LEWI Research

Regional energy-growth nexus and energy conservation policy in China  

Professor CHENG Yuk-shing

China’s ambitious decarbonization strategy disaggregates the national energy conservation target by province. Using panel data of 30 provinces for 1995–2017, we revisit China’s energy-growth nexus that considers the likely cross-section dependence among the provinces within each of China’s three regions. Our key finding is a bidirectional causal relationship of energy (natural log of per capita energy consumption) and income (natural log of per capita real GDP) for the Eastern and Central regions and a unidirectional causal relationship from income to energy for the Western region. The Eastern and Central regions’ bidirectional relationship suggests caution in China’s energy conservation policy which may decelerate these regions’ economic growth. The Western region’s unidirectional relationship suggests promoting energy conservation without adversely affecting this region’s economic growth. Hence, the East and Central regions’ conservation effort should be accompanied by cost-effective development of emissions-free renewable resources like hydro, solar and wind for displacing China’s fossil-fuel consumption.


Yuk-Shing Cheng, Raymond Li, Chi-Keung Woo


Elsevier Ltd




Fig. 1. China’s real GDP (RMB billion at 1995 prices) and energy consumption (million tons of standard coal equivalent) in the period of 1995–2017 (Source: National Bureau of Statistics of China).


Fig. 2. China’s classification of provinces into the three regions (1999).


Fig. 3. Provincial targets for percent reduction of energy intensity during the 12th Five-year Plan period (2011–2015)