a r t i c l e i n f o a b s t r a c t
Article history: Received 11 November 2007 Received in revised form 15 March 2008 Accepted 15 March 2008 Available online 27 March 2008
Usinganeo-classicalaggregateproductionmodelwherecapital,labor and energy are treated as separate inputs, this paper tests for the existence and direction of causality between output growth and energyuseinChinaatbothaggregatedtotalenergyanddisaggregated levels as coal, oil and electricity consumption. Using the Johansen cointegration technique, the empirical findings indicate that there exists long-run cointegration among output, labor, capital and energy use in China at both aggregated and all three disaggregated levels. Then using a VEC specification, the short-run dynamics of the interested variables are tested, indicating that there exists Granger causality running from electricity and oil consumption to GDP, but does not exist Granger causality running from coal and total energy consumption to GDP. On the other hand, short-run Granger causality existsfromGDPtototalenergy,coalandoilconsumption,butdoesnot exist from GDP to electricity consumption. We thus propose policy suggestions to solve the energy and sustainable development dilemma in China as: enhancing energy supply security and guaranteeing energy supply, especially in the short run to provide adequate electric power supply and set up national strategic oil reserve; enhancing energy efficiency to save energy; diversifying energy sources, energetically exploiting renewable energy and drawing out corresponding policies and measures; and finally in the long run, transforming development pattern and cut reliance on resource- and energy-dependent industries. © 2008 Elsevier B.V. All rights reserved.
JEL classification: Q43 C32
Keywords: Cointegration Vector error-correction Energy consumption Economic growth China
Energy Economics 30 (2008) 3077–3094
⁎ Corresponding author. Tel./fax: +86 10 80798654. E-mail address: yuanjh126@126.com (J.-H. Yuan).
0140-9883/$ – see front matter © 2008 Elsevier B.V. All rights reserved. doi:10.1016/j.eneco.2008.03.007
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