Does Energy Price Induce China’s Green Energy Innovation?

Siming Liu,Yue Liu,Xueying Xu,Pierre Failler

doi:10.3390/en13154034

Abstract

This paper aims to comprehensively analyze the relationship between energy price and green energy innovation in China, and first studies the impact of energy price on China’s green energy innovation, then further investigates the moderating role of energy price distortion in the price–innovation relationship, especially in the context of lagging energy marketization level in the process of China’s transition from planned economy to the market economy. Based on the data of 30 provinces in China from 2003 to 2017, this paper provides a measurement of green energy innovation capacity through the number of “alternative energy production” and “energy conservation” patents. Our results show that energy price has a significantly positive impact on China’s green energy innovation, no matter the number of green energy patent applications or the number of green energy patent grants is used as the proxy of green energy innovation capacity. However, there exists heterogeneity related to the influence of energy price on green energy innovation. Specifically, energy price has a noticeable role in promoting green energy innovation in central and western China, but not in eastern China. Further research results show that energy price distortion significantly reduces the inducing effect of energy price on green energy innovation. Meanwhile, the distortion degrees of energy price in the central and western regions of China are significantly lower than that in the eastern region, which explains to a large extent why the inducing effect of energy price on innovation is more prominent in the central and western regions.

Highlights

Identifying the impact of energy price on green energy innovation is of great importance for green energy innovation promotion and energy transformation acceleration
In the econometric model setting of this paper, the energy price which is taken as the one-year lagged value or the three-year lagged value can address the potential endogenous issues in the model estimation to a large extent, yet to ensure the robustness of the estimation results, this paper further uses the panel instrumental variable model for parameter estimation [56,57]
When the number of green energy patent grants is taken as the dependent variable, the estimated results in Columns 7 and 8 in the table show that the effect of energy price on green energy patents is significantly positive

Summary

Introduction

Identifying the impact of energy price on green energy innovation is of great importance for green energy innovation promotion and energy transformation acceleration. The production activity and human life become increasingly dependent upon energy consumption. According to BP statistics (http://www.bp.com.cn/stats2019), except in 2009, global primary energy consumption has maintained a sustained growth momentum in the past 20 years. As the world’s largest developing country, China’s rapid economic growth in recent years has generated huge energy consumption. In 2018, China’s primary energy consumption reached 3273.5 million tons of oil equivalent, accounting for 23.6% of the total global primary energy consumption, making it the world’s largest energy consumer. China’s fossil fuel energy consumption accounted for 87.67% of the total energy consumption in 2014, 6.76 percentage points higher than the global average (https://data.worldbank.org).

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Conclusion