Does China exhibit any evidence of an Environmental Kuznets Curve? An ARDL bounds testing approach

This paper is an attempt at empirically studying the link between environmental deterioration, economic growth and trade openness in China. The Environmental Kuznets Curve (EKC) is augmented as a theoretical framework for the study and an Autoregressive Distributed Lag bounds testing approach is applied to test whether China exhibits similar behaviour. With the objective of documenting the impact of economic growth and international trade on the emission of carbon dioxide in China, the traditional income-emissions model is applied with variables such as the GDP per capita, the squared value of the GDP per capita, and trade openness for annual data for the period 1971-2014. The findings of the study show that CO2 emissions in China are highly elastic in terms of their connection to the income levels, and that the income driven growth beyond a certain level makes society cleaner and less polluted. Furthermore, it is also found that, in the long run, the trade-driven growth causes more environmental degradation. The evidence available from this empirical exercise validates the EKC hypothesis for China in the long run. The results have significant policy implications. The policy makers in China should consider emphasising or continuing to promote those policy measures which will make it possible to reduce the emissions from trade induced economic growth.