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The drivers of energy intensity in China: A spatial panel data approach

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  • Jiang, Lei
  • Folmer, Henk
  • Ji, Minhe

Abstract

We use a panel of 29 Chinese provinces for the period 2003–2011 to estimate the drivers of energy intensity by means of a spatial Durbin error model. We find an inverted U-shaped relationship between energy intensity and income (energy intensity Kuznets curve). Ten provinces, notably the developed east coast provinces, have already passed the turning point of 29,673 RMB. The number of years for the other 19 provinces to reach the turning point ranges between 8.3 (Jilin) and 21.8 (Yunnan). The share of the secondary sector in the own province and in neighboring provinces causes an increase in energy intensity, the capital-labor ratio a decrease. Foreign direct investment (FDI) has a significant negative spatial spillover impact on energy intensity. To improve the sustainability of its energy resources and its environmental conditions, China needs to continue reducing its energy intensity by further developing modern industrial systems to counterbalance the negative effects of its economic growth and energy consumption. An adequate policy handle is investment in research and development and stimulation of their introduction into production processes. For that purpose, market mechanisms can be readily applied, particularly energy prices that adequately reflect energy scarcity and external effects. FDI is also an effective tool to transfer advanced technology to China.

Suggested Citation

  • Jiang, Lei & Folmer, Henk & Ji, Minhe, 2014. "The drivers of energy intensity in China: A spatial panel data approach," China Economic Review, Elsevier, vol. 31(C), pages 351-360.
    • Handle: RePEc:eee:chieco:v:31:y:2014:i:c:p:351-360
    DOI: 10.1016/j.chieco.2014.10.003
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    More about this item

    Keywords

    Energy intensity; Kuznets curve; Spatial Durbin error model; Foreign direct investment; China;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • P28 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Natural Resources; Environment
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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