One region's gain is another's loss: The impact of market segmentation on renewable energy development in China

Abstract

Current research has focused on the effects of policy and economic factors on renewable energy (RE) development but has ignored the effects of market segmentation. We developed a two-stage Cournot equilibrium model to explore the relationship between the market segmentation behaviors of local governments and their effects on RE development. We empirically tested the spatial effects of market segmentation by using a spatial Durbin model based on panel data of Chinese provinces from 2006 to 2020. The results are as follows. (1) There are positive spatial dependences among the RE development in the provinces. Most provinces show a “high-high” or “low-low” spatial agglomeration pattern. (2) Market segmentation caused by local protection can promote local RE development but significantly inhibits the development of RE in neighboring regions, i.e., one region's gain is another's loss. The inhibition is much greater than the local development, thus hindering overall RE development. (3) Regions with more stringent environmental regulations have greater incentives to adopt the market segmentation strategy in order to promote local RE development. (4) Market segmentation can increase the degree of local capital and labor mismatch, thereby promoting local RE development and hindering RE development in neighboring regions.