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Evaluating pollution damage function through carbon pricing, renewable energy demand, and cleaner technologies in China: blue versus green economy

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Abstract

Climate change and increased greenhouse gas emissions boost the global average temperature to less than 2°C, which is the estimated breakeven point. The globe is moving into blue pollution economies as the environmental sustainability objective becomes more distorted. The study looked at three United Nations Sustainable Development Goals, namely (i) affordable and clean energy; (ii) industry, innovation, and infrastructure; and (iii) climate change, to see how far the Chinese economy has progressed toward green and clean development strategy. In the context of China, the “pollution damage function” was intended to refer to carbon damages related to carbon pricing, technological variables, sustained economic growth, incoming foreign investment, and green energy. The data was collected between 1975 and 2019 and analyzed using various statistical approaches. The results of the autoregressive distributed lag model suggest that carbon taxes on industrial emissions reduce carbon damages in the short and long run. Furthermore, a rise in inbound foreign investment and renewable energy demand reduces carbon damages in the short term, proving the “pollution halo” and “green energy” hypotheses; nonetheless, the results are insufficient to explain the stated results in the long run. In the long run, technology transfers and continued economic growth are beneficial in reducing carbon damages and confirming the potential of cleaner solutions in pollution mitigation. The causal inferences show the one-way relationship running from carbon pricing and technology transfer to carbon damages, and green energy to high-technology exports in a country. The impulse response estimates suggested that carbon tax, inbound foreign investment, and technology transfers likely decrease carbon damages for the next 10 years. On the other hand, continued economic growth and inadequate green energy sources are likely to increase carbon pollution in a country. The variance decomposition analysis suggested that carbon pricing and information and communication technology exports would likely significantly influence carbon damages over time. To keep the earth’s temperature within the set threshold, the true motivation to shift from a blue to a green economy required strict environmental legislation, the use of green energy sources, and the export of cleaner technologies.

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Availability of data and materials

The data is freely available at World Development Indicators published by World Bank (2021) at https://databank.worldbank.org/source/world-development-indicators.

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Acknowledgements

Researchers Supporting Project number (RSP-2021/87), King Saud University, Riyadh, Saudi Arabia.

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Authors and Affiliations

  1. Department of Economics, University of Haripur, Haripur, Khyber Pakhtunkhwa, Pakistan

    Muhammad Zaheer Akhtar & Khalid Zaman

  2. Laboratory of International and Regional Economics, Graduate School of Economics and Management, Ural Federal University, Ural, Russia

    Faheem Ur Rehman

  3. Department of Management, College of Business Administration, King Saud University, P.O. Box 71115, Riyadh, 11587, Saudi Arabia

    Abdelmohsen A. Nassani & Muhammad Moinuddin Qazi Abro

  4. Department of Management, Birmingham Business School, University of Birmingham, Birmingham, UK

    Mohamed Haffar

Authors
  1. Muhammad Zaheer Akhtar
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  2. Khalid Zaman
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  3. Faheem Ur Rehman
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  4. Abdelmohsen A. Nassani
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  5. Mohamed Haffar
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  6. Muhammad Moinuddin Qazi Abro
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Contributions

MZA: conceptualization, methodology, writing-reviewing and editing. KZ: software, methodology, formal analysis. FUR: methodology, formal analysis, resources. AAN: supervision, resources, methodology, software. MH: resources, visualization, formal analysis. MMQA: data curation, validation, formal analysis.

Corresponding author

Correspondence to Khalid Zaman.

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Highlights

• Carbon pricing, technological variables, inward FDI, and green energy are used to analyze China’s pollution damage function.

• Carbon taxes reduce carbon pollution in the short and long term.

• Inbound FDI reduces carbon harms in the short run, proving the “pollution halo” idea.

• Cleaner technology advancements aid in the reduction of carbon pollution in a country.

• Renewable energy Granger causes high-technology exports.

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Akhtar, M.Z., Zaman, K., Rehman, F.U. et al. Evaluating pollution damage function through carbon pricing, renewable energy demand, and cleaner technologies in China: blue versus green economy. Environ Sci Pollut Res 29, 24878–24893 (2022). https://doi.org/10.1007/s11356-021-17623-y

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  • DOI: https://doi.org/10.1007/s11356-021-17623-y

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