A win-win opportunity for economic growth and carbon emissions reduction in China: The perspective from correcting energy price distortions

Abstract

Distorted energy prices undermine resource allocation efficiency and threaten China's economic growth and reduction of carbon emissions. This study examines the price distortions for fossil and renewable energy based on Chinese provincial panel data and estimates the influence of distorted energy prices on the coordination of economic growth and carbon emissions reduction (CECR). The results show that the energy price distortions significantly inhibit CECR and especially distorted coal price has the most inhibitory impact. The impact is regionally differentiated, with the eastern region (E region) being more negatively affected by price distortions in oil, natural gas, and renewable energy. Coal price distortion is a greater impediment to coordinated development in the Central-Western regions (C–W regions). Therefore, the correction of energy price distortions (CEPD) becomes key to achieving a win-win situation for both economic growth and carbon emissions reduction (ECR). Further analysis reveals that the scenario of correcting actual energy prices is more conducive to promoting CECR, with a growth potential of 1.81 %, and the growth potential in C–W regions is greater than in E region. This study both provides for China and the emerging economies a useful expansion of the market's decisive role in the allocation of resources and a reference for exploring the win-win of ECR.