Do coal consumption and industrial development increase environmental degradation in China and India?

Abstract

The present study is aimed to explore the relationship between coal consumption, industrial production, and CO2 emissions in China and India for the period of 1971-2011. The structural break unit root test and cointegrating approach have been applied. The direction of causal relationship between the variables is investigated by applying the VECM Granger causality test. Our results validate the presence of cointegration among the series in both countries. Our results also validate the existence of inverted U-shaped curve between industrial production and CO2 emissions for India, but for China, it is a U-shaped relationship. Coal consumption adds in CO2 emissions. The causality analysis reveals that industrial production and coal consumption Granger cause CO2 emissions in India. In the case of China, the feedback effect exists between coal consumption and CO2 emissions. Due to the importance of coal in China and India, any reduction in coal consumption will negatively affect their industrial value added as well as economic growth.