The thermal power generation and economic growth in the central and western China: A heterogeneous mixed panel Granger-Causality approach

TL;DR

This study investigates the causal relationships between thermal power share and economic growth in central and western China using a heterogeneous panel Granger causality approach, revealing complex regional dynamics and policy implications.

Contribution

It applies a novel heterogeneous mixed panel Granger causality method to analyze regional energy-economy interactions, accounting for heterogeneity and cross-sectional dependence.

Findings

Unidirectional causality from GDP to RTPG in northwest China

Causality from RTPG to GDP in central China

Regional differences in energy-growth causal relationships

Abstract

The problem of the new energy economy has become a global hot issue. This study examines the causal relationship between the ratio of thermal power in total power generation (RTPG) and economic growth (GDP) in the western and central China by using the heterogeneous mixed panel Granger causality approach that accounts for both slope heterogeneity and cross-sectional dependence. For the overall panel, the empirical findings support the presence of unidirectional causality running from GDP to RTPG (in northwest China), and from RTPG to GDP (in central). At the provincial level, there is causality from GDP to RTPG in NeiMongol and Ningxia, and causality from RTPG to GDP in Shanxi, Anhui, and Jiangxi. As for the cross regions relationships, we find that GDP (in western) Granger-cause RTPG (in central), and RTPG (in southwest) Granger-cause GDP (in central and northwest). Moreover, panel regressions show the negative impact from GDP to RTPG in the northwest, and RTPG to GDP in the central. However, RTPG has a positive influence on GDP in the northwest. Therefore, to improve economic development without compromising the regions' competitiveness in central and western China, we can adjust the power generation structure, and increase investments in the renewable energy supply and energy efficiency.