Urbanization, Renewable Energy Expenditure, Economic Growth & Environmental Degradation in China

Abstract

The examination of the link among urbanization, economic growth, environmental degradation, and renewable energy investment has become a matter of great concern in a rapidly developing country like China. This study utilized the Autoregressive Distributed Lag (ARDL) model to explore both short-run and long-run relationships among these variables using annual time series data for the period 2014-2024. The results of the study showed that economic growth significantly and positively impacted CO₂ emissions. In other words, industrial activities are still the main source of environmental pollution. Urbanization also caused a sharp increase in emissions in the short term but the long-term coefficient turned negative, thus supporting the Urban Environmental Transition (UET) theory. Interestingly, the long-run coefficient for renewable energy was not only negative but also significant, indicating that the promotion of renewable energy through the development of corresponding infrastructure comes with less CO₂ emissions. China’s policy framework is characterized by a very fast adjustment mechanism as the Error Correction Term (ECT) of -0.94 shows that nearly 94% of disequilibria are corrected on an annual basis. Overall, these findings may be seen as evidence that China is on the right track in terms of sustainable development, as predicted by the Environmental Kuznets Curve (EKC) hypothesis. In the end, continual innovation and public involvement will play a most significant role in helping China achieve its goal of carbon neutrality by 2060, thus leading other developing countries that have the same aim of combining growth and sustainability.

Keywords: Urbanization; Economic Growth; Renewable Energy Investment; CO₂ Emissions; Environmental Degradation; China