Measuring the simultaneous effects of electricity consumption and production on carbon dioxide emissions (CO2e) in China: New evidence from an EKC-based assessment

Highlights: • Environmental effects of electricity (production and consumption) were examined for China. • Simultaneous equation modeling framework was used. • Electricity production increased CO₂ emissions in China. • Electricity consumption increased CO₂ emissions in China. • Agriculture value added decreased CO₂ emissions in China. Energy production has become an important concern because excessive coal and oil use for electricity generation and consumption in developing economies threaten the global environment. Past research mainly focuses on energy consumption, while there is a scarcity of models on the energy and electricity production-environmental pollution nexus in the Environmental Kuznets Curve literature. As an initial attempt, the paper examined the simultaneous impact of electricity production and electricity consumption on carbon dioxide emissions in one of the top energy-consuming, energy-producing, and carbon-emitting nations (China). The study applied the Zivot and Andrew tests to check the stationarity of the series with structural breaks. The autoregressive distributed lag (ARDL) method was to compute long-run coefficients using two separate models: Model 1 (total electricity production and environmental pollution) and Model 2 (total electricity consumption and environmental pollution) were considered. The results showed that electricity production and electricity consumption significantly contributed to environmental pollution in the short- and long-run. Apart from validating the EKC hypothesis (inverted-U-shaped curve) in the short- and long-run, the estimation demonstrated that agriculture value-added mitigated the environmental pollution. The paper offers important policy implications.