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 China's electricity sector has higher labor productivity but lower asset efficiency and energy productivity than that of mining and manufacturing sectors. The large-scale electricity trade alleviates the shortage of electricity supply in developed regions by outsourcing to the less-developed regions, reduces the unequal spatial distribution of coal and natural gas reserves, and changes CO2 flow embodied in power grid. Econometric analysis shows that coal reserve contributes to the 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 are the dominant factor of the embodied CO2 transfers through electricity trade within China, while asset efficiency and energy productivity are not significant in the regressions. Our findings could provide details about China's power grid expansion when confronting climate mitigation in the future.