Analysing the nexus between clean energy expansion, natural resource extraction, and load capacity factor in China: a step towards achieving COP27 targets

Abstract

The excessive use of non-renewable energy in 21st-century economic growth has continued to hurt the environment by accumulating carbon dioxide and other greenhouse gases. However, promoting environmental sustainability requires expanding clean energy utilisation. In this study, we examine the effects of clean energy expansion and natural resource extraction on load capacity factor (LCF) in China from 1970 to 2018. Using the dynamic autoregressive distributed lag simulations approach, we extend the standard load capacity curve (LCC) hypothesis by incorporating clean energy expansion and natural resource extraction as main determinants of the LCF. The empirical outcomes reveal that economic expansion is, although positively associated with the LCF, but its squared term degrades the LCF. This confirms that the LCC hypothesis is not valid for China. Moreover, while clean energy expansion has a positive effect on the LCF, the effect of natural resource extraction is negative. These effects are stronger and statistically significant only in the long run. Therefore, this study highlights the potentials for a sustainable decarbonized economy in China by investing not only in clean energy sources but also efficiently use the available natural resources in the country.