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Energy transforming like China: the emission reduction effects of renewable energy development and its cost-benefit analysis

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  • Shi, Beibei
  • Zhu, Guiyi
  • Zhang, Renjie
  • Li, Nan
  • Ekeland, Anders

Abstract

Developing renewable energy power is a key measure for developing countries to promote energy transition and achieve large-scale carbon reduction and emissions reduction. However, the effectiveness of renewable energy power in achieving emissions reduction, especially the mechanism of its role in emissions reduction and the costs and benefits during the emissions reduction process, still needs to be clarified. Given this, based on the actual development scenario of renewable energy power in China, this paper manually collected geographical distribution data for 12,139 power companies in China from 2003 to 2021 and matched it with multiple grid data sets, including “economy-carbon emissions-natural geography”. Using the unique data, this paper analyzes the impact of renewable energy power generation on regional carbon emissions and the cost-benefit of renewable energy power production.The study found that renewable energy power reduces carbon emissions through two channels: the “substitution effect” on fossil fuel power and the “Permeation effect” on the industrial and household sectors, with hydropower and wind power having the most significant emission reduction effects. Additionally, the development of renewable energy power not only promotes emission reductions in the region but also helps reduce carbon emissions in neighboring regions, demonstrating a significant spatial spillover effect. Cost-benefit estimates indicate that between 2003 and 2021, China's renewable energy power generation could achieve annual emissions reductions of nearly 20.382 million tons compared to fossil fuel power generation. This is equivalent to a reduction of approximately 6.75 % of carbon emissions from the power sector during the same period, with an estimated annual reduction value of approximately US$1027.97 million. Welfare analysis shows that with the increase of the proportion of renewable energy power, CS and SW increased rapidly from 2003 to 2021. The findings of this study provide strong empirical support for developing countries to promote large-scale carbon emissions reductions and socio-economic sustainable development through the development of renewable energy.

Suggested Citation

  • Shi, Beibei & Zhu, Guiyi & Zhang, Renjie & Li, Nan & Ekeland, Anders, 2026. "Energy transforming like China: the emission reduction effects of renewable energy development and its cost-benefit analysis," Energy Economics, Elsevier, vol. 154(C).
    • Handle: RePEc:eee:eneeco:v:154:y:2026:i:c:s0140988326000010
    DOI: 10.1016/j.eneco.2026.109123
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