A nexus between air pollution, energy consumption and growth of economy: A comparative study between the USA and China-based on the ARDL bound testing approach

The aim of the study is to investigate and compare the correlation between energy consumption, air pollution and economic growth in China and the USA. Both countries are powerful economic countries in the world, thus we attempt to know whether energy consumption and air pollution vary as the economy develops. The data for the research spanning from 1970 to 2014 was gathered from an indicator of the World Bank. The time span was decided due to the data availability of both countries. To examine the long-run equilibrium relationship, there was performed the ARDL bound test. Results of unit root indicated that all the variables were integrated of order one. In the case of the ARDL bound test, the values of F-statistics exceeded the upper bound value, which means they are statistically significant. The estimation results substantiated the positive coefficient of energy consumption at the 1% significance level in China, implying that air pollution can increase as the energy consumption rises in China. However, the empirical results of the USA were exactly on the contrary. The outcomes of the CUSUM and CUSUMSQ tests revealed that all coefficients in both the short- and long-run models were stable. Based on the above analysis, the study suggests that China should adopt innovation and environmentally friendly modern technologies. Specifically, China ought to inspire and motivate energy saving and low-carbon research innovations, energy saving industries, green investment and carbon sequester technologies as well as public environmental awareness creations to mitigate environmental deterioration and climate change.