The pathway to the natural gas industry: Financial development, coal consumption, and carbon dioxide emissions in P.R. China

This paper revisits the causal links between financial development, coal consumption, and CO(2) emissions in P.R. China over the 1977–2017 period to validate the development of its natural gas industry. It uses a Bootstrap ARDL bound test with structural breaks to establish stationarity, short- and long-run dynamics, and causality of the series. The results show there are no long-run relationships among these three variables, but a Granger causality test does indicate the presence of both a two-way Granger causality between coal consumption and CO(2) emissions, and a one-way Granger causality running from financial development to both coal consumption and CO(2) emissions. These results have important policy implications for the Chinese government's efforts to meet its commitment at the 75(th) UN General Assembly to achieve carbon neutrality. In that context, the promotion of its natural gas industry, including carbon pricing mechanisms and taxation schemes while enacting environmentally friendly energy abatement policies become a must.