Long-run dynamics of sulphur dioxide emissions, economic growth, and energy efficiency in China.

This paper estimates the linkages among total Sulphur dioxide (SO 2) emissions, total GDP and energy efficiency using China's provincial panel data from 2002 to 2015. We investigate total emissions rather than per capita emissions or ambient concentrations since it is total emissions that the environment cares about. Energy efficiency is estimated using stochastic frontier analysis and decomposed into both persistent and transient efficiency. We then investigate the long-run dynamics among SO 2 emissions, economic growth, and energy efficiency by employing the panel-based error correction model and taking the effects of cyclical variations into account. Our analysis shows that GDP has a positive impact on total SO 2 emissions in the short run and gains in energy efficiency have a significant negative effect on emissions in the long run. By controlling the effects of the business cycle, the effects of GDP on emissions remain positive in both the short and long run. The cross-sectional analysis provides similar insights. We argue that economic growth itself is an emission generator. Therefore, the government needs to establish a long-run strategy to curb emissions by improving energy efficiency. Image 1029 • We estimate the linkages among sulphur dioxide emissions, GDP and energy efficiency. • Energy efficiency is estimated by SFA and decomposed into persistent and transient efficiency. • We employ the panel-based error correction model with cyclical variations and structural break. • GDP has a positive impact on emissions in both the short and long run. • Gains in energy efficiency affects emissions negatively in the long run. [ABSTRACT FROM AUTHOR]