Equity-efficiency trade-off in China's energy capping policy

Abstract

As a part of the transition to a sustainable economy, China has set a cap on primary energy consumption for the first time, of 5.0 billion tonnes of standard coal equivalent by 2020. However, there is a debate on the cap feasibility and failure to adequately address the underlying equity-efficiency trade-off, which hampers achievement. This paper identifies some key challenges ahead, including the coal-dominant energy mix, declining financial support, inconsistent central-local goals, rising costs of energy-saving measures and quality of energy statistical data. By quantifying the preference of each providence toward equity-based or efficiency-based allocation schemes, the great disparity among provinces is revealed and the equity-efficiency trade-off relationship is confirmed. Developing regions, primarily located in central and western areas, tend to favor equity-based disaggregating schemes. Contrarily, developed coastal provinces strongly favor efficiency-based schemes. The present national disaggregation schemes are mainly based on historical energy consumption, but disregard the provincial development gap and efficiency factors. We conclude that this ambitious goal is likely within reach, but increased efforts and flexible instruments are needed.