Economic policy uncertainty (EPU) and firm carbon emissions: Evidence using a China provincial EPU index

By Jian Yu, Xunpeng Shi, Dongmei Guo, Longjian Yang. Energy Economics, 2020

441 citations recorded by the source corpus.

Although there have been numerous studies on economic policy uncertainty (EPU), its impact on firms’ emissions has not often been examined. Using an unbalanced panel data of firms and a newly constructed provincial EPU index in China, this paper estimates the impact of EPU on manufacturing firms’ carbon emission intensity. We further test the likely channels through which EPU can affect firm emission intensity, including the innovation channel, share of fossil fuels in the total energy consumption channel, and energy intensity channel. The findings show that China’s provincial EPU imposes a significant positive impact on firms’ carbon emission intensity. The channel analysis shows that EPU influences carbon emission intensity through the share of fossil fuels in the total energy consumption and energy intensity in the short run, but not firm innovation. The results indicate that manufacturing firms prefer to use cheap and dirty fossil fuels to respond to the rising EPU. This paper suggests that policymakers should pay careful attention to the increasing effect of EPU on carbon emission intensity which could undermine China’s sustainable development goals.

Subfields: Economics and Econometrics, Renewable Energy, Sustainability and the Environment

View Paper: https://www.semanticscholar.org/paper/8264f31a57d3492f691088e111d370388b82dd98

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Citations in the corpus

Do Economic Policy Uncertainty and Geopolitical Risk Lead to Environmental Degradation? Evidence from Emerging Economies (2021, background): “of provincial level carbon emissions, it is highlighted that EPU of China at provincial level increases the provincial level carbon emissions [58].”