Abstract
Based on a two-sector (clean energy and dirty energy) model of directed technical change, we examine the relationship between carbon emissions, clean energy consumption, and financial development in China using the ARDL method. The results show that clean energy consumption reduces carbon emissions effectively but the effect of financial development is opposite, suggesting that financial development increases carbon emissions, contradicting the findings of many existing studies. Then, we decompose financial development on carbon emissions into two different effects: substitution and income effects. The substitution effect reflects more dirty energy consumption as a result of directed technological change promoted by financial development, leading to more carbon emissions. The income effect results in a decline in carbon emissions because financial development enables firms to use more clean energy. The empirical results indicate that the net effect of financial development has caused more carbon emissions and a 1% increase in financial development results in a 0.45–0.79% increase in carbon emissions. The policy implication is also discussed.
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The datasets used or analyzed during the current research are available from the corresponding author on reasonable request.
Notes
Remarks by Chinese President Xi Jinping at the Climate Ambition Summit 2020. http://www.gov.cn/xinwen/2020-12/13/content_5569136.htm
The “3060” goal refers to achieve carbon peak by 2030 and carbon neutral by 2060.
Acemoglu et al. (2012) argue that a unique final good is producing by combining two inputs: dirty input and clean input. It is not impacting the results of analysis by substituting them respectively by dirty energy and clean energy if only considering the carbon emissions instead of other environmental depredations.
According to National Energy Administration of China, 49.7 billion kWh of wind power was abandoned in 2016, which is more than half of the electricity generated by the Three Gorges Dam in the year.
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Funding
This research is financially supported by the National Social Science Foundation of China Key Project (18ZDA005), the Graduate Scientific Research and Innovation Foundation of Chongqing, China (GYB19025), the National Natural Science Foundation of China (71673033), and the Chinese Ministry of Education (2020CDJSK02ZH02).
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Conceptualization [Shujie Yao, Shuai Zhang]; methodology [Shuai Zhang]; formal analysis and investigation [Shuai Zhang]; writing (original draft preparation) [Shuai Zhang]; writing (review and editing) [Shujie Yao]; funding acquisition [Shujie Yao, Shuai Zhang]; resources [Shujie Yao]; supervision [Shujie Yao]. All authors read and approved the final manuscript.
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Yao, S., Zhang, S. Energy mix, financial development, and carbon emissions in China: a directed technical change perspective. Environ Sci Pollut Res 28, 62959–62974 (2021). https://doi.org/10.1007/s11356-021-15186-6
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DOI: https://doi.org/10.1007/s11356-021-15186-6