How does economic policy uncertainty affect CO2 emissions? A regional analysis in China

This paper aims to examine the effects of economic policy uncertainty (measured by the World Uncertainty Index—WUI) on the level of CO2 emissions in the United States for the period from 1960 to 2016. For this purpose, we consider the unit root test with structural breaks and the autoregressive-distributed lag (ARDL) model. We find that the per capita income promotes CO2 emissions in the long run. Similarly, the WUI measures are positively associated with CO2 emissions in the long run. Energy prices negatively affect CO2 emissions both in the short run and the long run. Possible implications of climate change are also discussed.

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The Heterogeneity Research of the Impact of EPU on Environmental Pollution: Empirical Evidence Based on 15 Countries

Sustainability ◽

10.3390/su13084166 ◽

2021 ◽

Vol 13 (8) ◽

pp. 4166

Author(s):

Ying Chen ◽

Xiaoqian Shen ◽

Li Wang

Keyword(s):

Air Pollution ◽

Economic Policy ◽

Co2 Emissions ◽

Energy Demand ◽

Negative Impact ◽

Emerging Market ◽

Policy Uncertainty ◽

Economic Policy Uncertainty ◽

Per Capita ◽

The Impact

While economic growth has been the main goal of countries around the world, environmental problems such as air pollution have also arisen. Since the increase in economic uncertainty is limiting production capacity and consumers’ marginal propensity to consume, which reduces CO2 emissions, economic policy uncertainty has become one of the most important factors affecting CO2 emissions. COVID-19 has demonstrated that economic policy uncertainty reduces the enthusiasm of market participants, which, in turn, reduces energy demand and CO2 emissions. In order to further study the impact of economic policy uncertainty on air pollution, this study uses a panel model to empirically test the data for a sample of 15 countries covering the period from 1997 to 2019. According to the empirical results, we find that the economic policy uncertainty has a significant negative impact on per capita CO2 emissions. That is, the higher the uncertainty of economic policy, the lower the per capita CO2 emissions of countries. What’s more, this negative effect is larger in emerging market countries than in advanced countries.

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

10.21203/rs.3.rs-385163/v1 ◽

2021 ◽

Author(s):

Yan Liu ◽

Zepeng Zhang

Keyword(s):

Economic Policy ◽

Panel Data ◽

Environmental Regulation ◽

Regional Analysis ◽

Policy Implications ◽

Kuznets Curve ◽

Policy Uncertainty ◽

Economic Policy Uncertainty ◽

Explanatory Variables ◽

The Impact

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.

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