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Convergence of Operational Efficiency in China’s Provincial Power Sectors

Vishal Chandr Jaunky and Lin Zhang

Year: 2016
Volume: Volume 37
Number: China Special Issue
DOI: 10.5547/01956574.37.SI1.vjau
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Abstract:
To analyze the operational efficiency of Chinese power sector at the provincial level, this paper studies the convergence of technical efficiency and productivity growth of electricity across 29 Chinese provinces during the period 1996-2008 using several convergence models. Depending on the model being employed, we find evidence of convergence of operational efficiency towards either a national steady state or towards their own steady states, with the latter process occurring more rapidly. In essence, our study provides evidence of negative effects of government intervention. Additionally, we use the nonparametric distribution dynamics approach to analyze intra-distributional dynamics of technical efficiency and productivity. We find some support for productivity convergence while technical efficiency does not converge for provinces with relatively low levels. We discuss policy implementations based on our model results and highlight several aspects for policy making in the power sector reforms currently being undertaken.



Nuclear Phase-out Under Stringent Climate Policies: A Dynamic Macroeconomic Analysis

Lucas Bretschger and Lin Zhang

Year: 2017
Volume: Volume 38
Number: Number 1
DOI: 10.5547/01956574.38.1.lbre
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Abstract:
In this paper we investigate the long-run economic consequences of phasing out nuclear energy in the presence of stringent climate policies. We integrate endogenous growth theory and technology-based activity analysis into a dynamic numerical general equilibrium model. Both market-based and policy-mandated nuclear phase-out are studied. Using data from the Swiss economy we find that the aggregate welfare loss of carbon policy is as large as 1.21% and that nuclear phase-out raises the loss to 1.58%. Nuclear phase-out has no significant effect on economic growth. Increased investment, induced innovation, and sectoral change are the reasons that the economic impact of nuclear phase-out and the trade-off between energy and climate policy are moderate, once the dynamics of an economy are taken into account. Optimal phase-out time for nuclear depends mainly on future cost escalation in the energy sector. Keywords: Energy and growth, Decarbonization, Nuclear phase out, CGE model, Induced innovation



Energy Efficiency Transitions in China: How Persistent are the Movements to/from the Frontier?

Lin Zhang and Philip Kofi Adom

Year: 2018
Volume: Volume 39
Number: Number 6
DOI: 10.5547/01956574.39.6.lzha
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Abstract:
This study examines the energy efficiency transitions in China using provincial data covering the period 2003-2015. Sustainable progress in energy efficiency achievement is beneficial to energy security and the achievement of the Paris Agreement. This article combines the stochastic frontier method with the panel Markov-switching regression to model energy efficiency transitions. The estimated energy efficiency scores show significant regional and provincial heterogeneity. Also, while human capital development, urbanization, and foreign direct investment promote energy efficiency, price and income per capita reduce it. The transition probabilities indicate that the high energy-efficient state is less sustainable, and the movement towards the frontier seems less persistent than movement from the frontier. Thus, it appears that China is not making sustainable progress in energy efficiency. The unsustainable nature of the high energy-efficient state suggests that in China, there are weak energy efficiency efforts and energy efficiency policies lack robustness.



The Effect of Human Capital on CO2 Emissions: Macro Evidence from China

Yao Yao, Lin Zhang, Ruhul Salim, and Shuddhasattwa Rafiq

Year: 2021
Volume: Volume 42
Number: Number 6
DOI: 10.5547/01956574.42.6.yyao
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Abstract:
We study the effect of human capital on CO2 emissions using the Chinese provincial panel over the period 1997–2016. Allowing for cross-sectional dependence and structural breaks, we find a negative association between human capital and CO2 emissions in the long run and attribute it to the influences from younger workers and workers with advanced human capital. In particular, our results suggest that a one-year increase in average schooling reduces CO2 emissions by 12 per cent. Using disaggregated emission dataset by energy sources and end emitters, we demonstrate this negative association is likely to manifest through technology effect and the improvement in energy efficiency. These manifestations are limited to production sector. Our finding suggests a promising avenue for abating greenhouse gases without impeding economic growth.



The Thirst for Power: The Impacts of Water Availability on Electricity Generation in China

Yao An and Lin Zhang

Year: 2023
Volume: Volume 44
Number: Number 2
DOI: 10.5547/01956574.44.2.yaan
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Abstract:
Economic development under restricted resource availability has become a complex challenge for both developing and well-established economies. To maintain a sustainable electricity supply and mitigate the impact of water shortage on economic development, it is therefore important to understand how utility firms respond to the change in water availability and unpacks the underlying mechanisms of power outage. By pairing plant-level information with the fine-scale grid monthly meteorological data, we find significant plant-level technology substitution in response to water scarcity: a one-standard-deviation decrease in water availability causes an approximate 205 GWh decline per hydro power plant, a 145 GWh increase per nuclear plant, and a 28 GWh increase per coal-fired plant. This water-induced technology substitution takes place within the grid, and we do not identify cross-grid adjustment. Our estimation shows that the technology substitution is associated with a hidden increase in carbon emission up to 32000 tons per year by plant, resulting in an additional cost of 0.18 million USD. Water scarcity slows down the transition towards renewable energy.



When and Under What Conditions Does an Emission Trading Scheme Become Cost Effective?

Hongyan Zhang, Lin Zhang, and Ning Zhang

Year: 2024
Volume: Volume 45
Number: Number 2
DOI: 10.5547/01956574.45.2.hzha
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Abstract:
This paper studies when and under what conditions the actions undertaken by the power plants involved in China's emission trading scheme (ETS) pilot became cost effective. Based on unique plant-level panel data and the difference-in-differences strategy, we identify that an insignificant initial reduction in cost efficiency occurred at the announcement stage for power plants in the pilot provinces; however, the cost efficiency of the pilot plants increased significantly following formal policy implementation. Additionally, the by-stage treatment effects differed across the pilot provinces due to localized market and non-market variations. Localized conditions of higher marketization, stricter policy enforcement, and lower carbon dependence enhanced this positive effect. The synthetic control results confirmed this variation in the policy effects. The carbon trading pilots resulted in improved efficiency in power plants in Shanghai, Guangdong, and Tianjin during the period 2013–2017, with an associated total cost saving of approximately 29.75 million RMB. To enhance the efficacy of the ETS policy, our findings suggest that the design of the policy should consider localized external factors.





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