Renewable and Sustainable Energy Reviews 52 (2015) 680–688

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Renewable and Sustainable Energy Reviews

journal homepage: www.elsevier.com/locate/rser

Nonrenewable energy, renewable energy, carbon dioxide emissions

and economic growth in China from 1952 to 2012
Xingle Long a,b,n, Eric Yaw Naminse a,c, Jianguo Du a, Jincai Zhuang a
a
School of Management, Jiangsu University, Zhenjiang 212013, PR China
b
Intellectual Property Research Center of Jiangsu Province, Jiangsu University, Zhenjiang 212013, PR China
c
Faculty of Agribusiness and Communication Sciences, University for Development Studies, Box TL 1882 Tamale, Ghana

art ic l e i nf o a b s t r a c t

Article history: This paper mainly investigates the relationship among energy consumption, carbon emissions and
Received 9 January 2015 economic growth in China from 1952 to 2012. First, we implement unit root and cointegration analysis to
Received in revised form test the stationary. Furthermore, we analyze the mutual influence among energy consumption, carbon
26 May 2015
emissions and economic growth through Granger causality analysis. Next, we also conduct static and
Accepted 29 July 2015
dynamic regression analysis on the determinants of carbon emissions and economic growth. Last, we
predict the future influence of different energy consumption on carbon emissions and economic growth.
Keywords: We find that coal has dominant impact on economic growth and carbon emissions. GDP (Gross Domestic
Nonrenewable and renewable energy Product) has bi-directional relationship with CO2 (carbon dioxide) emission, coal, gas, and electricity
CO2 emission
consumption. It is imperative to change energy consumption structure in China. We had better decrease
Economic growth
coal consumption rate. It is significant to develop hydro and nuclear power in China.
& 2015 Elsevier Ltd. All rights reserved.

Contents

1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 680
2. Literature review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 681
3. Data and methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 682
4. Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 684
4.1. Unit root. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 684
4.2. Cointegration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 685
4.3. Granger causality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 685
4.4. Static and dynamic regression analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 686
4.5. Impulse response function analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 686
5. Conclusion and policy implications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 687
Acknowledgment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 688
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 688

1. Introduction

According to the Environmental Performance Index (EPI) [1]

produced by Yale University and Columbia University in 2012,
n
Corresponding author at: Intellectual Property Research Center of Jiangsu China was ranked 116 in 132 countries worldwide for their
Province, Jiangsu University, Zhenjiang 212013, PR China. Tel.: þ 86 51188797568; environmental performance. Smog, which has appeared in many
fax: þ86 51188795397.
Chinese cities, harms people's health and interferes with economic
E-mail addresses: longxingle@163.com (X. Long),
yawric@yahoo.com (E.Y. Naminse), jgdu2005@163.com (J. Du), sustainable development. In the context of rapid economic devel-
zhjincai.china@163.com (J. Zhuang). opment, China's environmental pollution has become more severe,

