Regional disparities and carbon "outsourcing": The political economy of China's energy policy

Since 2007, gross domestic product (GDP) growth in China's inland provinces has exceeded that of the affluent coastal provinces. Concurrently, they have also been given more lenient energy intensity reduction targets to provide latitude for continued growth. The regional unevenness of economic development and energy policy has implications for the ability of the country to achieve its energy savings target – an objective that has become the key part of China's climate change mitigation strategy. This study shows that there is an explicit trend in which changes in regional economic structure is moving towards increasing national energy intensity. This is due, in large part, to carbon leakage between provinces. Changes in regional economic structure increased national energy intensity by 0.13% during the 11th five-year plans (FYP) period, and is on track to cause a further increase of 1.35% during the 12th FYP period. In formulating national energy policy, the existing "Target Responsibility System" (TRS) of policy implementation may need to be improved. Regional economic disparities must be taken directly into account in policymaking, as inland provinces should be assigned higher, not lower, energy intensity reduction targets. This will increase the likelihood that national targets, and hence China's broader climate change mitigation goals, will be met. - Highlights: • Regional economic disparities are increasing China's national energy intensity. • Regional carbon "outsourcing" is a leading cause of rising energy intensity. • To meet future targets, the "Target Responsibility System" (TRS) needs to be improved. • Regional economic structure should be directly accounted for in energy policy. • Particularly, inland provinces should be assigned higher energy savings targets