1. Introduction and Review of the Literature
With the continued spread of the COVID-19 epidemic, the operation of the global industrial chain is unbalanced, the manufacturing industry is shrinking, and protectionism and trade barriers are rising. China faces an increasingly complex external environment. Therefore, on 14 May 2020, China first proposed to “build a new development pattern featuring domestic and international double circulation and mutual promotion”. Since then, the Fifth Plenary Session of the 19th CPC Central Committee has included “accelerating the building of a new development pattern” into the Proposal of the CPC Central Committee on formulating the 14th Five-Year Plan for National Economic and Social Development and the Long-Term Goal of 2035. Smoothing the “internal circulation” is to rely on the strong domestic market to connect all links of production, distribution, exchange, and consumption, to break the industrial monopoly and local protection, and to form a virtuous circulation of the national economy [
1]. As an important factor of production and living materials, how can energy participate in the “internal circulation”? In April 2022, the State Council issued the Opinions on Accelerating the Construction of a Unified National Market, which pointed out the construction of a unified national energy market to support economic development and to ensure energy security. The energy security strategy based on the energy “internal circulation” has become the basic support and inherent requirement for promoting China’s economic development [
2]. Most scholars believe that the segmentation of the energy market significantly inhibits the free flow and efficient agglomeration of energy, leading to information asymmetry and unreasonable interregional resource allocation [
3]. In addition, some scholars have found that energy market segmentation will inhibit energy efficiency, green development, and industrial upgrading [
4,
5,
6]. Therefore, as early as 2015, the EU officially launched the process of building an energy union to strengthen the interconnection and interaction of the internal energy market and to promote intra-energy circulation.
So, how do we understand the core implications of the energy “internal circulation”? The energy “internal circulation” is a virtuous circulation that takes the “internal circulation” as the carrier and support, connects the four links of production, distribution, circulation, and consumption, and follows each other in time and space with mutual synergy and orderly transformation. At the same time, the energy “internal circulation” can form a dynamic balance of demand pulling supply and supply creating demand, enhancing the flexibility and resilience of the energy system, and improving the ability to cope with short-term shocks. Its goal is to build an energy market with unified rules of market infrastructure, high standards connectivity of market facilities, fair and unified supervision, and further regulation of inappropriate market competition and market intervention, effectively smoothing the circulation barriers of all links and building a national unified energy market.
However, at the present stage, China suffers from market segmentation at the regional level of energy [
7] and has been relying on interregional transmission to ensure a stable supply. Meanwhile, state-owned capital monopoly and government energy pricing will lead to sectoral segmentation of the energy market [
8]. In addition, the popularization of renewable energy has led to a shift from centralized to distributed energy development [
9] and the intelligent linkage and real-time management of energy flows have become imperative issues to be addressed. In this regard, scholar Lin Boqiang et al. pointed out that China’s main resources and energies are distributed in the inland areas, while the manufacturing industries are concentrated in coastal areas. This reverse distribution pattern of energy resources and demand has led to the formation of a trans-regional fossil energy transportation system and emphasizes that, as China enters the stage of high-quality development, the energy system with fossil energy supply and transportation as the core needs to be reshaped [
10]. Huang Ying et al. analyzed that China is still in the period of planning and market coexistence, that there are still interprovincial barriers in the energy sector to maintain their interests and plan means to balance the interests of all parties, and that market prices have not been formed in the true sense yet. Moreover, market price failures will not only lead to the mismatch of energy products and reduce the efficiency of energy use but will also distort the regional distribution and investment of energy industries, causing adverse effects on the long-term development of the energy system [
11]. Further, scholar Hong Yong et al. introduced technology innovation to explore the impact of market segmentation and technology innovation on energy efficiency. The research shows that technology innovation can significantly improve energy efficiency, while market segmentation cannot discourage energy efficiency but may also weaken the promoting effect of technology innovation on energy efficiency by inhibiting technology innovation [
12]. Duan Wei et al. further concluded that the wide application of emerging energy technologies is an important means to reshape the energy system and to achieve green transformation [
13].