http://dx.doi.org/10.1016/j.rser.2015.07.176
1364-0321/& 2015 Elsevier Ltd. All rights reserved.
 X. Long et al. / Renewable and Sustainable Energy Reviews 52 (2015) 680–688
Fig. 1. GDP, CO2 emission and Energy consumption in China. (a) The unit of GDP is
100 million RMB; (b) the Unit of CO2 is 10,000 t; (c) the Units of coal, oil, gas and
electricity are 10,000 t coal equivalent. (d) GDP has been deflated based on 1990.
(e) the data are from China Compendium of Statistics 1949–2008 [3], and China
Statistical Yearbook [4].
Fig. 2. The installed capacity of hydro power consumption and its rates in China.
(a) Hydro power is indicated by the left value with the unit of 10,000 t coal
equivalent, and its rates are indicated by right value with the unit of percentage.
(b) The data are from China Compendium of Statistics 1949–2008 [3], and China
Statistical Yearbook [4].
and it is necessary to reverse the deterioration of the environment.
China aims to reduce carbon dioxide emissions by 3.1% [2].
Because China is still in the phase of industrialization, the
economy has close links with fossil energy consumption and
environmental pollution. It is imperative to decrease fossil energy
consumption, especially for coal, and rather increase renewable
energy consumption such as wind, solar, and hydro power, as well
as biomass and marine energy use.
Fig. 1 below shows that CO2 emission in China has increased
significantly with the development of the economy from 1952 to
2012. Prior to the 1978s economic reforms and opening up of
China, both GDP and CO2 emission grew slightly. Afterwards, CO2
emission has been increasing tremendously with economic devel-
opment. It seems that coal consumption has close links with
carbon emissions and economic growth in China.
We also notice that carbon emission has increased rapidly with
coal consumption. In China, mostly electricity, cement production
and other economic activities are linked with coal consumption
which emits a great deal of CO2 into the natural atmosphere. It
therefore appears that, it is necessary to adjust the energy
consumption structure in order to reduce nonrenewable energy
use and expand renewable energy consumption in the economy. In
this way, carbon emission could be reduced, and the environment
protected from further deterioration.
On February 28th 2005, China approved a Renewable Energy
Law, which was implemented on January 1st, 2006. The purpose of
the law is to promote the exploration and efficient use of wind,
solar, water, biomass, geothermal and ocean energy to increase
681
Fig. 3. The installed capacity of nuclear power consumption and its rates in China.
(a) Nuclear power is indicated by the left value with the unit of 10,000 t coal
equivalent, and its rates are indicated by right value with the unit of percentage.
(b) The data are from China Compendium of Statistics 1949–2008 [3], and China
Statistical Yearbook [4].
energy supply, improve energy structure, guarantee energy safety,
protect the environment and facilitate the sustainable develop-
ment of the economy and society. After the issue of Renewable
Energy Law in 2005, a great deal of renewable energy policies have
been proposed as follows: laws by National People's Congress;
regulations and development planning by State Council and its
ministries administrative measures, price policy; finance and tax
policy; technology standards; comprehensive measures and other
special measures (Zeng et al. [5]). All these policies have promoted
the development of renewable energy in China. The installed
capacity of renewable energy has increased up to 27.5% of the
total installed capacity in China by the end of 2011.The installed
capacity of hydro power was 230 million KW by 2011, accounting
for 21.8% of the total capacity in China, which has dominated the
renewable energy market in China. The installed capacity of
nuclear power has increased to 12.57 million KW, up by 1.19 of
the total capacity in China (Zeng et al. [5]). The wind power has
also developed quickly, with the installed capacity of 62.73 million
KW by 2011(CWEA [6]). The installed capacity of solar photovol-
taic has increased from 0.1 million KW to 2.24 million KW from
2004 to 2011(CEC [7]).
The installed capacity of hydro power reached 10573.91
(10,000 t coal equivalent) in 2012, its consumption rate has
increased from 2% to 3.1% from 1994 to 2012 (see Fig. 2). The
installed capacity of nuclear power was 1364.376 (10,000 t coal
equivalent) in 2012, but its consumption rate has increased from
0.1% to 0.4% among all energy consumptions from 1994 to 2012
(see Fig. 3). We can see that the hydro and nuclear rates are still
not higher, compared with other fossil energy. It is significant to
increase the consumption rate of hydro and nuclear power.
This paper, therefore, mainly investigates the relationship
among energy consumption, carbon emissions and economic
growth by comparing nonrenewable and renewable energy con-
sumption with economic growth. The remainder structure of the
paper is as follows. Section 2 presents literature review about
energy consumption and economic growth. Data and methodol-
ogy are discussed in Section 3.We conduct discussion of results in
Section 4, while conclusion and policy implications are put
forward in Section 5.
2. Literature review
There is quite an extensive theoretical and empirical studies
focusing on the relationship between energy consumption and
economic growth in both the industrialized and emerging econo-
mies, with mixed findings. In effect, there are three main
682 X. Long et al. / Renewable and Sustainable Energy Reviews 52 (2015) 680–688
hypotheses which have been adduced from the studies conducted
on the nexus between energy consumption and economic growth.
First is unidirectional causality hypothesis, which incorporates the
conservative and economic growth hypotheses [8,9]. The former
indicates that economic growth has significant positive impact
upon energy consumption, while the latter means that energy
consumption rather exerts positive influence upon economic
growth. The second form of relationship is called bi-directional
causality hypothesis. This is also known as the feedback hypothesis
[10]. The third relational form is called the neutral causality
hypothesis, which suggests that there is virtually no significant
relationship between economic growth and energy consumption
[8]. There are some variations of the hypotheses testing due to
model specification, econometric methods, country development
levels (Sebri [11]).
Some of the previous studies on this subject matter, explored
Granger-causality time series approach, unit root, and cointegra-
tion tests to determine the relationship between economic growth
and energy consumption using various frameworks. Kraft and
Kraft [12] for instance, in earlier times used Granger-causality to
examine the relationship between GNP (Gross National Product)
growth and energy consumption in the United States. Zhang and
Cheng [13] used a multivariate model for economic growth, energy
use, carbon emission, capital and urban population in China from
1960 to 2007. Chiou-Wei et al. [14] applied linear and nonlinear
Granger causality tests to six Asian industrializing countries and
the United States. According to Lin et al. [15], renewable energy
consumption in China has mutual Granger causality relationship
with economic growth. Ma et al. [16] surveyed the renewable
energy economy of China from the aspects of reviewing the
situation of renewable energy development, assessing the coun-
try's potential for renewable energy. Sun and Peng [17] analyzed
the relationship between energy consumption and economic
growth in the Yangtze River Delta of China from 1990 to 2008.
Zhang [18] examined the nexus between energy consumption and
economic growth through co-integration analysis in the BRICS
countries (Brazil, Russia, India, China, South Africa).
Zhang and Ren [19] investigated the mutual relationship
between energy consumption and economic growth in Shandong
Province of China from 1980 to 2008. Ying et al. [20] analyzed the
energy consumption and economic growth nexus in China using
co-integration analysis and state-space model. Lin et al. [21]
investigated the relationship between energy consumption and
economic growth in South Africa using a nonparametric testing
approach. Sadorsky [22] found that real per capita income and per
capita renewable energy consumption of emerging economies are
positively and significantly related through panel co-integrated
estimates in the study of renewable energy consumption and
income in emerging economies.
Chang et al. [23] reviewed China's energy production, con-
sumption and the prospects for renewable energy use. Further-
more, Pao and Fu [24] employed cointegration test to investigate
renewable energy, non-renewable energy and economic growth in
Brazil. Hu et al. [25] studied the relationship amongst China's
economic growth, energy production and consumption vis-à-vis
their connection with air emission from 2000 to 2011 based on a
system indicator. Yasar et al. [26] examined how biogas production
from spent wash of sugar industrial waste has been very helpful in
reducing CO2 emission in Jhang Punjab district of Pakistan, but
decried the labor intensive nature of the work. The relationship
between energy consumption and economic growth might not be
fixed, due to policy changes in times series data, structural breaks,
technology and economic changes [27].
Ozturk and Bilgili [28] investigated the nexus between
economic growth and biomass consumption for 51 nations in
Sub-Saharan Africa. Wong et al. [29] estimated long-run and
short-run elasticity of energy consumption and energy R&D to
variations in oil prices and income for 20 OECD (Organization for
Economic Co-operation and Development) member countries
from 1980 to 2010. Satti et al. [30] further investigated coal
consumption and economic growth in Pakistan using error
correction model (ECM) and Granger causality test from 1974
to 2010. They found bidirectional relationship between them.
Inglesi-Lotz [31] explored the influence of renewable energy
consumption upon economic growth of four OECD countries from
1990 to 2010. The results indicated that renewable energy con-
sumption has positive impact on economy growth through unit
root, cointegration of panel data, and fixed-effect regression
analysis. Omri et al. [32] examined the different impacts of nuclear
energy, renewable energy on economic growth in 17 developed
and developing countries through dynamic simultaneous-
equation panel data analysis. It is important to establish the
coordinated management mechanism of integrated planning and
transmission of renewable energy in China (Zeng et al. [33]).
Shahbaz et al. [34] studied the impact of renewable energy
consumption on economic growth in Pakistan through the quarter
data from 1972Q1 to 2011Q4. They found renewable energy
consumption has mutual influence upon economic growth.
With the increase of carbon dioxide emission, “3-E” (energy,
environment and economy) has become a hot topic. Many pre-
vious studies just paid more attention on “2-E” (such as Pao and
Fu, [24]; Shahbaz et al. [34]). Also, while most previous studies
mainly focused on renewable energy or non-renewable energy,
this paper investigates different roles of renewable and non-
renewable energy consumption on economic growth and carbon
emissions. What is more, we also analyze hydro and nuclear
power in China. Most literatures adopt static regression analysis,
but this paper combines static and dynamic regressions to explore
the impacts of energy consumption on economic growth and
carbon emissions.
The potential innovations of this paper are as follows: first and
foremost, this paper mainly investigates the relationship among
energy consumption, carbon emissions and economic growth in
China from 1952 to 2012. More importantly, we also explore the
different impacts of renewable and non-renewable energy con-
sumption on carbon emissions and economic growth in China. For
renewable energy, we choose three different forms of indices:
hydro power, nuclear power and their summation. Next, we
implement unit root and cointegration analysis to test the sta-
tionary, because our data is from 1952 to 2012 and it tends to walk
randomly with drift. Furthermore, we analyze the mutual influ-
ence among energy consumption, carbon emissions and economic
growth through Granger causality analysis. We also conduct static
and dynamic regression analysis on the determinants of carbon
emissions and economic growth. Last, we predict the future
influence of different energy consumptions on carbon emissions
and economic growth. Coal has dominant impact on economic
growth and carbon emissions. Through Granger causality analysis,
we find that GDP has bi-directional relationship with CO2 emis-
sion, coal, gas, and electricity consumption. It is imperative to
adjust energy consumption structure in China. We had better
decrease the coal consumption rate, and increase the renewable
energy consumption rate such as hydro, solar, and ocean power
among others.
3. Data and methodology
We compute real GDP by deflating nominal GDP according to
the base year of 1990. We use employment numbers as labor.
Capital stock is estimated by perpetual inventory method.
 X. Long et al. / Renewable and Sustainable Energy Reviews 52 (2015) 680–688 683

