Identifying the determinants and spatial nexus of provincial carbon intensity in China: A dynamic spatial panel approach

Zheng, Xinye and Yu, Yihua and Wang, Jing and Deng, Huihui (2013): Identifying the determinants and spatial nexus of provincial carbon intensity in China: A dynamic spatial panel approach. Forthcoming in: Regional Environmental Change (2014)

Abstract

Is emission intensity of carbon dioxide (CO2) spatially correlated? What determines the CO2 intensity at a provincial level? More importantly, what climate and economic policy decisions should the China’s central and local governments make to reduce the CO2 intensity and prevent the environmental pollution given that China has been the largest emitter of CO2? We aim to address these questions in this study by applying a dynamic spatial system-GMM (generalized method of moment) technique. Our analysis suggests that provinces are influenced by their neighbours. In addition, CO2 intensities are relatively higher in the western and middle areas, and that the spatial agglomeration effect of the provincial CO2 intensity is obvious. Our analysis also shows that CO2 intensity is nonlinearly related to GDP (gross domestic product), positively associated with secondary-sector share and FDI (foreign direct investment), and negatively associated with population size. Important policy implications are drawn on reducing carbon intensity.

• Item Type: MPRA Paper
• Language: English
• Keywords: Carbon intensity, Environmental Kuznets curve, Dynamic spatial panel
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C23 - Panel Data Models ; Spatio-temporal Models; O - Economic Development, Innovation, Technological Change, and Growth > O5 - Economywide Country Studies > O53 - Asia including Middle East; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q40 - General

References

Anderson T, Hsiao C (1982) Formulation and estimation of dynamic models using panel data. J Econom 18: 47–82

Anselin L (1991) Handbook of regional and urban economics: Peter Nijkamp, ed., Volume 1: Regional Economics (North-Holland, Amsterdam, 1986). Reg Sci and Urban Econ 21(1): 143–156

Anselin L (1995) Local indicators of spatial association – LISA. Geogr Analy 27: 93–115

Anselin L, Bera A, Florax R, Yoon M (1996) Simple diagnostic tests for spatial dependence. Reg Sci and Urban Econ 26: 77–104

Arellano M (2003) Panel data econometrics. Oxford University Press

Arellano M, Bond S (1991) Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. Rev of Econ Stud 58: 277–297

Arellano M, Bover O (1995) Another look at the instrumental variable estimation of error-components models J of Econom 68: 29–51

Baltagi B(2008) Econometric analysis of panel data. 4th edn., Chichester: John Wiley

Blundell R, Bond S (1998) Initial conditions and moment restrictions in dynamic panel data models. J Econom 87(1): 115–143

Burnett J, Bergstrom J (2010) U.S. state-level carbon dioxide emissions: A spatial-temporal econometric approach of the environmental Kuznets curve. Faulty Series #96031 from Department of Agricultural and Applied Economics, University of Georgia

Cai F (2008) Lewis turning point: A coming new stage of China’s economic development. Social Sciences Academic Press (China)

Chen S (2011) The carbon intensity’s downward fluctuation mode and economic explanations in China. World Econ 4: 124–143 (in Chinese)

Costantini V, Martini C (2006) A modified environmental Kuznets curve for sustainable development assessment using panel data. Working Papers 2006.148, Fondazione Eni Enrico Mattei

Dasgupta S, Laplante B, Wang H, Wheeler D (2002) Confronting the environmental Kuznets curve. J Econom Perspect 16(1): 147–168

Debarsy N, Ertur C (2010) Testing for spatial autocorrelation in a fixed effects panel data model. Reg Sci and Urban Econ 40: 453–470

Dinda S (2004) Environmental Kuznets curve hypothesis: A survey. Ecol Econ 49(4): 431–455

Du G, Cai Y, Li S (2010) The changing trend analysis of provincial carbon intensity from fossil energy in China between 1997 and 2007. Geogr and Geogr Inf Sci 5: 76–81 (in Chinese)

Du T, Mao F, Luo R (2007) An analysis of economic growth and CO2emission evolution. Chinese J Pop, Resour and Env 2: 94–99 (in Chinese)

Elhorst P (2010) Dynamic panels with endogenous interaction effects when T is small. Reg Sci and Urban Econ 40(5): 272–282

Elhorst P (2012) Dynamic spatial panels: models, methods, and inferences J Geogr Sys 14: 5–28

Fan D, Liu H (2012) The distribution characteristics and changes of provincial carbon intensity in China. J Xi'an Inst of Finan and Econ 3: 4–10 (in Chinese)

Fan Y, Liu L, Wu G, Tsai H, Wei Y (2007) Changes in carbon intensity in China: Empirical findings from 1980 to 2003. Ecol Econ 62(3-4): 683–691

Friedl B, Getzner M (2003) Determinants of CO2 emissions in a small open economy. Ecol Econ 45(1): 133–148

Galeotti M, Lanza A (2005) Desperately seeking environmental Kuznets. Environ Model and Soft 20(11): 1379–1388

Grossman G, Krueger A (1991) Environmental impacts of a North-American free trade agreement. NBER Working Paper 3914

Hansen L (1982) Large sample properties of generalized method of moments estimators. Econom 50: 1029–1054

Hsiao, C. (2003) Analysis of panel data. Cambridge University Press: Cambridge

Im S, Pesaran M, Shin Y (2003) Testing for unit roots in heterogeneous panels. J Econom 115: 53–74

