The relationship between CO2 emissions, energy consumption, economic growth and trade openness: A study on Turkey and China

The aim of this study is to examine the relationship between CO2 emissions, energy consumption, economic growth, and trade openness through the case studies of Turkey and China. CO2 emissions are generally considered in the economic literature as an indicator of environmental degradation caused by economic activities. However, the link between CO2 and climate change has convinced the public that its impacts extend beyond environmental damage and has shaped international policies in the fight against climate change. Consequently, a consensus has emerged regarding the necessity for developing countries to pursue low-carbon development paths to prevent their development efforts from causing further damage to global climate. Many countries, including Turkey and China, have announced "carbon neutrality" targets. This study investigates the relationship among income, energy consumption, trade openness, and CO2 emissions in Turkey and China. A better understanding of these relationships is essential for countries to design more effective carbon-reduction policies. Within the scope of this study, these relationships were analyzed using cointegration methods and causality tests. The empirical application of the study analyzed the cointegration relationship among CO2 emissions, energy consumption, economic growth, and trade openness in Turkey and China using the ARDL (Autoregressive Distributed Lag) model. Additionally, the role of renewable energy as a factor reducing CO2 emissions and policies promoting renewable energy were summarized for both countries. Subsequently, the findings of the empirical analysis were discussed and interpreted within the framework of a comparative country analysis. In the scope of the study, a dataset covering the period from 1970 to 2022 was used for Turkey, while a dataset covering the period from 1979 to 2022 was used for China. Based on the analysis results, a cointegration relationship was identified between per capita CO2 emissions, per capita energy consumption, per capita renewable energy consumption, per capita GDP, the square of per capita GDP, trade openness, and the share of FDI in GDP for both Turkey and China.In the case of Turkey, in the long run, an increase in the square of per capita GDP and in per capita renewable energy consumption reduces per capita CO2 emissions, whereas increases in per capita GDP, per capita energy consumption, and FDI increase per capita CO2 emissions. Furthermore, the EKC hypothesis and the PHH were validated for Turkey in the long-run. For China, in the long run, increases in per capita GDP and per capita energy consumption increase per capita CO2 emissions, whereas increases in FDI, the square of per capita GDP, per capita renewable energy consumption, and openness reduce per capita CO2 emissions. Moreover, the EKC and Pollution Halo Hypothesis were found to be valid for China in the long-run. For both countries, increasing renewable energy consumption is an effective method to reduce CO2 emissions. However, this effect is significantly more pronounced in China. During the analyzed period, China exhibited carbon-intensive growth. In both China and Turkey, the factors that most significantly contribute to the increase in CO2 emissions are, respectively, per capita GDP and per capita energy consumption. However, the impact of these variables on CO2 emissions is higher in China compared to Turkey. In conclusion, both countries need to improve energy efficiency, promote renewable energy, and adopt specific measures tailored to their unique contexts. Turkey should initiate an emissions trading system, whereas China needs to expand the scope of its existing one. Turkey's FDI policies should prioritize environmentally friendly sectors, while China should implement policies to enhance openness and increase investments in green sectors. Both countries should develop a phased plan for transitioning away from coal to ensure alignment with their carbon neutrality targets.