Table 1
CO2 emission coefficient estimates for coal, oil and gas.

Energy NCV CEF(IPCC 2006) COF Conversion factors from physical unit to coal equivalent CO2 emission coefficient

Value Unit Value Unit Value Unit Value Unit

Coal Soft coal 20,908 kj/kg 25.8 kg/1,000,000 kg 0.99 0.7143 kg coal equivalent/kg 2.763 kg/kg coal equivalent
Anthracite coal 20,908 kj/kg 26.8 kg/1,000,000 kg 0.99 0.7143 kg coal equivalent/kg 2.145 kg/kg coal equivalent
Weighted mean 20,908 kj/kg 26 kg/1,000,000 kg 0.99 0.7143 kg coal equivalent/kg 1.642 kg/kg coal equivalent
Oil 41,816 kj/kg 20 kg/1,000,000 kg 1 1.4286 kg coal equivalent/kg 2.145 kg/kg coal equivalent
Gas 38,931 kj/ m3 15.3 kg/1,000,000 kg 1 1.33 kg coal equivalent/m3 1.642 kg/kg coal equivalent

Source: Chen [39].

Table 2
Descriptive analysis.

Variable Unit Mean Std. dev. Min Max

GDP 100 million RMB 29032.1 39372.28 1405.789 155277.1

CO2 10,000 t 238908.4 224766.9 13509.53 842402.2
Labor 10,000 persons 49022.08 19721.73 20729 76704
Capital 100 million RMB 110073.2 215577 807 992428.9
Coal 10,000 t coal equivalent 70646.05 64695.67 4744.163 240913.5
Oil 10,000 t coal equivalent 18241.06 18655.85 184.9169 68005.62
Gas 10,000 t coal equivalent 2793.097 4109.484 2.899014 18810.06
Electricity 10,000 t coal equivalent 6191.174 7907.7 88.52525 34002.81
Hydro 10,000 t coal equivalent 4857.267 2586.265 2333.97 10573.91
Nuclear 10,000 t coal equivalent 518.541 384.3334 118.071 1364.376

Table 3
Correlation analysis.

