China's energy strategies have attracted a huge amount of attention, precisely because they have been so effective. Chinese energy companies - from global oil and gas giants, to new wind and solar power success stories as well as electric grid operators, not to mention rising Electric Vehicle (EV) producers - have all had an impact on the industry, and sometimes shaken it up. In solar Photovoltaic (PV) cells there are aggressive counter-moves being made by both the US (and potentially the EU) against Chinese subsidized exports. These threaten to spill over into related sectors, and could trigger an all-out trade war.

The impact of fiscal decentralization on energy intensity has been a long-standing subject of interest and debate. However, to date, there has been a notable absence of studies delving into the effects of fiscal decentralization on energy intensity from the vantage point of tax sharing. This investigation explores the effects of China’s value-added tax (VAT) revenue-sharing reform on energy intensity using prefecture-level city data from 2006 to 2020. Results show a correlation between an increased proportion of VAT revenue sharing and higher regional energy intensity. Heightened competition among local governments amplifies this impact, while environmental regulations and technological innovation mitigate it. Our findings contribute to a more scientifically grounded formulation of the revenue-sharing ratio between central and local governments, aiming to reduce local energy intensity.