Supply-Side Solutions to China’s Energy Transition*

China Economist - - Articles - Shi Dan Institute of Industrial Economics, Chinese Academy of Social Sciences (CASS) * Corresponding author: Shi Dan, Gongyejingji Yanjiusuo, Yuetan Beixiaojie 2 Hao, Xicheng District, Beijing, China (100836). Email:


Compared with the first two energy transitions in human history, the current third energy transition is characterized by the changing concepts of development. Considering its energy mix dominated by fossil fuels, China is faced with a daunting task of transition. This paper discusses the following policy recommendations on China’s energy transition, including building a renewables-friendly electric power system, developing smart grids and electric vehicles, promoting cross-regional electric power transactions, encouraging financial innovation, and creating new energy industry investment funds to broaden financing channels and diversify investment entities.

energy transition, renewable energy, supply-side solutions

JEL classification: Q21, Q28


Energy transition refers to the fundamental change in the way energy i s p roduced and consumed and its profound impact on national and global economic development and geopolitics. In the past two centuries, human society has completed two rounds of energy transition spearheaded by advanced industrial powers like the U. K. and the U. S. Massive utilization of fossil fuels including coal, oil and natural gas opened a brandnew chapter of industrialization in human history. While creating tremendous wealth and prosperity, industrial activity also took a toll on the environment and climate. Today, the third energy transition i s reshaping the world economic landscape. Countries have unanimously agreed on the concept of sustainable development and are taking an active part in creating a clean, low- carbon, efficient and sustainable system of energy supply and consumption.

Compared with countries t h a t have completed the first two rounds of energy transition, China is faced with a much more daunting challenge: It must transition from a high- carbon to a low- carbon energy mix in a much shorter timeframe. For China, it will take nothing short of an energy revolution to achieve this transition. In addition to transforming energy supply and demand, China must also reform its energy system and foster market mechanisms in favor of new energy. This paper will focus on the discussion of supply- side policy solutions for advancing China’s energy transition.

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