GDP CO2 Labor Capita Coal Oil Gas

GDP 1.0000
CO2 0.9791 1.0000
Labor 0.7953 0.8828 1.0000
Capital 0.9722 0.9176 0.6541 1.0000
coal 0.9765 0.9997 0.8837 0.9133 1.0000
Oil 0.9747 0.9935 0.8934 0.9078 0.9905 1.0000
Gas 0.9667 0.9363 0.6969 0.9868 0.9330 0.9227 1.0000
Electricity 0.9956 0.9811 0.8045 0.9718 0.9785 0.9750 0.9746

Capital stock is estimated by perpetual inventory method,
K t ¼ I t þ ð1  δÞK t  1
In Eq. (1), K, I and δ represent capital stock, investment, and
depreciation rate respectively. Following Zhang et al. [35], we treat
depreciation rate as 9.6%. Following Wang et al. [36], we use total
social fixed asset investment as investment variable. Following
Chow and Lin [37] and Kim [38], the initial capital stock is
estimated as Eq. (2):
It
K0 ¼
ðdt þ g t Þ
where d and g are “depreciation rate” and “growth rate”, respectively.
We estimate coal, oil, gas and electricity (generated by wind,
water and nuclear), hydro power and nuclear power through
products between total energy consumption and their percentages
respectively.
When we estimated carbon dioxide emissions, we used coal, oil
and gas consumption. Here, electricity is generated by wind, hydro
and nuclear, and we treat it as the proxy variable of renewable
energy. In other words, we only considered the CO2 emissions for
fuel combustion, rather than heat, cold consumption and electri-
city consumption. Our data is from China Compendium of Statis-
tics 1949–2008, and China Statistical Yearbook
Following Chen [39], CO2 emissions are estimated by Eq. (3),
ð1Þ X
3 X
3
CO2 ¼ CO2 ¼ Ei  NCVi  CEFi  COFi  ð44=12Þ ð3Þ
i¼1 i¼1
where CO2 indicates carbon dioxide emission of coal, oil and
natural gas. Electricity used is renewable, which is generated by
wind, water and nuclear. Thus, we exclude such electricity to
compute carbon emission.
Energy consumption just incorporates coal, oil and gas. NCV is
ð2Þ net calorific value provided by China Energy Statistics Yearbook
[40] in 2007. CEF is carbon emission factor provided by Inter-
governmental Panel on Climate Change (IPCC) [41]. Following
Chen [39], coal consumption mainly includes soft coal (about
75–80%) and anthracite coal (about 20%) in China. IPCC [41] does
not provide CEF of coal directly. We compute CEF of coal through
weighted mean of soft coal (80%) and anthracite coal (20%) [41].
COF is carbon oxidization factor, and (44/12) reveals the molecular
weights ratio between carbon dioxide and carbon (see Table 1).
Correlation analysis is used to explore the mutual relationship
between two different variables. It is computed as Eq. (4).
CovðX; YÞ
CorrðX; YÞ  pffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffi ð4Þ
VarðXÞVarðYÞ
684 X. Long et al. / Renewable and Sustainable Energy Reviews 52 (2015) 680–688

where Cov(X,Y) means the covariance between variable Y and X, Table 4

Var(X) and Var(Y) represent the variable value of (X) and (Y) Unit root test.
respectively. In case the correlated value is higher, it reflects that
Variables ADF PP
the relationship between two different variables is closer, and vice
versa. Table 2 presents descriptive analysis. Carbon dioxide emis- Level First Critical Level First Critical
sion has the largest standard deviation, which is 224766.9. difference value at 5% difference value at
Different regions have great heterogeneity for CO2 emissions. level 5% level

According to the average value, coal consumption is much more lnGDP  1.446  5.366  3.49  1.546  5.18  3.49
than oil, electricity, gas, hydro power and nuclear power con- lnlabor  0.013  7.071  3.49  0.133  7.071  3.49
sumption in China. This means that China's economy depends lncapital  0.066  2.968  3.49  0.453  3.161  3.49
heavily on coal consumption. lnCO2 3  4.938  3.49  3.213  4.838  3.49
lncoal  3.031  4.943  3.49  3.286  4.849  3.49
According to the correlation analysis in Table 3 below, the
lnoil  2.337  5.113  3.49  2.269  4.965  3.49
correlation coefficient of CO2 emission is 0.9791, which indicates that lngas  2.459  4.496  3.49  2.431  4.359  3.49
some GDP of China come from environmental pollution. When we lnelectricity  3.368  8.234  3.49  3.374  8.246  3.49
compare the four energy consumptions, we find that electricity
consumption has the closest correlation with GDP, while Coal, oil Notes: (a) Both ADF and PP tests contain time trend. (b) ADF test employs t-
statistics. (c) PP test uses adjusting t-statistics.
and gas consumptions have fallen behind electricity consumption.
Augmented Dickey–Fuller (ADF) [42] and Phillips and Perron
(PP) [43] tests are often employed to test whether time series data α2i a 0 (for some i¼1,…,k); a causal relationship of X3 Y, when
is stationary or not. Consider the following three different models β1j ¼0 (for all j¼1,…,k) and α2i ¼0 ( for all i¼ 1,…k).
by ADF [42];

X
p 1
4. Discussion
Model1 : Δyt ¼ ηyt  1 þ δ βi yt  i þ εt t ¼ 1; 2; …; T ð5Þ
i¼1
We also implemented unit root, cointegration, Granger causality,
X
p 1 static and dynamic regressions and impulse response function to
Model2 : Δyt ¼ ηyt  1 þ α þ δ βi yt  i þ εt t ¼ 1; 2; …; T ð6Þ analyze the relationship among nonrenewable and renewable energy
i¼1 consumption and economic growth in China from 1952 to 2012.

