This study is to use cointegration, linear and non-linear Granger causality test to investigate the relationship between carbon dioxide (CO2) emissionand economic growth (GDP) in China for the period 1961–2010. Our analysis shows that CO2 emission and GDP are balanced in the long-run. The results suggest that there is evidence that economic development can improve environmental degradation in the long-run. Moreover, the result of linear and non-linear Granger causality test indicates a long-run unidirectional causality running from GDP to CO2 emissions. The study suggests that in the long run, economic growth may have an adverse effect on the CO2 emissions in China. Government should take into account the environment in their current policies, which may be of great importance for policy decision-makers to develop economic policies to preserve economic growth while curbing of carbon emissions.
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Vol. 7 • No. 2