Moderating effect of institutional policies on energy and technology towards a better environment quality: A two dimensional approach to China's sustainable development

Abstract

Our study contributes towards identifying the world best practises and possible ways of attaining China's climate and sustainable goals. China is among the fastest growing emerging economies in the world, and its growth cannot be separated from utilization of energy sources which are capable of jeopardizing its climate and sustainable goals. China is ranked 1st in the global carbon emission which has great implications in both its domestic environment sustainable development and global climate change. Considering the position of China in the global economic and environmental performance, it is essential to investigate the possible global best practices to achieve its sustainable development. We utilized China's data of 1996Q1-2018Q4 for this study. Relevant instruments (renewable energy, technology innovation and institution) and methodology (Autoregressive Distributed Lag-ARDL bound and dynamics with granger causality) are adopted to scientifically test both the economic and environment performance of China. Findings from ARDL test established non validity of inverted U-shaped theory of Environmental Kuznets Curve (EKC) for the case of China. Also, inverse relationship is established between all the selected variables (renewable energy, technological innovation and institution) and the CO2. Interestingly, the output from granger causality is in synergy with the output from ARDL short and long run outputs. Feedback transmission was found between the variables (renewable energy, technological innovation and institution) of our choice with both environment (carbon dioxide emissions-CO2) and economic growth (Gross Domestic Product-GDP). The trend of relationship established between the selected variables (renewable energy, technology innovation and institution) points towards China's ability to achieve its climate and sustainable goal by framing its policy around energy sector and enhancement of technology with strong institutions.