The symmetric and asymmetric effects of economic policy uncertainty and oil prices on carbon emissions in the USA and China: evidence from the ARDL and non-linear ARDL approaches.

The environmental consequences of economic policy uncertainty (EPU) and oil price changes have attracted much attention in recent years, but few studies have estimated the asymmetric impact. This research investigates the symmetric and asymmetric effects of EPU and oil prices on carbon emissions in the USA and China. Based on monthly data from 1995:1 to 2019:12, we address this issue by applying the ARDL and non-linear ARDL cointegration methodology. The symmetric results show that the change in EPU has no evident impact on carbon emissions in the short and long run for the USA and China, and oil prices have a lag effect in this regard. The non-linear ARDL estimation documents significant asymmetric effects of EPU and oil prices. Specifically, the negative change in EPU facilitates emissions in the USA in the long and short run, and a unit increase in EPU increases emissions by 2.24% and 4.95%, respectively, whereas its positive change does not produce any significant effect. Carbon emissions in China are significantly and positively affected by the positive change in EPU only over the long run, and an increase in EPU increases emissions by 0.04%. Furthermore, the positive shock of oil prices significantly and positively influences emissions in the long run, and a unit increase in this factor increases emissions by 15.73% and 0.44% in the USA and China, respectively. Moreover, the short-term effect of the negative shock of oil prices exhibits a lag effect. The empirical results provide a practical reference for the USA and China to craft robust policies on emission cutting.