Natural resources extractions and carbon neutrality: The role of geopolitical risk

Abstract

This research paper examines the linkage between resource rents and environmental sustainability in China by utilizing oil and gas rents to capture resource rents. China's rapid economic growth and industrialization have led to severe environmental problems, including air and water pollution, deforestation, and loss of biodiversity. At the same time, China is rich in natural resources, particularly in oil and gas, which contribute significantly to its economy. The study aims to investigate whether there is a significant relationship between resource rents and environmental sustainability in China, and if so, to what extent. To achieve this aim, the study employs a quantile regression approach, using the data from 1988 to 2021. The study further examines the robustness of the results by conducting sensitivity analyses and addressing potential endogeneity issues. The findings indicate that oil and gas rentals have a positive long-term effect on CO2 emissions. Changes in gas rentals will have little effect on CO2E in the foreseeable future. Both the short-term and long-term factors imply that oil and gas rents harm China's environmental sustainability. Additionally, the geopolitical risk in China significantly adds to the lowering of CO2E. The policy implications of this study's findings for China's academic institutions and research are significant. The results of the study may contribute to the understanding of the relationship between resource rents and environmental sustainability in China, providing insights into the trade-offs and synergies between economic development and environmental protection. These findings have important policy implications for China, which is facing significant environmental challenges as it continues to develop its economy and exploit its natural resource endowments. Specifically, policymakers should consider implementing policies to diversify the energy mix away from oil and toward natural gas, promoting energy efficiency and reducing energy consumption, and reducing geopolitical risk to mitigate carbon emissions in China and other countries around the world.