With the rapid development of the new technological revolution, the current digital revolution represented by digital and digital technology is becoming a key force to smooth energy circulation and to reshape the energy system. Scholar Zhang Lin et al. found that the digital economy development can have a positive impact on the technology market development by enhancing the marketization level and the regional innovation capacity [
14]. Further, Li Tao et al. examined the mechanism and influence channels of the digital economy on energy efficiency. The results showed that the digital economy has a significant positive promoting effect on regional total factor energy efficiency, that market trade is an important intermediary transmission way, and that the promoting effect of the digital economy on energy efficiency shows a gradually decreasing trend in the east–west–central region. It also pointed out that the government should vigorously promote the deep integration and balanced development of the digital economy and energy industry in all regions [
15]. Therefore, in the context of the digital economy, China is opening a “new stage” in the “great changes not seen in a century”. It is important to enhance technological innovation capacity, increase disposable income, and reduce energy distribution costs to accelerate the release of the dividends of the development of the digital economy, ensure efficient and unimpeded energy “internal circulation”, and accelerate the establishment of a unified energy market.
The possible marginal contributions of this paper are mainly as follows: (1) The paper innovatively starts from the perspective of “internal circulation” and takes “energy elements” as the practical starting point to explore the impact of the digital economy development on the energy “internal circulation”. It not only expands the research horizon of the new development pattern of “double circulation” but also provides an important basis and policy reference for the construction of the big energy market. (2) In combination with the substantial connotation of China’s “internal circulation” and the special reality of China’s energy sector, this paper analyzes the theoretical mechanism from four aspects—production, distribution, exchange, and consumption—and conducts empirical tests to make the research conclusions more scientific and instructive.
The rest of this paper consists of the following sections. The theoretical mechanisms and research hypotheses are detailed in the next section.
Section 3 introduces the research design through the model introduction and variable description.
Section 4 details the results of the empirical tests, including the benchmark test, robustness test, mechanism test, and heterogeneity test. Finally, the fifth part gives the research results and policy recommendations.
5. Conclusions and Recommendations
Based on the panel data on digital economy and energy trade in each province of China from 2006 to 2020, this paper studies the relationship between the digital economy and the energy “internal circulation” and explores the mechanism of the digital economy’s influence on energy circulation from four aspects: production, distribution, exchange, and consumption. The results show that: (1) The rapid development of the digital economy is conducive to making the circulation of energy in China unimpeded. (2) The digital economy accelerates the energy “internal circulation” by influencing energy production, distribution, exchange, and consumption. (3) The higher development level of the digital economy, the energy-rich area, and the central region with the strongest digital–energy coupling and coordination degree have a stronger promoting effect on the energy “internal circulation”. Therefore, the following policy recommendations are proposed:
First, based on China’s reality, we need to accelerate the development of the digital economy. China should make full use of its huge domestic market and relatively complete industrial system to accelerate the development of the digital economy, break the time and space constraints, effectively promote the rapid flow of energy, build a large energy “internal circulation”, and promote high-quality economic growth.
Second, we need to focus on the four major links to promote the integration of digital and energy. The production chain should strengthen the practical empowerment of digital technology in the modernized industrial system of energy, improve the supply of fossil energy and renewable energy, and rebuild the high-quality energy supply side. The distribution session needs to improve the efficiency of digital regulatory services, actively formulate countermeasures against monopoly, damage to consumer interest, and lack of labor rights protection, and build an efficient regulatory system. In the exchange session, we should also build region-wide digital transportation in the roadway, railway, shipping, and waterway sectors, upgrade logistics infrastructure and modernize warehousing, and minimize the time spent in the transportation of energy. In the consumption session, we should make full use of distributed energy to effectively coordinate and optimize the supply and energy use links on the user side, forming a dynamic balance of supply creating demand and demand pulling supply.
Third, we need to promote the coordinated development of the digital economy and energy system. The smooth operation of the energy “internal circulation” requires the interconnected development of the eastern, central, and western regions. The priority should be to combine the energy endowment advantages of the central and western regions with the technological, market, and digital industry advantages of the eastern region and to speed up the establishment of a supporting and coordinated development mechanism. In addition, the central and western regions need to further consolidate the foundation for the digital economy and to strengthen new infrastructure.
It should be noted that this paper has estimated the level of digital economy development and interprovincial energy trade for each province. However, the development of the digital economy has a more direct impact on electricity. In addition, the trade estimates using the gravity model are still subject to errors due to the lack of direct interprovincial energy trade data. How to accurately portray the impact of the digital economy on the interprovincial electricity cycle is a question worthy of further research in the future.