation in the long-run. Moreover, the result of linear and non-linear Granger causality test indicates a long-run unidirectional causality running from GDP to CO₂ emissions. The study suggests that in the long run, economic growth may have an adverse effect on the CO₂ emissions in China. Government should take into account the environment in their current policies, which may be of great importance for policy decision-makers to develop economic policies to preserve economic growth while curbing of carbon emissions.