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Coal Consumption, Industrial Production and CO2 Emissions in China and India

  • Sahbi Farhani
  • Muhammad Shahbaz
  • Ilhan Ozturk

The present study explores the relationship between coal consumption, industrial production and CO2 emissions in case of China and India for the period of 1971-2011. The structural break unit root test and cointegrating approach have been applied. The direction of causal relationship between the variables is investigated by applying the VECM Granger causality test. Our results validate the presence of cointegration among the series in both countries. We also find the existence of inverted U-shaped curve between industrial production and CO2 emissions for India but for China it is U-shaped relationship. Coal consumption adds in CO2 emission. The causality analysis reveals that industrial production and coal consumption Granger cause CO2 emission in India. In case of China, the feedback effect exists between coal consumption and CO2 emissions. Due to the importance of coal in China and India, any reduction in coal consumption will negatively affect their economic growth as well as electricity supply.

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Paper provided by Department of Research, Ipag Business School in its series Working Papers with number 2014-225.

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Length: 23 pages
Date of creation: 22 Apr 2014
Date of revision:
Handle: RePEc:ipg:wpaper:2014-225
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