China's numerical management system for reducing national energy intensity

In China, the national target for energy intensity reduction, when integrated with target disaggregation and information feedback systems, constitutes a numerical management system, which is a hallmark of modern governance. This paper points out the technical weaknesses of China's current numerical management system. In the process of target disaggregation, the national target cannot be fully disaggregated to local governments, sectors and enterprises without omissions. At the same time, governments at lower levels face pressure for reducing energy intensity that exceeds their respective jurisdictions. In the process of information feedback, information failure is inevitable due to statistical inaccuracy. Furthermore, the monitoring system is unable to correct all errors, and data verification plays a limited role in the examination system. To address these problems, we recommend that the government: use total energy consumption as the primary indicator of energy management; reform the accounting and reporting of energy statistics toward greater consistency, timeliness and transparency; clearly define the responsibility of the higher levels of government.     

The impacts of energy prices on energy intensity: Evidence from China

In this paper, we present a review of the deregulation of energy prices in China between 1985 and 2004 and assess the impacts of changes in energy prices on aggregate energy intensity and coal/oil/electricity intensity. We used time series data to provide estimates of energy price elasticities. Empirical results showed that: (1) The own-price elasticities of coal, oil, and aggregate energy were negative in periods both before and after 1995, implying that higher relative prices of different energy types lead to the decrease in coal, oil, and aggregate energy intensities. However, the positive own-price elasticity of electricity after 1995 probably indicates that the price effect was weaker than other factors such as income effect and population effect. (2) The impacts of energy prices were asymmetric over time. (3) Sectoral adjustment also drove the decrease in aggregate energy intensity. Although raising energy prices to boost efficiency of energy use seems to be an effective policy tool, other policy implications concerned with energy prices, such as energy supply security and fuel poverty, must also be considered.     

The energy intensity target in China's 11th Five-Year Plan period—Local implementation and achievements in Shanxi Province

Facing the mounting pressure on energy security and increasing environmental concerns about air pollution and climate change, the Chinese government set a mandatory goal of 20% reduction of energy intensity in its 11th Five-Year Plan period (FYP, 2006–2010). In this paper we use Shanxi province to illustrate how policies and measures are implemented in practice at a provincial level as a response to the National FYP issued by the central government. Local policies are described and their effects are analyzed. We compare reported energy saving achievements with our own estimates and conclude that the achievements in Shanxi probably have been substantial since the start of the 11th FYP period. The most important measures taken by provincial and local governments seem to be in the secondary sector, such as Top-200/Top-1000 program and phasing out outdated technologies. However, Shanxi has still a long way to go to achieve satisfactory energy use. Further improvement of energy intensity will require continuing efforts. Although many measures are necessary, improving the energy efficiency in heavy industries and reducing the dependence on these industries should be particularly effective.     

Government expenditure and energy intensity in China

The recent economic stimulus package of China has raised growing concern about its potential impact on energy demand and efficiency. To what extent does such expansion of government expenditure influence energy intensity? This question has not been well answered by the previous research. Using provincial panel data, this paper provides some evidence of a link between government expenditure and energy intensity in China. The empirical results demonstrate that the expansion of government expenditure since Asian financial crisis has exerted a significant influence on energy intensity. An increase in government expenditure in China leads to an increase in energy intensity. Further analysis compares such relationships in different economic situations. The comparison shows that such positive effect of government expenditure remains significant after the alteration in economic situation. Therefore, the results suggest introducing some measures to consolidate China's existing gains in energy efficiency. The analysis also explains why the downward trend in energy intensity is reversed in China since 2002.     

Why did the energy intensity fall in China's industrial sector in the 1990s? The relative importance of structural change and intensity change

There have been a variety of studies investigating the relative importance of structural change and real intensity change to the change in China's energy consumption in the 1980s. However, no detailed analysis to date has been done to examine whether or not the increased energy efficiency trend in the 1980s still prevailed in the 1990s. This article has filled this gap by investigating the change in energy consumption in China's industrial sector in the 1990s, based on the data sets of value added and end-use energy consumption for the 29 industrial subsectors and using the newly proposed decomposition method of giving no residual. Our results clearly show that the overwhelming contributor to the decline in industrial energy use in the 1990s was the decline in real energy intensity, indicating that the trend of real energy intensity declines in the 1980s at the 2-digit level was still maintained in the 1990s. This conclusion still holds even if we lower the growth rate dramatically in line with the belief that the growth rate of China's GDP may be overestimated.     

