Imported technology and CO2 emission in China: Collecting evidence through bound testing and VECM approach

Several studies have investigated the determinants of CO2 emission; however, prior research has been neglected to examine the emission of CO2 due to the trade of goods and services and royalty and licensing fees. To do so, the present work contributes to research stream by investigating the relationship between imported technology and environmental degradation within the time span of 1980-2011 in the case of China. Based on the Auto Regressive Distributive Lag (ARDL) model and Vector Error Correction (VECM) Granger causality approach we draw an inference that imported technologies mainly contributes to CO2 emission in the long run path for China. The long run causality results originates bi-directional causality between imported technology and CO2 emission. Moreover, in the long run, feedback hypothesis is also detected between energy consumption and CO2 emission. To ensure the stability of model and reliability of results for policy implication numerous significant tests are carried out. This study suggests that Government of China needs to expand input in R&D for higher technological strength and intellectual property rights management capacity, which will be favorable for the protection of the environment.