pX
1
Model3 : Δyt ¼ ηyt  1 þ α þ λt þ δ βi yt  i þ εt t ¼ 1; 2; …; T
i¼1
In Eqs. (5)–(7), Δyt indicates the differentiation of y, yt  1 is one
order lagged variable, yt  i is i order lagged variable, and ε is
random disturbance. Model 1 contains no time trend and constant,
Model 2 includes constant, and Model 3 has both constant and
time trend. Null hypothesis is H0: δ ¼ 0, and alternative hypothesis
is H1: δ o 0. A null hypothesis reveals there is at least one unit root.
Alternative hypothesis indicates there is no unit root.
Compared with ADF [42], PP [43] just contains one order lagged
variable of y. Consider the following three different models,
Model1 : Δyt ¼ ηyt  1 þ εt t ¼ 1; 2; …; T
Model2 : Δyt ¼ ηyt  1 þ α þ εt t ¼ 1; 2; …; T
Model3 : Δyt ¼ ηyt  1 þ α þ λt þ εt t ¼ 1; 2; …; T
Model 1 has no constant and time trend. Model 2 contains
constant. Model 3 includes both constant and time trend. Null
hypothesis is H0: δ ¼ 0, and alternative hypothesis is H1: δ o 0.
Null hypothesis means that time series is unstable with at least
one unit root, whereas alternative hypothesis indicates that time
series is stationary without unit root.
Following Granger et al. [44] [45], the causal relationship of
two variables X and Y is indicated as follows.
Xk Xk
Yt ¼ α Y þ j ¼ 1 β1j X t  j þ ε1t
i ¼ 1 1i t  i
ð11Þ
Xk Xk
Xt ¼ i¼1
α2i Y t  i þ j¼1
β2j X t  j þ ε2t
where Yt  i and Xt  j indicate the lagged variables of Y and X
respectively. There are four different relationships between X and
Y. A causal relationship of “X ) Y”, when β1j a0 (for some j¼ 1,…,
k) and α2i ¼0 ( for all i ¼1,…k); a causal relationship of “Y ) X”,
when β1j ¼ 0 (for all j¼1,…,k) and α2i a 0 (for some i¼1,…,k); a
causal relationship of X3 Y, when β1j a 0 (for some j¼1,…,k) or
ð7Þ 4.1. Unit root
Our data extends from 1952 to 2012, which covers 61 years.
Because different years have unique disturbances, the long-period
time series data tends to experience random drift. In other words,
the data is non-stationary time series. Unit root tends to lead to
the following demerits. The estimator of auto-regression is not
approximate to normal distribution. Even the central limit theo-
rem is not suitable to non-stationary time series. Because
t-statistics value is not approximate to normal distribution, t-test
and hypothesis test will be inefficient. Unit root tends to cause
spurious regression, in which the regression is not reliable any
ð8Þ more. Thus, it is necessary to implement unit root test from
different energy consumption, carbon emissions and economic
ð9Þ growth from 1952 to 2012. In this paper, we use Augmented
Dickey–Fuller and Phillips and Perron methods to investigate
ð10Þ whether energy consumption, carbon emissions and economic
growth in China are stationary or not from 1952 to 2012.
In order to test for the presence of stationary, we implemented
unit root analysis upon the logarithm of GDP, labor, capital stock,
CO2 emission, coal, oil, gas and electricity consumptions. The unit
root test contains ADF and PP, both of which employ level and first
difference analysis (see Table 4). We chose critical value level to be
at 5%. All t-values of level analysis in ADF are more than critical
value at 5% significance, which accepts null hypothesis and
indicates the existence of unit root. However, all t-values of first
difference analysis in ADF are less than critical value at 5%
significance level, which rejects null hypothesis and indicates the
absence of unit root.
ð12Þ All adjusting t-values of level analysis in PP are over critical
value at 5% significance, which accepts null hypothesis and reveals
the existence of unit root. However, all adjusting t-values of first
difference analysis in PP are less than critical value at 5% sig-
nificance, which rejects null hypothesis and indicates no unit root
existence. In all, level values of the eight variables are non-
stationary at 5% significance, but their first differences are sta-
tionary. Hence, GDP, labor, capital stock, CO2 emission, coal, oil, gas
 X. Long et al. / Renewable and Sustainable Energy Reviews 52 (2015) 680–688 685

Table 5
Cointegration analysis.

Trace test

Number of cointegrations Eigenvalue Trace statistic 5% Critical value Probability

Nonen 0.708568 256.6563 159.5297 0.0000

At most 1n 0.628494 185.1452 125.6154 0.0000
At most 2n 0.540075 127.7143 95.75366 0.0001
At most 3n 0.399215 82.66618 69.81889 0.0034
At most 4n 0.332153 53.11413 47.85613 0.0148
At most 5 0.255210 29.69975 29.79707 0.0513
At most 6 0.180602 12.60991 15.49471 0.1299
At most 7 0.018062 1.057185 3.841466 0.3039

Max-Eigen test
Number of cointegrations Eigenvalue Max-Eigen statistic 5% Critical value Probability
Nonen 0.708568 71.51104 52.36261 0.0002
At most 1n 0.628494 57.43097 46.23142 0.0022
At most 2n 0.540075 45.04808 40.07757 0.0127
At most 3 0.399215 29.55205 33.87687 0.1507
At most 4 0.332153 23.41438 27.58434 0.1565
At most 5 0.255210 17.08984 21.13162 0.1678
At most 6 0.180602 11.55272 14.26460 0.1286
At most 7 0.018062 1.057185 3.841466 0.3039

n
Notes: denotes rejection of the hypothesis at the 0.05 significance level.

and electricity consumption are non-stationary (Table 4), which Table 6

should thus be cointegrated. Granger causality analysis.