Provincial energy intensity in China: The role of urbanization

Chinese policymakers have attached great importance to energy intensity reduction. However, the unprecedented urbanization process exercises additional pressure on the realization of energy intensity reduction targets. A better understanding of the impacts of urbanization is necessary for designing effective policies aimed at reaching the next energy intensity reduction targets. This paper empirically investigates the impacts of urbanization on China's aggregate and disaggregated energy intensities using a balanced panel dataset of 30 provinces covering the period from 2000 to 2012 and panel estimation techniques. The results show that urbanization significantly increases aggregate energy intensity, electricity intensity and coal intensity.     

What induced China's energy intensity to fluctuate: 1997–2006?

China is the second largest energy consumer in the world. During 1997–2002, China's energy intensity declined by 33%. However, it rose by 10.7% over 2003–2005, and declined by 1.2% in 2006. What induced China's energy intensity to fluctuate so drastically? Industry accounts for approximately 70% of the total energy consumption in China. In this paper, we decompose China's industrial energy intensity changes between 1997 and 2002 into sectoral structural effects and efficiency effects (measured by sectoral energy intensities at two-digit level and including the shifts of product mix in the sub-sector or firm level), using Törnqvist and Sato–Vartia Index methods. The results show that in this period, efficiency effects possibly contributed to a majority of the decline, while the contribution from structural effects was less. During 2003–2005, the excessive expansion of high-energy consuming sub-sectors and the high investment ratio were foremost sources of the increasing energy intensity. Attributed to the government efforts, the energy intensity has started to decline slightly since July 2006. In future, to save more energy, in addition to technical progress, China should attach more importance to optimizing its sectoral structure, and lowering its investment ratio.     

Substitution possibilities and determinants of energy intensity for China

This paper measures technological change, factor demand and inter-factor and inter-fuel substitutability measures for China. We use individual fuel price data and a two-stage approach to estimate total factor cost functions and fuel share equations. Both inter-factor and inter-fuel substitution elasticities are calculated and the change in energy intensity is decomposed into its driving forces. The results suggest that energy is substitutable for capital regionally and for labor nationally. Capital substitutes for energy more easily than labor does. Energy intensity changes vary by region but the major drivers seem to be “budget effect” and the adoption of energy-intensive technologies, which might be embodied in high-level energy-using exports and sectors, capital investment and even old technique and equipment imports. Whether the trend in rising energy intensity continues will be significant for China and the rest of the world.     

Firm-level determinants of energy and carbon intensity in China

In recent years, China׳s leaders have sought to coordinate official energy intensity reduction targets with new targets for carbon dioxide (CO₂) intensity reduction. The Eleventh Five-Year Plan (2006–2010) included for the first time a binding target for energy intensity, while a binding target for CO₂ intensity was included later in the Twelfth Five-Year Plan (2011–2015). Using panel data for a sample of industrial firms in China covering 2005 to 2009, we investigate the drivers of energy intensity reduction (measured in terms of direct primary energy use and electricity use) and associated CO₂ intensity reduction. Rising electricity prices were associated with decreases in electricity intensity and increases in primary energy intensity, consistent with a substitution effect. Overall, we find that energy intensity reduction by industrial firms during the Eleventh Five-Year Plan translated into more than proportional CO₂ intensity reduction because reducing coal use—in direct industrial use as well as in the power sector—was a dominant abatement strategy. If similar dynamics characterize the Twelfth Five-Year Plan (2011–2015), the national 17 percent CO₂ intensity reduction target may not be difficult to meet—and the 16 percent energy intensity reduction target may result in significantly greater CO₂ intensity reduction.     

