Electricity generation and China's GDP growth under dual control policy

Abstract

To achieve the carbon neutralization plan by 2060, China implemented the “Dual Control” ( Neng Hao Shuang Kong in Chinese) policy in 2015 by limiting the energy intensity and consumption, leading to forced slowdown of energy-related production and consumptions, which in turn hampered China's economic growth. The economic impact of energy shortage has been discussed in such studies as Cheng et al., the economic consequences of the new policy remain unanswered. In this article, we select China's provincial GDP and electricity generation data from 2001 to 2021 to perform causality tests and a double log model which delineates the nexus between GDP growth and electricity generation. We find that (a) electricity generation growth Granger causes GDP growth but not vice versa, and (b) a 1% increase in electricity generation growth will lead to 0.17% increase in GDP growth. The significance of the finding is: as coal still primarily fuels electricity generation, dual control will further hinder China's economic development sans significant enhancement of electric system or expansion of renewable energy, our findings thus support an upgrade of current grid network by China Power International Development; an expansion of renewable capacity such as a proposal of 400 GW new energy project; and construction of energy storage devices such as the CGD Group thermal storage System and Yingcheng Compressed Air Energy Storage System.