Is China at the tipping point? Reconsidering environment-economy nexus

Fei Li*, Eran Feitelson*, Yu Li*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

9 Scopus citations

Abstract

Environmental Kuznets Curve (EKC) has become the predominant approach between environmentalists and sociologists to modeling environment-economy nexus during the past quarter century, also with regard to China, the largest industrial pollutant emitter in the world, where unprecedented change offers a unique approach to the aggregate emissions. In the case of China the question is whether a tipping point can be reached without de-industrialization and at a lower income phase than in developed economies. It is also the worldwide intrinsic concern of environment-economy nexus in the prospective industrialization process of developing countries. However, China relative researches involve some existing challenges, such as cross-regional time series, various socioeconomic drivers, and turning thresholds. Taking the new normal China economy formulation into consideration, a rethink and reexamination of the environment-economy relationship was performed, using the longest possible environmental and economic data from 30 provincial economies for the period of 1985–2017. Different from the existing mostly time-series based China EKC literature, not only the LLC, IPS, Fisher unit root tests, Pedroni and Kao panel cointegration tests and the panel OLS are used, but, the problem of cross-sectional dependence is handled in panel unit root tests across various cross-economies, and the error-correction based cointegration test is employed, allowing for various forms of heterogeneity, robust against the cross-sectional dependence, and the DOLS estimators are applied to resolve the standard OLS for serial correlation and for endogeneity of regressors, especially in only small possible China samples. In particular, the finding contrasts with the overly optimistic research of certain scholars, who state that China could be on a clearly different path from the routes of some developed economies in the world, realizing the environmental turnaround at low levels of economy and industrialization. China economy is not just having a certain environmental “dividend effect”, but mainly faces a more significant environmental “pressure effect”. Environmental input and its efficiency is still insufficient to perform the intended pollution reduction effects. Fundamentally, the environmental investment as a proportion of GDP should reach the past levels of some developed economies in the similar pollution-economy phase.

Original languageAmerican English
Article number123156
JournalJournal of Cleaner Production
Volume276
DOIs
StatePublished - 10 Dec 2020

Bibliographical note

Publisher Copyright:
© 2020 Elsevier Ltd

Keywords

  • Environment-economy nexus
  • Industrial pollution
  • New normal economy
  • Tipping point

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