Department of Geography and Resource Management (GRM), The Chinese University of Hong Kong

Research Projects

Comparative advantage strategy for energy transition and pollution mitigation

Prof. XU Yuan

With rapid economic growth in the past four decades, China has grown into the world’s largest fossil fuel consumer and CO2 emitter. Surprisingly from a negligible level in early 2000s, the country has also become a global leader in wind and solar energy utilization and industries. This project develops a theory of comparative advantage strategy to explain the evolution. On the demand side, China first made progress in the deployment of more wind and solar facilities and then improve their operational performance. The resulting low technological market entry barriers helped to build enough industrial capacity to meet the huge demand with prices under control.


In the past two decades of renewable energy development, wind power dominated before 2012, while annual solar PV installation quickly caught up afterwards. The comparative advantage strategy explains the comparative trajectory of wind power and solar PV, contingent upon their relative costs, for achieving renewable energy goals. We further explore why China with a tradition of central planning could approach the least-cost, market-oriented roadmap. Several factors were effective in enabling the comparative advantage strategy without central planning but mainly bottom-up decision making.


In contrast, Japan has been almost one-sidedly leaning toward the more expensive solar PV against the comparative advantage strategy. For using solar PV electricity, the Japanese consumers are also paying sizably higher tariffs than those in other countries, especially after the Fukushima nuclear accident in 2011 that led to the sudden suspension of all nuclear power plants. Japan’s energy transition towards renewables is accordingly largely single legged, rather than more balanced to take advantage of both wind turbines and solar PV. We explain the puzzle on why renewable energy development in Japan has created such a wide distance from more economically optimal situations. We focus on the initiation, formation and impacts of the solar lobby that comprises bureaucracies, politicians, solar PV manufacturers, and independent power producers.


This long-term project was generously funded by the Hong Kong RGC, WUN and CUHK and has resulted in the following publications: (1) Zhu, L., Y. Xu *, Y. Pan, 2019. Enabled comparative advantage strategy in China’s solar PV development. Energy Policy. 133: 110880. (2) Li, A., Y.Xu *, H. Shiroyama, 2019. Solar lobby and energy transition in Japan. Energy Policy. 134: 110950. (3) Xu, Y. *, 2017. Climate Change as a Flagship Opportunity for Domestic Governance. Environmental Science & Technology.51(4):1946–1947. (4) Xu, Y. *, 2013. Comparative advantage strategy for rapid pollution mitigation in China, Environmental Science & Technology, 47 (17): 9596–9603.