Is Geopolitical Risk Powerful Enough to Affect Carbon Dioxide Emissions? Evidence from China

Abstract

Escalating geopolitical factors are closely related to climate warming, but researchers have not fully considered this. Therefore, the purpose of this study is to explore the interaction between geopolitical risk (GPR) and carbon dioxide (CO2) in China. This paper uses the recently developed GPR index and a bootstrap Granger rolling-window estimation. Empirical results spanning different subsamples reveal a two-way causal relationship between GPR and CO2. GPR transforms energy consumption and economic activities through trade disputes, military deployments and energy issues, which have a complex impact on CO2 emissions. Oppositely, CO2 emissions affect GPR through changes in international cooperation and shaping of geopolitical systems. In view of these empirical results, we put forward several policy recommendations. The Chinese government can effectively consider GPR to control CO2 emissions by increasing green investment and signing environmental contracts. Enterprises must focus on research and development (R&D) and investment in new energy innovations. In addition, international organizations can be a useful tool for monitoring decarbonization policies and resolving conflicts between countries.