Null hypothesis Obs. F. P.

4.2. Cointegration
lncapital does not Granger Cause lnGDP 59 5.66694 0.0058
Cointegration mainly explores whether different variables have lnGDP does not Granger Cause lncapital 59 5.76339 0.0054
long-run equilibrium relationship. In case their relationship is lnlnbor does not Granger Cause lnGDP 59 1.60571 0.2102
stationary, it is I(0), zero order of cointegration; if their relation- lnGDP does not Granger Cause lnlnbor 59 0.93292 0.3997
lnCO2 does not Granger Cause lnGDP 59 4.53374 0.0151
ship is not stationary, they tend to walk randomly with drift. They
lnGDP does not Granger Cause lnCO2 59 5.44019 0.0070
are I(1), one order of cointegration. In this paper, we employ Trace lncoal does not Granger Cause lnGDP 59 4.69735 0.0132
and Max-Eigen test to analyze whether the relationships among lnGDP does not Granger Cause lncoal 59 6.24629 0.0036
different energy consumption, carbon emissions and economic lnoil does not Granger Cause lnGDP 59 1.69983 0.1923
lnGDP does not Granger Cause lnoil 59 1.76586 0.1808
growth are stationary or not in the long run.
lngas does not Granger Cause lnGDP 59 16.3061 0.0001
We use Johansen cointegration [46] to examine whether GDP, lnGDP does not Granger Cause lngas 59 5.50845 0.0067
labor, capital stock, CO2 emission, coal consumption, oil consump- lnelectricity does not Granger Cause lnGDP 59 5.86077 0.0050
tion, gas consumption and electricity consumption are cointe- lnGDP does not Granger Cause lnelectricity 59 6.24629 0.0036
grated or not (Table 5). Johansen cointegration compromises trace lnhydro does not Granger Cause lnGDP 17 0.15367 0.8592
lnGDP does not Granger Cause lnhydro 17 14.3700 0.0007
and Max-Eigen tests. We chose two lagged periods. When the
lnnuclear does not Granger Cause lnGDP 17 4.78332 0.0297
trace statistics are more than the critical value at 5% significance lnGDP does not Granger Cause lnnuclear 17 0.69491 0.5181
level under none, at most 1, at most 2, at most 3 and at most
4 cointegrations, it rejects null hypothesis and indicates stationary
presence. However, when the trace statistics are less than the whether different energy consumption, carbon dioxide emissions
critical value at 5% significance under none, at most 5, 6 and and economic growth have two-way impacts or not.
7 cointegrations, we accept null hypothesis and this indicates According to Granger causality analysis in Table 6, capital has bi-
nonstationary. When Max-Eigen statistics are more than the directional relationship with GDP; labor has no mutual relationship
critical value at 5% significance level under none, at most 1, at with GDP, while CO2 emission and economic growth have positive bi-
most 2, at most 3 and at most 4 cointegrations, we reject null directional influence on each other. It can be inferred that carbon
hypothesis and this means stationary is present. On the other emission can increase profits for corporations and enhance taxes for
hand, when the Max-Eigen statistics are less than the critical value local governments; economic growth increases with carbon emis-
at 5% significance under none, at most 5, 6 and 7 cointegrations, sions. It is imperative to decrease carbon emissions in order to
we accept null hypothesis, an indication of nonstationary. Hence, develop green economy in China.
the results of Trace and Max-Eigen statistics indicate the existence Furthermore, coal consumption has mutual influence upon eco-
of at least one cointegration relationship among economic growth, nomic development. As a large coal-producing and consuming
labor, capital stock, CO2 emission, the consumption of coal, oil, gas, country, China's economic development has been greatly influenced
and electricity. by coal consumption such as electricity generation of power plants,
transportation and others. However, as a nonrenewable energy, coal
4.3. Granger causality will deplete in future. It would therefore be better for China to
increase coal use efficiency, explore value-added products of non-
Granger causality analysis is mainly used to test whether two renewable energy such as coal coking, electricity generated by coal,
different variables have mutual links or not. That is, one-way coal liquefaction, coal gasification, and explore and utilize more
Granger causality relationships, bi-directional links, no mutual renewable energy. The results also show that oil consumption has
relationship. We implement Granger causality analysis to test no bi-directional influence on economic growth. Maybe the reason is
686 X. Long et al. / Renewable and Sustainable Energy Reviews 52 (2015) 680–688

