Climatic impact on China's residential electricity consumption: Does the income level matter?

It is widely accepted that energy use contributes to climate change. However, climate change can also affect energy demand. There is ample proof in the literature that a feedback phenomenon exists. However, empirical evidence of its mechanism and operation in different contexts is missing. As China is the largest consumer of electricity worldwide, a detailed study of its energy consumption patterns would be insightful. Moreover, how the increasing income of Chinese residents affects the climate sensitivity of electricity demand is particularly relevant. Using data from 278 cities in China over the period 2005 to 2015, this study applies a newly developed technique, partially linear functional-coefficient panel data model, which enables disclosure of the role of income levels. The results indicate that climate change significantly stimulates residential electricity consumption in hot weather rather than in cold weather. Additionally, the level of income affects climate sensitivity. Specifically, an increase in income initially increases the marginal effect of cooling degree days (days on which building cooling is desired) on electricity consumption, but the curve of the marginal increment becomes flat as income growth increases further.