How Does Economic Policy Uncertainty Affect CO2 Emissions? A Regional Analysis in China

Abstract

More recently, the COVID-19 pandemic outbreak has created massive economic policy uncertainty (EPU). EPU and its economic fallout have been a hot topic of study, however, the impact of EPU on CO2 emissions has been seldom addressed to date. This paper investigates the direct impact of the EPU on CO2 emissions and indirect effect via the environmental regulation at the national and regional levels using the panel data model and provincial panel data from 2003 to 2017 in China. The empirical results show that the central region is the most special one, which all explanatory variables except energy consumption are all non-significant even at the 10% level. For other samples, there is a significant positive correlation between EPU and CO2 emissions, whether in the national or regional level. Additionally, environmental regulation alone can achieve the purpose of curtailing carbon emissions. However, when the EPU is taken into consideration, environmental regulation exerts a significantly positive effect on CO2 emissions, leading to unintended increase in emissions. Moreover, the Environmental Kuznets Curve (EKC) hypothesis was confirmed in the national and eastern samples, while CO2 emissions increase monotonically as economic level grows for western datasets. Based on the overall findings, some policy implications were put forward.

Triangular nexus among entrepreneur, energy policy and economic policy uncertainties: A symmetric and asymmetric evidence of inclusive sustainable development goal (SDGs)

“…This indicates that 75.7% of disequilibrium in environmental deterioration level in short run can be mended in the long run given the independent variables. This finding supports the findings by Liu and Zhang, (2021) for China; Chu and Le, (2021) for G7 countries; Shabir et al, (2021) for 24 developed and developing countries and 0.027%, respectively. Furthermore, the environmental Kuznets Curve (EKC) hypothesis is valid for Turkish economic activities and environmental sustainability relations.…”

The role of economic policy uncertainty and social welfare in the view of ecological footprint: evidence from the traditional and novel platform in panel ARDL approaches

“…Consequently, they move toward using environmentally friendly energy sources when their revenues grow, improving the environmental quality. Zahra and Badeeb (2022), Pirgaip and Dinçergök (2020), Adams et al (2020), andJiang et al (2019) confirm our results, but Liu and Zhang (2022) and Adedoyin and Zakari (2020) have achieved different results.…”

“…Pirgaip and Dinçergök (2020), Adams et al (2020), andJiang et al (2019) concluded that the EPU has detrimental effects on the environment and acts as a stimulant to increase CO 2 emissions and reduce the quality of the environment. In contrast, Liu and Zhang (2022) proved that the EPU could improve the quality of the environment by reducing CO 2 emissions. In another study, Adedoyin and Zakari (2020) found that EPU has the greatest impact on CO 2 emission reduction in the short run.…”