Transition to Green Energy: How China's Coal De-Capacity Policyaffects Renewable Energy Development Efficiency?

Abstract

Abstract: Developing renewable energy (RE) is crucial for achieving the goals of carbon peaking and carbon neutrality. However, the effectiveness of China's 2016 coal production reduction policy in encouraging RE development remains uncertain. To address this question, this study applies a novel approach, called the global reference modified slacks-based measure (Global-MSBM) model, to assess the renewable energy development efficiency (REDE), and applies the difference-in-differences (DID) method to examine the impact of the de-capacity policy on REDE. This study also investigates the mechanisms driving the policy's impact and the associated heterogeneity. The findings indicate the following. (1) Implementing the de-capacity policy significantly enhances REDE, and its impact becomes greater over time. (2) The policy encourages REDE by advancing renewable energy technology and enhancing marketization. (3) The heterogeneity analysis indicates that the de-capacity policy has a higher effect on REDE regions with stricter environmental regulations. This study reliably assesses the effectiveness of the de-capacity policy and provides valuable insights to enhance China's energy policy system.

Keywords: Keywords: Coal de-capacity policy, Renewable energy development efficiency, Environmental regulation, Difference-in-differences method