Socio-economic implications of inter-provincial green electricity trading in China

Abstract

Inter-provincial Green Electricity Trading (IGET) is an important mechanism for addressing the imbalance in China's energy geographic distribution. While alleviating power generation-load spatial-temporal mismatches, IGET triggers deep-seated regional fairness issues that exacerbate conflicts and undermine its sustainability. This study makes a theoretical breakthrough by moving beyond the traditional embodied carbon accounting framework to introduce the novel concept of “Environmental Exploitation.” It captures the systematic undervaluation and asymmetric appropriation of green electricity's multi-dimensional environmental value (encompassing both emission reduction and consumption-added value) in inter-provincial transactions. Based on empirical analysis, this study identifies socio-economic implications of China's IGET. The environmental value transferred in IGET has been undervalued systematically, which indicates that there exists substantial “Environmental exploitation” - where electricity purchasers inadequately compensate suppliers’ contributions. And the overall underestimation multiple of the environmental value of green electricity has shown an increasing trend from 2008 to 2022. Although the positive contribution of IGET to overall social welfare is gradually increasing, the net effect in the eastern input provinces is usually larger, and the distribution gap between eastern input provinces and the western output provinces is also showing an expanding trend under the influence of factors such as regional heterogeneity of economic structure and environmental policies. This study provides important theoretical basis and policy insights for the future directions of optimizing the IGET in China.