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Changes in China's Energy Intensity: Origins and Implications for Long-Term Carbon Emissions and Climate Policies

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  • Jing Cao

    ()
    (Harvard China Project, Harvard University Center for the Environment and School of Economics and Management Tsinghua University, Beijing)

  • Mun S. Ho

    (Harvard China Project, Harvard University Center for the Environment and School of Economics and Management Tsinghua University, Beijing)

Abstract

Since the economic reforms that began in 1978, China has experienced a dramatic decline in energy intensity but in 2002 it flattened out and even rose slightly. There have been considerable debates about the origins of this dramatic decline in energy intensity before the year 2000: is this decline mostly due to changes in the composition of economic activity? (structural change) or is it mostly due to changes in technology? (energy per ton of steel, for example). However, very few studies have examined the slightly rising energy intensity trend for the post-2000 period. In this report, we use a new time-series input-output data set from 1981– 2007 to decompose the reduction in energy use into technical change and various types of structural change, including changes in the quantity and composition of imports and exports. We use two different decomposition methodologies: Structural Decomposition Analysis (SDA) and Index Decomposition Analysis (IDA) methods. Based on these estimates of changes in energy intensity, we project Autonomous Energy Efficiency Improvement (AEEI) parameters in forecasting future capital, labor and energy input shares of output for each industry. We then construct a recursive-dynamic computable general equilibrium (CGE) model of the Chinese economy to analyze both command-and-control policies and carbon taxes, and provide policy recommendations on how China could pursue a more sustainable development trajectory to deal with greenhouse gas emissions.

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File URL: http://www.eepsea.net/pub/rr/2010-RR12-Jing%20Cao%20and%20Mun%20S%20HO.pdf
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Bibliographic Info

Paper provided by Economy and Environment Program for Southeast Asia (EEPSEA) in its series EEPSEA Research Report with number rr2010126.

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Date of creation: Dec 2010
Date of revision: Dec 2010
Handle: RePEc:eep:report:rr2010126

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Keywords: energy intensity; China;

References

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  1. Polenske, Karen R. & Lin, Xiannuan, 1993. "Conserving energy to reduce carbon dioxide emissions in China," Structural Change and Economic Dynamics, Elsevier, vol. 4(2), pages 249-265, December.
  2. Ma, Chunbo & Stern, David I., 2008. "China's changing energy intensity trend: A decomposition analysis," Energy Economics, Elsevier, vol. 30(3), pages 1037-1053, May.
  3. Ang, B. W., 2004. "Decomposition analysis for policymaking in energy:: which is the preferred method?," Energy Policy, Elsevier, vol. 32(9), pages 1131-1139, June.
  4. Richard F. Garbaccio & Mun S. Ho & Dale W. Jorgenson, 1999. "Why Has the Energy-Output Ratio Fallen in China?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 63-91.
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