Determinants of the Embodied Co2 Transfers Through Electricity Trade within China

There is unequal spatial distribution of resource endowment, population density, industrial structure, and economic development with diverse differences in labor, energy, and capital productivities in China. However, previous studies paid little attention to the determinants of CO2 transfers embodied in electricity trade. In this study, we use both the absolute and comparative advantage theories to reveal the determinants of embodied CO2 transfers through electricity trade within China. Results show that electricity sector has higher labor productivity but lower asset efficiency and energy productivity than that of mining and manufacturing sectors in China. The large-scale electricity trade alleviates the shortage of electricity supply in developed regions by outsourcing electricity to the less-developed regions, changes the CO2 flow embodied in power grid, and reduces the unequal spatial distribution of coal and natural gas reserves with the differences in labor productivity, asset efficiency, and energy productivity across China. Econometric shows that coal reserve contributes to an increase of embodied CO2 emission, while natural gas reduces the embodied CO2 emission. The regional differences in the opportunity cost of labor productivity of non-electricity sector is the dominant factor in determining the embodied CO2 transfers through electricity trade within China, but asset efficiency and energy productivity could play a limited role. Our finding provides the details about the power grid expansion planning with considering climate change mitigation in the future