Factors influencing CO2 emissions in China's power industry: Co-integration analysis

More than 40% of China's total CO2 emissions originate from the power industry. The realization of energy saving and emission reduction within China's power industry is therefore crucial in order to achieve CO2 emissions reduction in this country. This paper applies the autoregressive-distributed lag (ARDL) co-integration model to study the major factors which have influenced CO2 emissions within China's power industry from 1980 to 2010. Results have shown that CO2 emissions from China's power industry have been increasing rapidly. From 1980 to 2010, the average annual growth rate was 8.5%, and the average growth rate since 2002 has amounted to 10.5%. Secondly, the equipment utilization hour (as an indicator of the power demand) has the greatest influence on CO2 emissions within China's power industry. In addition, the impact of the industrial added value of the power sector on CO2 emissions is also positive from a short-term perspective. Thirdly, the Granger causality results imply that one of the important motivators behind China's technological progress, within the power industry, originates from the pressures created by a desire for CO2 emissions reduction. Finally, this paper provides policy recommendations for energy saving and emission reduction for China's power industry.

► We study the major factors influencing China's power industry CO2 emissions.
► The average annual growth rate of CO2 emission from power industry is calculated.
► Installed capacity has the greatest influence on power industry CO2 emission.
► The Granger causality between CO2 emission and its effecting factors is analyzed.