The impact of energy price on CO 2 emissions in China: A spatial econometric analysis.

Excessive greenhouse gas emissions pose a global environmental concern. This paper examines the impact of energy price on China's CO ₂ emissions based on an extended STIRPAT (Stochastic Impacts by Regression on Population, Affluence and Technology) structural human ecology model. We utilize Chinese provincial data from 2002 to 2016 and apply the spatial panel data techniques to explicitly consider spatial correlations and spillover effects between observations. Our results show that energy price has a significant negative impact on China's CO ₂ emissions after controlling for other economic and energy market factors and spatial correlations of these variables. We identify a significant direct impact of the focal province's price change on CO ₂ emissions and an indirect effect exerted by energy price changes in adjacent provinces. Such spatial spillover effects are also observed in other determinants identified in the extended STIRPAT model. We also document a path dependent pattern in China's provincial CO ₂ emissions with last period CO ₂ emissions influencing the current CO ₂ emission levels. Our results show that the negative impact of energy price on CO ₂ emissions remains qualitatively the same after incorporating the influence of previous period CO ₂ emissions. Our results are also robust to the inclusion of lagged energy price measures, alternative spatial economic models, and alternative spatial weight matrices. Overall, our paper highlights the role of energy market in curbing CO ₂ emissions and promoting sustainable economic development.
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