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Decoupling of Emissions and GDP: Evidence from Aggregate and Provincial Chinese Data

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  • Gail Cohen
  • João Tovar Jalles
  • Prakash Loungani
  • Ricardo Marto
  • Gewei Wang

Abstract

We provide a comprehensive analysis of the relationship between greenhouse gas (GHG) emissions and GDP in China using both aggregate and provincial data. The Kuznets elasticity is about 0.6 for China, higher than that in advanced countries but below that of major emerging markets. The elasticity is somewhat lower for consumption-based emissions than for production-based emissions, providing mild evidence consistent with the “pollution haven” hypothesis. The Kuznets elasticity is much lower for the last three decades than for the three previous decades, suggesting a longer-term trend toward decoupling as China has become richer. Further evidence of this comes from provincial data: richer provinces tend to have smaller Kuznets elasticities than poorer ones. In addition to the trend relationship, we find that the Environmental Okun's Law holds in China.

Suggested Citation

  • Gail Cohen & João Tovar Jalles & Prakash Loungani & Ricardo Marto & Gewei Wang, 2018. "Decoupling of Emissions and GDP: Evidence from Aggregate and Provincial Chinese Data," IMF Working Papers 18/85, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:18/85
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    Keywords

    Greenhouse gas emissions; Gross domestic product; China; Economic growth; Business cycles; Low income countries; Fossil fuels; Natural gas; Emissions; Environmental Okun's Law; Kuznets Curve; Provinces; Kuznets; production-based; consumption-based; Okun; GHG;

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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