China and India are the two countries with the strongest economic growth in the world. Meanwhile they consume much of the global coal to fuel their economic development. With coal burning as a major factor contributing to global greenhouse gas emissions, China and India are confronted with a dilemma of economic growth and environment protection. Will coal consumption reduction cause economic shocks? Is there a causal relationship between coal consumption and economic growth in China and India? In this paper Granger causality tests were used to examine the relationship between coal consumption and GDP in China and India, using data for the period from 1965 to 2006. It was found that a unidirectional causality from GDP to coal consumption existed in China while a unidirectional causality from coal consumption to GDP did in India. Therefore, developing cleaner and more efficient technologies is essential to reduce their CO2 emissions to reach sustainable development.
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