Table 7 According to regression analysis from 1952 to 2012, we can see that
Static and dynamic regression analysis. coal consumption has the largest impact upon economic growth and
carbon emissions in static and dynamic regressions among all energy
Time period: 1952–2012
consumption. It indicates that coal is the dominant energy consump-
Static regression Dynamic regression tion in China. On one hand, coal has promoted the rapid economic
growth through thermal power plants, iron and steel plants and
Variables lnGDP lnCO2 Variables ΔlnGDP Δln CO2 others; on the other hand, coal consumption also has serious
Constant  2.247 nn
1.917nnn
Constant 0.032  0.007nnn
environmental pollution.
(1.049) (0.198) (0.02) (0.002) Oil consumption has positive impacts on economic growth and
lnlabor 0.249n  0.087nnn Δlnlabor  0.364 0.018 carbon emissions in China. It seems that oil consumption has
(0.136) (0.026) (0.281) (0.033) promoted the development of chemical and transport, which also
lncapital 0.392nnn 0.014nnn Δlncapital 0.261nn 0.041nnn
causes the emissions of great environmental pollutants. Gas consump-
(0.025) (0.005) (0.121) (0.014)
lncoal 0.312nnn 0.914 nnn
Δlncoal 0.408nnn 0.896nnn tion has negative impact on economic growth from 1952 to 2012.
(0.054) (0.010) (0.083) (0.01) Maybe China's importation of more gas from other countries has
lnoil 0.157nnn 0.135 nnn
Δlnoil 0.125 0.120nnn increased financial budget of the country. Compared with coal and oil,
(0.056) (0.012) (0.091) (0.011) gas consumption has negative impact on carbon emission. Renewable
lngas  0.232nnn  0.014nn Δlngas  0.166nnn  0.002
(0.033) (0.006) (0.032) (0.004)
energy consumption has positive influence on economic growth and a
lnelectricity 0.249nnn  0.017 Δlnelectricity 0.086  0.001 negative impact on carbon emissions even though they are insignif-
(0.079) (0.015) (0.055) (0.007) icant. It is important to increase the consumption rate of renewable
Obs. 61 61 Obs. 60 60 energy and decrease the consumption rate of coal.
2
R 0.998 0.999 R2 0.67 0.998
Based on the regression analysis from 1994 to 2012, coal
Time period: 1994–2012 consumption also has the largest influence on economic growth
Static regression Dynamic regression and carbon emissions, which is consistent with the previous
Variables lngdp lnCO2 Variables ΔlnGDP Δln CO2
Constant  15.65nn 3.034nnn Constant 0.033 0.002
result. Oil consumption has positive effects upon economic growth
(6.546) (0.326) (0.032) (0.002) and carbon emissions. Gas consumption has positive impact upon
lnlabor 1.764nn  0.135nnn Δlnlabor 0.61  0.160n economic growth and carbon emissions, which is inconsistent
(0.615) (0.031) (1.391) (0.076) with the previous result. China's gas storage is not more than coal;
lncapital 0.342nnn 0.004 Δlncapital 0.215  0.003
hence, the gas consumption was not so much that its carbon
(0.049) (0.002) (0.122) (0.007)
lncoal 0.206nnn 0.793nnn Δlncoal 0.107 0.799nnn emissions could be serious. However, after 1994, gas consumption
(0.057) (0.003) (0.074) (0.005) has increased greatly, which also polluted the natural environment
lnoil  0.116 0.180nnn Δlnoil 0.005 0.175nnn more. The impacts of hydro power and nuclear power are not
(0.105) (0.005) (0.088) (0.005) significant for economic growth and carbon emissions. Compared
lngas 0.172nnn 0.0247nnn Δlngas 0.12 0.019nnn
(0.039) (0.002) (0.078) (0.004)
with coal consumption, the rates of hydro and nuclear power
lnhydro 0.027 0.002 Δlnhydro 0.015 0.001 consumption are still lower. It is necessary to decrease the coal
(0.034) (0.002) (0.027) (0.002) consumption rate, and increase the rates of hydro and nuclear
lnnuclear  0.021 0.001 Δlnnuclear  0.016  0.001 power consumption.
(0.015) (0.001) (0.016) (0.001)
Obs. 19 19 Obs. 18 18
R2 0.999 0.999 R2 0.539 0.999 4.5. Impulse response function analysis

Notes: (a) Standard errors are in parentheses. (b) Δ represents difference. (c)nnn, nn, n
indicate the significance levels of 1%, 5% and 10%, respectively.
that oil storage is not rather abundant in China, which depends more
on oil importation from oil-producing countries. Gas consumption has
two-way Granger causality relationship with economic growth. Eco-
nomic growth has bi-directional Granger causality links with electri-
city. Economic growth has unidirectional causality with hydro power
consumption, which seems to be related to low rate of hydro power
use. It is significant to increase the hydro power consumption rate.
Nuclear power consumption has one-way causality with economic
growth. We had better use nuclear power safely, and increase the R&D
expenditure of nuclear power. Renewable energy consumption can
decrease carbon emissions and other environmental pollutants, which
can also facilitate the sustainable economic development of China.
4.4. Static and dynamic regression analysis
We also conduct static and dynamic regression analysis on the
determinants of economic growth and carbon emissions (see Table 7).
The purpose of dynamic regression analysis is to explore the changing
effects of nonrenewable and renewable energy consumption on
economic growth and carbon emissions. Because the data of hydro
and nuclear power started from 1994, thus we have two different time
series data: one is from 1952 to 2012, which uses the summation data
of hydro and nuclear power; the other is from 1994 to 2012, which
employs the data of hydro and nuclear power consumptions.
The response of carbon dioxide emissions will decline towards
economic growth in the following 20 years (see Fig. 4). The response of
coal consumption will also decrease for economic growth, which
reveals that China should reduce the rate of coal consumption to abate
carbon emissions. The gas and hydropower consumption will have
relatively higher impact on economic growth. It is significant to shift
energy consumption rate, to increase the consumption rate of gas and
hydropower. Oil consumption also has positive influence on economic
growth. Because oil shortage is obvious in China, we had better
increase oil import from other countries, more importantly, China
should increase oil exploration offshore.
Nuclear power also has positive impact on economic growth in
China, even though its impact is still not stronger. Because fossil
energy has severe environmental pollution, it is important to
expand the consumption rate of nuclear power. Coal consumption
and gas consumption have rather higher impact upon carbon
emissions in the further twenty years. It is necessary to control
and decrease fossil energy consumption, and rather increase
renewable energy consumption rates. The response of economic
growth has declined for carbon emission in the future. Compared
with coal and gas consumption, the impact of oil consumption is
not so strong for carbon emissions. The response of hydropower is
not so big for carbon emissions, compared with other fossil energy.
Nuclear power has weak influence upon carbon emissions.
The State Council of China put forward “Energy Development
Strategy Action Initiative (2014–2015)”. By this strategy, China is
determined to reduce coal consumption rate of total energy
 X. Long et al. / Renewable and Sustainable Energy Reviews 52 (2015) 680–688 687

