How does mandatory energy conversion affect sustainable development: Perspectives of regional heterogeneity and efficiency decomposition

Abstract

Clean energy conversion is a core approach and development trend to tackle climate change, while the severe drawbacks such as supply deficiency and cost increase restrict regional sustainable development. This paper employs a natural experiment of coal-to-gas conversion of the Chinese government to study the effect of such policy on regional sustainable development, as well as the underlying mechanism. Based on a city-level dataset from 2006 to 2019, this paper measure green total factor productivity (GTFP) using data envelopment analysis (DEA) combined with the Malmquist‒Luenberger productivity index. Then, this paper evaluates the impact of the CTG policy in pilot cities using the Difference-in-Difference (DID) with Propensity Score Matching (PSM) approach. This paper finds that the CTG policy increased the GTFP of the pilot cities by 2.25% (0.0229/1.02). A series of robustness tests confirmed the findings. Subsequent mechanism analysis shows that the CTG policy increases the GTFP of pilot cities mainly by increasing technical efficiency. In addition, the mechanism of the CTG policy's impact differs between central and noncentral cities. In particular, the CTG policy increases the technological innovation indicator (TC) of provincial capital cities by 2.35% while it increases the technical efficiency indicator (EC) of other cities by 1.89%, which proves the Porter effect in provincial capital cities. Finally, several implications are provided for policymakers to promote other types of renewable energy.