THE DISTRIBUTIONAL EFFECT OF INTER-REGIONAL TRANSMISSION GRID EXPANSION ON CHINA’S POWER INDUSTRY

Xu Tan, Sheng Lin and Bai-Chen Xie

Chapter 4 in Asian Mitigation:Insights, Mitigation Actions, Strategies and Policies for Asian Economies, 2025, pp 67-92 from World Scientific Publishing Co. Pte. Ltd.

Abstract: China suffers significant heterogeneities in resource endowments and geological conditions across the regions. Ultra-high voltage (UHV) line construction is a project put forward by the government to boost the inter-regional transmission grid expansion, benefiting economic development by reducing pollutant emissions and absorbing more clean energy. This study investigates the extent to which this giant infrastructure has distributional effects on China’s power industry. We estimate the distributional effect of UHV lines from the perspective of power deployment, carbon emissions, and producer surplus by simulating an equilibrium model of the national electricity market through the mixed complementarity problems (MCPs) method. Furthermore, the Lorenz curve is also employed to investigate the distributional effect of UHV introduction. The results indicate that: (1) the distributional effect of introducing UHV lines is regressive considering its limited contributions to the equalization of environmental and economic welfare; (2) the emission reduction effect of the UHV lines has been improved between 2015 and 2018; (3) power plants with a large installation capacity could seek more economic profits while emitting more pollution; (4) the deployment of clean power in the resourceabundant regions is far below its potential. Meanwhile, we propose improving the structure and technology of the power mix, which can accelerate China’s market-oriented reform of the power system by equally distributing the benefits.

Keywords: Climate Mitigation; Climate Policy Assessment; Climate Change Economics; DSGE; CGE; LEAP; Input-output Model; LCA Analysis; GHG Emissions; Greenhouse Gases; Regional Studies; Policy Measures; Asia; Paris Agreement; Emissions; Carbon; Carbon Emissions; Carbon Neutrality; Decarbonisation; Climate Goals; Mitigation Strategy; Emissions Trading Scheme; China; Green Energy; Global Warming; Climate Change; Carbon Footprint (search for similar items in EconPapers)
JEL-codes: O53 Q52 Q54 Q56 Q58 (search for similar items in EconPapers)
Date: 2025
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