Government Spendings and Environmental Stewardship: Assessing the Economic and Environmental Impacts of Energy Consumption

Abstract

The demand for energy and its effects on the environment has been debated for several years due to continued economic developments. According to IEA (2023), global energy-related CO₂ emissions significantly peaked at an unforeseen level in 2023, especially in developing countries. Furthermore, this statistic highlights the need to increase environmental protection expenditures to address pressing environmental concerns. Therefore, this study investigates the moderating role of environmental protection expenditures on the associations of total energy consumption with both economic growth and CO₂ emissions. For this purpose, a panel data set of 30 Chinese provinces for the years 2012-2023 was included.  According to estimation results through panel-corrected standard errors and generalized method of moments, energy consumption significantly and positively promotes economic growth and also contributes to increased CO2 emissions. In the moderation case, the study found that environmental protection expenditures significantly diminish the CO2 emissions caused by energy consumption while boosting economic growth. In light of these findings, the government should raise expenditures in environmental protection programs to form favourable conditions for economic growth and mitigate the impacts of CO2 emissions.