Intergovernmental Panel on Climate Change (IPCC) (2007) IPCC fourth assessment report: climate change 2007. Cambridge University Press: Cambridge Jacobs J, Ligthart J, Vrijburg H (2009) Dynamic panel data models featuring endogenous interaction and spatially correlated errors. International Center for Public Policy (formerly the International Studies Program) Working Paper Series 0915, Andrew Young School of Policy Studies, Georgia State University

Kahrl F, Roland-Holst D (2006) China’s carbon challenge: Insights from the electric power sector (available at http://areweb.berkeley.edu/~dwrh/Docs/CCC_110106.pdf, accessed on March 14, 2013) Kukenova M, Monteiro J (2009) Spatial dynamic panel model and system GMM: A Monte Carlo investigation IRENE Working Papers 09-01, Irene Institute of Economic Research

Lee L-F, Yu J (2010) Estimation of spatial autoregressive models with fixed effects, J of Econom 154: 165–185

Levin A, Lin CF, Chu CSJ (2002) Unit roots tests in panel data: asymptotic and finite sample properties. J Econom 108: 1–24

Lin B, Jiang Z (2009) EKC forecasting and driving forces of China’s CO2. Manag Sci 4: 27–36

Lindsay H (2001) Global warming and the Kyoto Protocol. Environ Pol Iss (available at http://www.csa.com/discoveryguides/ern/01jul/overview.php, accessed on March 14, 2013

Liu L, Wang J, Wu G, Wei Y (2010) China’s regional carbon emissions change over 1997-2007. Inter J of Energy and Env 1: 161–176

Liu H, Zhao H (2012) The regional differences of CO2 intensity in China. Stat Res 6: 46–50 (in Chinese)

Millimet D, List J, Stengos T (2003) The environmental Kuznets curve: Real progress or misspecified models? Rev of Econ and Stat 85(4): 1038–1047

Moomaw W, Unruh G (1997) Are environmental Kuznets curves misleading us? The case of CO2 emission. Environ Dev Econ 4: 451–463

Moran, P (1950) Notes on continuous stochastic phenomena. Biometrika 37(1): 17–23

Narayan P, Narayan S (2010) Carbon dioxide emissions and economic growth: Panel data evidence from developing countries. Energy Policy 38: 661–666

Nickell S (1981) Biases in dynamic models with fixed effects. Econometrica 49: 1417–1425

Panayotou T (1993) Empirical tests and policy analysis of environmental degradation at different stages of economic development World Employment Programme Research Working Paper WEP2-22/WP 238

Panayotou T (2000) Economic growth and the environment. CID Working Paper 56, Harvard

Phillips P, Perron P (1988) Testing for a unit root in time series regression. Biometrika 75, 335–346

Roberts J, Grimes P (1997) Carbon intensity and economic development 1962-91: A brief exploration of the environmental Kuznets curve. World Dev 25: 191–198

SarganJ (1958)The estimation of economic relationship using instrumental variables. Econom 26: 393–415

Schmalensee R, Stoker T, Judson R (1998) World carbon dioxide emissions: 1950-2050. Rev Econ and Stat 80: 15–27

Soytas U, Sari R (2009) Energy consumption, economic growth, and carbon emissions: Challenges faced by an EU candidate member. Ecol Econ 68: 1667–1875

Stern D (2004) The rise and fall of the environmental Kuznets curve. World Dev 32: 1419–1439

Tisdell C (2001) Globalisation and sustainability: Environmental Kuznets curve and the WTO. Ecol Eon 39: 185–196

Wang C, Chen J, Zou J (2005) Decomposition of energy-related CO2 emission in China: 1957-2000. Energy 30: 73–83

Wei T, Glomsrod S (2002) The impacts of carbon tax on Chinese economy and CO2 emission. World Econ and Polit 8: 47–49

Wu L, Kaneko S, Matsuoka S (2005) Driving forces behind the stagnancy of China’s energy-related CO2 emissions, intensity change and scale change. Energy Policy 33: 319–335

____ (2006) Dynamics of energy-related CO2 emissions in China during 1980 to 2002: The relative importance of energy supply-side and demand-side effects. Energy Policy 34: 3549–3572

Yu H (2012) The determinants and spatial nexus of provincial energy consumption intensity in China. Resour Sci 7: 1353–1365 (in Chinese)

Yu Y, Zheng X, Zhang L (2011) Economic development, industrial composition, and CO2 intensity – A provincial panel data analysis in China. Econ Theory and Bus Manage 3: 72–81(in Chinese)

Yue C, Hu X, He C, Zhu J, Wang S, Fang, J (2010) An analysis of provincial carbon emissions and carbon intensity in China from 1995-2007 J of Peking Univ 46: 510– 516 (in Chinese)

Zeng X, Pang H (2009) The CO2 emissions, trends, and emission reduction measures of Chinese provinces. China Soft Sci (The Supplementary Issue) 8: 64–70 (in Chinese)

Zhao Y, Huang X, Zhong T (2011) The spatial evolution characteristics of CO2 intensity from energy consumption in China from 1999 to 2007. Env Sci 11: 3145–3152 (in Chinese)

Zheng X, Zhang L, Yu Y, Lin S (2011) On the nexus of SO2 and CO2 emissions in China: the ancillary benefits of CO2 emission reductions. Reg Environ Change 11: 883–891

Zheng X, Li F, Song S, Yu Y (2013) Central government’s infrastructure investment across Chinese regions: A dynamic spatial panel data approach. China Econ Rev 27: 264–276