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Decomposition analysis of debt’s impact on China’s energy consumption

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  • Sun, Xiaoqi
  • Liu, Xiaojia

Abstract

Debt can influence the energy consumption of private sectors and public agencies by changing their fiscal budget constraints. From 1996 to 2016, China has had rapid debt growth and become the second-largest borrower in the world. Additionally, China has been the largest energy consumer since 2009. The impact of debt growth on its energy consumption, however, is not much addressed in the literature. Using an extended LMDI model, we investigate the impact of China’s debt on its energy consumption from 1996 to 2016 in a new way. The results show that (1) among the closed set of debt-related factors and other conventional variables studied, private debt per capita makes the strongest contribution to China’s energy consumption, and population has a moderate impact on the growth of energy consumption; (2) energy efficiency improvement, output efficiency of government debt, debt structure adjustment, and increased tertiary industry share are mitigating forces of energy consumption. These results provide a new, holistic perspective for the Chinese government to formulate synergistic policies of risk control and pollution control.

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  • Sun, Xiaoqi & Liu, Xiaojia, 2020. "Decomposition analysis of debt’s impact on China’s energy consumption," Energy Policy, Elsevier, vol. 146(C).
    • Handle: RePEc:eee:enepol:v:146:y:2020:i:c:s0301421520305218
    DOI: 10.1016/j.enpol.2020.111802
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