Decoupling CO2 emissions and industrial growth in China over 1993-2013: The role of investment

- An extended LMDI model including three novel investment factors is proposed.
- Degree of the decoupling of CO2 emissions and industrial growth is explored.
- The role of investment factors in the decoupling of CO2 emissions is investigated.
- Investment scale and investment efficiency have crucial effects on the decoupling.
- Emission-reduction and decoupling policies should focus on RCMCP, NMP, and SPFM.

Since industrial sector is a leading energy consumer and CO2 emitter in China, the degree of the decoupling of CO2 emissions and industrial growth plays a critical role in realizing the energy-conservation and emission-reduction goals of China. This is the first study to present a specific investigation on the decoupling of CO2 emissions and industrial growth in China from 1993 to 2013. Using an extended logarithmic mean Divisia index (LMDI) model focusing on both energy-related and process-related CO2 emissions and introducing three novel investment factors, i.e., investment scale, investment share, and investment efficiency, we highlight and explore the remarkable role of investment in the mitigation and decoupling of CO2 emissions with industrial growth. The results show that China's industrial sector experienced the weak decoupling during 1993-2013. The investment scale is the most important factor responsible for the increase in CO2 emissions and the inhibition of the decoupling. The investment efficiency effect has a volatile trend and overall, it plays the most significant role in reducing CO2 emissions, followed by the energy intensity effect and process carbon intensity effect, whereas the energy mix, carbon coefficient, and investment share have marginal effects. Among 36 industrial sub-sectors, the seven factors of RCMCP (raw chemical materials and chemical products), NMP (nonmetal mineral products), and SPFM (smelting and pressing of ferrous metals) have significant effects on the decoupling. Thus, the three sub-sectors should be among the top concerns for abating CO2 emissions. Finally, we provide policy recommendations considering both conventional and investment factors for China's industrial sector to realize emission reduction targets.