Green GDP and its Environmental Implications; Is China’s Growth Becoming Greener?

A widely cited identity I = PAT proposed by the Ehrlich and Holdren in the early 1970s, suggested that population interacts with affluence and technology to determine a society’s environmental impact. Namely, with a rising population and consumption, on a given economic growth path, environmental consequences would inevitably increase unless the technological advancements were sufficient to overcome it. Arguments that came out of the controversy regarding this formula, provided some theoretical foundations for the claim that economic growth can indeed be sustainable and green. The relatively new concept of Green GDP in fact endorses this apparently virtuous model of growth so that economic development can go hand in hand with greater improvement in physical, human as well as natural capital. One country, namely China, elusively ignores mainstream economic vocation progressively advancing towards establishing itself as a political and economic force, yet it is still labelled as developing country with relatively low per capita income that constantly faces traps of economic progress. The goal of this paper is to evaluate the implications of augmented hence, more economically inclined, I = PAT equation by observing a country that witnessed an enormous population growth followed by almost impeccable economic growth and showed inconsistent green policy aspirations over time. Long-run empirical assessment on the augmented equation for China is based on cointegration approach and vector-error correction term modelling for the period 1970-2018. The analysis indicates conclusions that are consistent with theoretical foundations, confirming the negative effect of population and affluence, and a positive effect of technological improvement on the green growth perspective.