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Sectoral CO2 emissions in China: asymmetric and time-varying analysis


Today, China is the second-largest, fastest-growing economy in the world. This study analyzes asymmetric and time-varying impact of world energy prices (including world energy prices index, world coal prices, world crude oil prices and world natural gas prices) on China's CO2 emissions. We used a non-linear ARDL (NARDL) model and wavelet analysis using monthly data from 1992 to 2017. The results based on the NARDL estimate show that world energy prices have an asymmetric impact on CO2 emissions. However, the results of wavelet pairwise correlation and wavelet-transform coherence suggest that the relationship between world energy prices and CO2 emissions differs over time and across sectors (i.e. short-term, medium-term, long-term and very long-term). Evidence suggests that ignoring fundamental non-linearities can lead to misleading outcomes. Such empirical results are expected to have a high importance for the efficient design and implementation of world energy prices and Chinese environmental policies. 

Keywords: carbon emissions; world energy prices; NARDL; wavelet; China