## Macroeconomic Impacts of China’s Energy Transition

_IMF Working Papers, August 28, 2026_

## Source details

**Canonical URL:** [Macroeconomic Impacts of China’s Energy Transition](https://www.imf.org/en/publications/wp/issues/2026/08/28/macroeconomic-impacts-of-chinas-energy-transition-579203)

## Other formats

- [Markdown version](/en/publications/wp/issues/2026/08/28/macroeconomic-impacts-of-chinas-energy-transition-579203/index.md)
- [Structured JSON version](/en/publications/wp/issues/2026/08/28/macroeconomic-impacts-of-chinas-energy-transition-579203/index.json)
- [Bundle manifest](/en/publications/wp/issues/2026/08/28/macroeconomic-impacts-of-chinas-energy-transition-579203/bundle-manifest.json)

## Bibliographic details
- Authors: Hugo Rojas-Romagosa, Gregor Schwerhoff, Sneha D Thube, Sha Yu
- Published: August 28, 2026
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798229060783.001

---

### Summary
- Solar and wind power account for a growing share of electricity generation in China and now dominate new capacity additions.
- The power system transition toward renewable generation increases the need for greater flexibility to maintain system stability.
- The paper uses a computable general equilibrium (CGE) model to assess macroeconomic implications of this transition.
- Model results indicate a modest increase in electricity prices in the near-term, followed by sustained declines as renewable shares rise, particularly when variability is managed through battery storage rather than coal-fired backup generation.
- The transition requires substantial adjustments in electricity supply and investment, raises GDP in the long run, and strengthens energy security.
- Battery-based flexibility outperforms continued reliance on coal across multiple dimensions, even when accounting for rising electricity demand from emerging technologies such as artificial intelligence.
- The battery-centered transition pathway increases the risk of stranded assets in the coal power sector.

### Model, Scope, and Methodology
- Method: Computable general equilibrium model (CGE models).
- Geographic focus: China.
- Sectors and topics: Electricity, Renewable energy, Non-renewable resources, Renewable resources, Environment, Commodities.
- Consideration of demand-side changes including rising electricity demand from emerging technologies such as artificial intelligence.

### Key Findings and Quantitative Points
- Near-term: modest increase in electricity prices.
- Medium-to-long term: sustained declines in electricity prices as renewable shares rise.
- Flexibility options compared:
  - Battery storage management leads to better outcomes than coal-fired backup generation.
- Macroeconomic impacts:
  - The transition raises GDP in the long run.
  - Strengthens energy security.
- Structural and investment implications:
  - Requires substantial adjustments in electricity supply and investment.
  - Raises the risk of stranded assets in the coal power sector.

### Policy Implications and Trade-offs
- Favor battery-based flexibility over continued reliance on coal to achieve stronger macroeconomic and energy-security outcomes.
- Prepare for significant electricity supply and investment adjustments during the transition.
- Anticipate and manage the risk of stranded coal assets through targeted policies (investment planning, retraining, and asset-transition measures implied by the findings).

---

## Content in this bundle

- **Working Paper**
  - [Working Paper (Markdown version)](/-/media/files/publications/wp/2026/english/wpiea2026185-source-pdf.pdf.md){rel="alternate" type="text/markdown"}
  - [Working Paper (PDF)](/-/media/files/publications/wp/2026/english/wpiea2026185-source-pdf.pdf){rel="external" type="application/pdf"}

---

_Source: https://www.imf.org/en/publications/wp/issues/2026/08/28/macroeconomic-impacts-of-chinas-energy-transition-579203_