Relationship between Greenhouse Gas Emissions Trade Openness and Economic Growth A Comparative Study between India and China

Abstract

The present study is an attempt to investigate the relationship between greenhouse gas emissions per capita, trade openness and gross domestic product per capita in India and China, the worldand#8223;s fastest growing economies. The present study is based on the Environment Kuznets curve hypothesis which says about the decoupling between environment and economic growth. The study used data for the period 1970 to 2018 from World Bank, World Resources Institute, Our world in data and Emissions database for global atmospheric research websites. Suitable econometric techniques like cointegration approach, vector error correction approach, Grangerand#8223;s causality approach, decoupling analysis, variance decomposition analysis, impulse response function, CUSUM tests and CUSUM square tests were applied to fulfill the objectives of the study. newlineResults from cointegration analysis using VECM indicate presence of long run relationship among the variables at conventional levels of significance. The study found the inverted U shape for the study period thus confirming the existence of EKC hypothesis in China. But for India there is no evidence of such a relationship between greenhouse gas emissions per capita and gross domestic product per capita.The existence of EKC in China guarantees the definitive improvement in the environment along the trade openness path. newlineDecoupling analysis shows that decoupling happens in both the countries but it is weak decouplingand#8223; for majority of the years indicating the need for stronger commitment to shift to energy efficient methods of production. Results based on granger causality show evidence of a causality running from GDP per capita to greenhouse gas emissions per capita for both India and China. This implies that both the economies especially India should pursue energy conservation policies and greenhouse gases emission reduction policies in the long run without compromising economic growth. This calls for policy makers to consolidate the policy framework to ensure that the economy grows sustainably.