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The impacts of energy reallocation on economic output and CO2 emissions in China

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  • Tan, Ruipeng
  • Xu, Mengmeng
  • Sun, Chuanwang

Abstract

The energy allocation distortion is serious in China since energy price is controlled as an important policy instrument by the government. Incorporating energy factor into the production function, we firstly establish a model to analyze the energy allocation distortion as well as the distorted CO2 emissions. Then, we analyze the impacts of energy reallocation without distortion on the output and CO2 emissions. We find that the actual consumptions of energy in the secondary industry of all provinces are more than that if there were no distortions, while the case for the tertiary industry is on the contrary. Removing the distortion and reallocating the energy could increase the output of tertiary industries and reduce the CO2 emissions in whole China. Therefore, we suggest constructing a market mechanism in forming the energy price and in the elimination process of energy distortion, a relative free flow of capital and labor among different industries should also be encouraged.

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  • Tan, Ruipeng & Xu, Mengmeng & Sun, Chuanwang, 2021. "The impacts of energy reallocation on economic output and CO2 emissions in China," Energy Economics, Elsevier, vol. 94(C).
    • Handle: RePEc:eee:eneeco:v:94:y:2021:i:c:s0140988320304023
    DOI: 10.1016/j.eneco.2020.105062
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