Tackling energy poverty through trade activities: Analyzing social well-being in China

Abstract

Energy requirements for household and commercial uses have been extended significantly during China’s recent economic development and transition process. Despite enormous achievements in export volume and diversity, domestic quality of life is still obstructed by energy poverty in the presence of economic and trade policy uncertainties. We explore the impact of economic complexity (EC) and financial globalization (FG) on energy poverty (EP) in China, considering trade (TPU) and economic policy uncertainties (EPU). For this purpose, we use quarterly data from 2000Q1 to 2020Q4 and employ a novel econometric technique of Rolling Window Correlations that deals efficiently with model instability and provides consistent correlations over time. We find asymmetries in the connections over time, which keep evolving dynamically. Economic complexity and financial globalization can increase energy poverty at various time scales if not assisted by appropriate trade policies. We observe significant impacts of the trade and economic policy uncertainties on energy poverty in China. The findings are robust to using an alternative proxy for energy poverty. The government should formulate sound trade policies and ensure certainty in its communications to assist economic activities in a manner not detrimental to energy poverty. As China is going through a transition stage in energy and economic perspectives, amplifying the energy mix, enhancing energy efficiency, and aligning economic policies with energy goals is necessary.