Ecological Sustainability: The Role of Trade, Industrial Energy Efficiency, Energy Losses, Natural Gas Usage in China

ABSTRACT This study explores the relationship between trade, industrial energy efficiency, energy losses, and natural gas consumption on China's ecological sustainability from 1990 to 2021, with a focus on the Inverted Load Capacity Factor (ILCF). Using advanced econometric methods, including Fourier Engle‐Granger cointegration and various regression techniques (FMOLS, CCR, DOLS) and ARDL, the analysis identifies a stable long‐term relationship between ILCF and key economic indicators. The findings support the existence of an inverted U‐shaped relationship between trade and ILCF, thus proving the validity of the Inverted Load Capacity Curve (ILCC) hypothesis. This hypothesis suggests that trade initially has a negative impact on ecological sustainability, but increases in trade volume and improvements in trade practices can positively affect ecological sustainability once a certain threshold is exceeded. These findings emphasize that the environmental impacts of trade may change over time. Industrial energy efficiency emerges as a crucial factor in reducing ecological impact, highlighting the need for sustained policy efforts in this area. Additionally, addressing energy losses and accelerating the transition from natural gas to renewable energy are identified as important for achieving ecological goals. These insights provide valuable guidance for China's policy strategies, emphasizing the balance between economic growth and ecological sustainability.