Resource Misallocation in Electricity Sector: Reform and Policies in China

Chin-Hsien Yu, Xinghao Li, Dayong Zhang and Han Phoumin

Chapter 3 in Electricity Market Reforms in the ASEAN, China, India, and Japan, 2023, pp 63-89 from World Scientific Publishing Co. Pte. Ltd.

Abstract: China has made a firm commitment to achieving carbon neutrality by the middle of this century. To achieve this, reform of the current energy system, especially the electricity sector, is needed. In other words, transforming the traditional fossil fuel-based sector into a renewables-dominated system is critical, and efficient resource allocation among different power sectors is an important way to achieve energy transition. However, resource misallocation in China’s electricity sector leads to significant negative economic consequences. This chapter thus extends the Hsieh and Klenow (2009) framework and applies it to enterprise-level data to model resource misallocation in China’s electricity sector. We find that resource misallocation in electricity sector not only brings about inefficiencies but also affects the progress of the energy transition. Further marketisation reform is important to resolve the problem.

Keywords: Electricity Market Reform; Market Liberalisation; Tariff Reform; Electricity Trade; Renewable Energy; Resource Allocation; Sustainability; Electricity Market; ASEAN; Southeast Asia; Japan; India; China; Renewable Energy; Energy Transition; Sustainable Electricity Market; Liberalised Electricity Markets; Efficiency; Emission Reduction; Carbon Reduction; Clean Energy; Green Energy; Electricity Tariffs (search for similar items in EconPapers)
JEL-codes: O13 Q01 Q4 Q41 Q42 Q43 Q48 (search for similar items in EconPapers)
Date: 2023
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