The role of capital deepening in China’s energy transition |
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| Authors: | Dong Wang Jian Ding Wanjia Wang |
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| Institution: | 1. Victoria Energy Policy Centre, Victoria University, Melbourne, Australia;2. Victoria Institute of Strategic Economic Studies, Victoria University, Melbourne, Australia;3. Inner Mongolia Honghe Energy and the Environment Consultancy, Hohhot, China;4. Crawford School of Public Policy, Australian National University, Canberra, Australia;5. College of Business and Economics, Australian National University, Canberra, Australia |
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| Abstract: | ABSTRACTThis paper provides a theoretical model to explain the causality between China’s energy transition and capital deepening found by the empirical study. We prove that in the equilibrium, China’s energy transition is endogenously determined by capital deepening due to the homogeneity of electricity and the monopolistic competition features of China’s electricity market. Price effect, which is the effect of change in relative factor price, will affect energy transition only if the policy intervenes electricity price in terms of the primary sources from which it is generated. We propose that investment can promote energy transition by stimulating capital deepening which is biased to clean energy development. In this regard, our paper provides a new way of thinking for other developing countries to design an effective energy transition policy. |
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| Keywords: | Energy transition capital deepening China electricity market |
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