Response of LNCO2 to LNGDP Response of LNCOAL to LNGDP Response of LNGAS to LNGDP

.10 .12 .12

.08 .08
.05

.04 .04
.00
.00 .00

-.05
-.04 -.04

-.10 -.08 -.08

2 4 6 8 10 12 14 16 18 20 2 4 6 8 10 12 14 16 18 20 2 4 6 8 10 12 14 16 18 20
Response of LNOIL to LNGDP Response of LNHYDRO to LNGDP Response of LNNUCLEAR to LNGDP
.08 .12 .4

.06
.08
.2
.04
.04
.02 .0
.00
.00
-.2
-.04
-.02

-.04 -.08 -.4

2 4 6 8 10 12 14 16 18 20 2 4 6 8 10 12 14 16 18 20 2 4 6 8 10 12 14 16 18 20

Response of LNCOAL to LNCO2 Response of LNGAS to LNCO2 Response of LNGDP to LNCO2

.12 .12 .06

.08 .08 .04

.04 .04 .02

.00 .00 .00

-.04 -.04 -.02

-.08 -.08 -.04

2 4 6 8 10 12 14 16 18 20 2 4 6 8 10 12 14 16 18 20 2 4 6 8 10 12 14 16 18 20

Response of LNHYDRO to LNCO2 Response of LNNUCLEAR to LNCO2 Response of LNOIL to LNCO2

.10 .3 .08

.2
.05 .04
.1

.00 .0 .00

-.1
-.05 -.04
-.2

-.10 -.3 -.08

2 4 6 8 10 12 14 16 18 20 2 4 6 8 10 12 14 16 18 20 2 4 6 8 10 12 14 16 18 20

Fig. 4. Response of different variables to lnGDP and lnCO2.

consumption within 62% by 2020; increase natural gas consumption
rate of total energy consumption over 10% by 2020; increase the
proportion of non-fossil energy of primary energy consumption to
about 15% by 2020. It is significant to develop hydroelectricity power,
with the aim to increase the installed capacity of wind electricity to
0.35 billion KW by 2020. China also aims to generate 0.2 billion KW
wind electricity power by 2020, and invest wind power base and
related outflow project in Jiuquan, west of inner Mogolia, east of Inner
Mogolia, North of Hebei, Jilin, Heilongjiang, Shandong, Hami and
Jiangsu. It is also important to develop solar electricity power, to
guarantee the installed capacity of solar power electricity reaching
0.1 billion KW. We had better develop geothermal energy, biomass
energy and marine energy positively [47]
5. Conclusion and policy implications
This paper mainly investigates the relationship among renew-
able energy, carbon emissions and economic growth in China from
1952 to 2012. More importantly, we also compare the different
688 X. Long et al. / Renewable and Sustainable Energy Reviews 52 (2015) 680–688
impacts of renewable and non-renewable energy consumption on
carbon emissions and economic growth in China.
Through unit root, we find energy consumption, carbon emis-
sions and economic growth are not stationary. They have long-run
equilibrium relationship through cointegration analysis. Through
Granger causality analysis, we find that GDP has bi-directional
relationship with CO2 emission, coal, gas, and electricity consump-
tion. Through static and dynamic regression, we find coal has
dominant impact upon economic growth and carbon emissions;
oil consumption has positive impact on carbon emissions. Through
impulse response function, we find the impacts of hydro and
nuclear power have positive impact on economic growth.
We attempt to put forward some policy implications according
to the empirical analysis. Through static and dynamic regression
analysis, we can see the impacts of hydro and nuclear power is not
as strong as coal. It is important to change energy consumption
structure. We should decrease the coal consumption rate to reduce
carbon emissions, and enhance the consumption rate of natural
gas. China should explore more value-added products of non-
renewable energy. Nuclear power has unidirectional causality
upon economic growth. It means nuclear power is significant for
long time economic development. It is important to develop
nuclear power safely. Economic growth has unidirectional caus-
ality on hydro power. The development of hydro power can reduce
carbon emissions. With environmental deteriorating, it is impera-
tive to explore and utilize more renewable energy such as wind,
hydro, biofuel, solar and other, to promote the sustainable devel-
opment of economy in China.
Acknowledgment
We appreciate the financial support provided by Grant from
the China Postdoctoral Science Foundation (No. 2014M551504),
the Joint Research Grant of NSFC-NRF Scientific Cooperation
Program (No. 71411170250), National Research Foundation of
Korea Grant funded by the South Korean Government (NRF-
2014K2A2A2000766), National Research Foundation of Korea
Grant funded by the South Korean Government (NRF-
2014S1A2A2027622), National Natural Science Foundation of
China (Nos. 71471076, 71473107), and Natural Science Founda-
tion of Jiangsu Higher Education Institutions of China (No.
15KJD610002).
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