Inconsistency of economic growth and electricity consumption in China: A panel VAR approach

• Published in: Journal of cleaner production Vol. 229; pp. 144 - 156
• Main Authors: Lin, Boqiang, Wang, Yao
• Format: Journal Article
• Language: English
• Published: Elsevier Ltd 20.08.2019
• Subjects: capital; China; Deviation; economic development; Economic growth; electric energy consumption; electricity; Electricity consumption; inventories; issues and policy; markets; Panel Vector autoregressive model (VAR); planning; China; Panel Vector autoregressive model (VAR); Deviation; Economic growth; Electricity consumption
• ISSN: 0959-6526; 1879-1786
• DOI: 10.1016/j.jclepro.2019.04.396

China has the largest electricity system in the world, which is undergoing a critical market reform. Based on the panel data in 2000 to 2016 of China, this paper tries to explain theinconsistency between electricity consumption and economic growth. For example, in 2015, GDP growth rate was close to 6.9% but with only 2.9% growth in electricity consumption. However, in 2018, a 6.6% growth in GDP required an 8.5% electricity growth. The results explain the reasons for inconsistency and identify the key factors. We find that the increase in inventory, fixed capital and industrial electricity consumption will narrow the gap when economy grows faster than electricity consumption, and widen the gap on the contrary. Heterogeneity exists among regions, the model and variables seem most convincing in explaining the situation in the western region, which is most similar to the full sample of China. Feedback effect is also observed between electricity consumption and economic growth in most parts of China by Granger test. The findings provides suggestions for the policy makers in making power planning, in an effort to avoid large power shortage or surplus. •Inventory, fixed capital and industrial electricity consumption will impact the deviation.•Impacts on deviation in western region are most similar to the full sample, and eastern region goes opposite.•Feedback effect is observed between electricity consumption and economic growth in most parts of China.