The sheer scale of China’s urban renewal and CO2 emissions: Multiple structural breaks, long-run relationship and short-run dynamics

In the light of urban environmental transition (UET) theory, this study explores the relationship between carbon dioxide (CO2) emissions, economic growth, urbanization and trade openness using updated Chinese data over the extended period (1971-2013). After confirming that all the underlying series are stationary and adjusted with single structural break point, the results of auto-regressive distributed lag (ARDL) bounds test approach to cointegration confirms the cointegration between the variables. The long- and short-run dynamics reveal that urbanization reduces the CO2 emissions both in short- and long-run, but statistically insignificant. These findings contrast with previous literature and sounds the validation of urban environmental transition theory (UET). However, economic growth and trade openness contribute environmental degradation both in long- and short-run paths. The causality analysis reports bi-directional causal link between trade openness and urbanization in the short-run. However, in the long-run, economic growth ranger cause carbon dioxide emissions, urbanization and trade openness. Similarly, trade openness Granger cause carbon dioxide emissions, economic growth and urbanization in the long-run. The overall results imply that rural to urban immigration is still mostly driven by exports related manufacturing sectors. In addition, the higher GDP also contributes to urbanization as a feedback effect. In the end, stability of the model is also checked, model found stable and findings are suitable for environmental policy control use.