Disaggregating energy use cap among China's provinces

• A three-step disaggregation scheme of China's energy use cap is proposed.
• Both equity and efficiency principles are taken into account.
• Decision-makers face with trade-off between equity and efficiency criteria.
• The energy cap in 2020 is far-reaching without substantial actions.

The 2015 Paris climate change negotiations represents the most ambitious worldwide effort to date to combat climate change. As the largest energy consumer and carbon emitter, China pledges 60–65% cut in carbon intensity below 2005 levels by 2030. To accelerate China's climate efforts, China has also committed to cap its primary energy use at 4.8 billion tons of coal equivalent in 2020. This paper proposes an equitable and efficient scheme to disaggregate this national goal among provinces. A three-step disaggregation procedure is proposed which takes into account the initial allocation, national redistribution and inter-provincial adjustment. First, this study allocates the incremental energy quota, taking 2010 as the base year. Second, part of the energy quota is set aside by the central government for redistribution purposes, while an incremental energy quota index comprising equity and efficiency criteria is used for initial allocation among provinces. Finally, historical efforts and inter-provincial energy flows are considered for inter-provincial adjustment. This disaggregation scheme is flexible and can be easily extended to allocation and management of other resource and environmental targets. The empirical findings can assist decision-makers in identifying which provinces are likely to over-consume the energy quota relative to the proposed allocation and which provinces are likely to perform better in energy conservation. Moreover, the results show that the energy cap set for 2020 is unachievable without further action. Market-based instruments, such as an energy allowance trading market, are strongly recommended to achieve the energy use target in an equitable and cost-effective manner.