The unexpected challenges of using energy intensity as a policy objective: Examining the debate over the APEC energy intensity goal

AimsEnergy intensity (energy demand per unit of economic output) is one of the most widely used indicators of energy efficiency in energy policy discussions. Yet its application in real-world policymaking can be surprisingly problematical. This paper aims to provide guidance to governments and organizations considering using energy intensity as a policy objective.ScopeIn 2007 the APEC community adopted, then in 2011 revised, an APEC region-wide energy intensity improvement goal. This paper presents a case study of that experience, focusing on three key ‘lessons learned’. These lessons are not original findings. However, none of them have received the recognition they deserve, and consequently, they came as a surprise to many of those involved in APEC's policy discussions.ConclusionsThe three lessons are as follows: (1) Energy intensity improvement is happening surprisingly quickly, but not quickly enough to meet the world's energy challenges. (2) It is difficult to find a definition of energy intensity that can make it suitable for use as an indicator of regional energy efficiency. (3) Whether the GDP's of individual economies are converted to common currency using market exchange rates or purchasing power parity (PPP) can dramatically change regional energy intensity improvement calculations.     

The effect of increasing exports on industrial energy intensity in China

Given China's heavy reliance on fuel energy and the dominance of its industrial sector in the economy, improving energy efficiency remains one of the practical means for the country to decrease energy intensity and to fulfill its commitment made at the Copenhagen Climate Change Conference to achieve a 40–45 percent reduction in CO₂ emission intensity by 2020. This study investigates the impact of exports on industrial energy intensity to explore the possibility of reducing energy intensity through greater exports. A panel varying-coefficient regression model with a dataset of China's 20 industrial sub-sectors over 1999–2007 suggests that in general, greater exports aggravate energy intensity of the industrial sector and that great divergences exist in the impact of exports on energy intensity across sub-sectors. A panel threshold model further estimates the thresholds for the major determinants of energy intensity: exports, input in technological innovations, and Foreign Direct Investment (FDI) intensity. Given the great differences in specific sub-sector characteristics and the changing roles played by different factors across sub-sectors, there is no general export policy that would work for all sub-sectors in reducing sub-sector energy intensity. Instead, policies and measures aiming to encourage more efficient use of energy should take into full consideration the characteristics and situations of individual sub-sectors.     

Dynamics of final sectoral energy demand and aggregate energy intensity

This paper proposes a regional and sectoral model of global final energy demand. For the main end-use sectors of consumption (industrial, commercial and public services, residential and road transportation), per-capita demand is expressed as an S-shaped function of per-capita income. Other variables intervene as well, like energy prices, temperatures and technological trends. This model is applied on a panel of 101 countries and 3 aggregates (covering the whole world) and it explains fairly well past variations in sectoral, final consumption since the beginning of the 2000s. Further, the model is used to analyze the dynamics of final energy demand, by sector and in total. The main conclusion concerns the pattern of change for aggregate energy intensity. The simulations performed show that there is no a priori reason for it to exhibit a bell-shape, as reported in the literature. Depending on initial conditions, the weight of basic needs in total consumption and the availability of modern commercial energy resources, various forms might emerge.     

Growth and structural change in China's energy economy

China has been the world's most vibrant economy and its largest source of energy demand growth over the past two decades, accounting for more than one-quarter of net growth in global primary energy consumption from 1980 to 2005. To sustain economic growth and rising living standards, China needs effective policies that anticipate and shape the country's future energy requirements. In this paper, we examine China's national economic and energy accounts over the past decade for insights into changing energy use patterns and their relationship to economic structure. Our results indicate that incipient structural changes in the Chinese energy economy and sustained economic and energy demand growth in China will pose important, and different, challenges for policymakers.     

China's energy security: Perception and reality

China, now the world's second-largest economy, is worried about energy security, which underpins the core objectives of Beijing and the political legitimacy of the Communist Party of China. The purpose of this study is to explore certain popular myths about China's energy security. The study consists of six parts. After the introduction, it formulates the obscure concept of “energy security” and attempts to contextualize it with “Chinese characteristics.” Then it explicitly points out that the largest driver of oil demand by China as the “World's Factory” is transport instead of industry. Next, it explores the effectiveness of transnational pipelines as a measure of energy security and explains why they are less effective than many observers have previously assumed. Furthermore, it investigates the global expansion of Chinese national oil companies and questions their actual contribution to energy security. A few concluding remarks then follow.     

Calculating economy-wide energy intensity decline rate: The role of sectoral output and energy shares

We specify formulas for computing the rate of decline in economy-wide energy intensity by aggregating its two determinants—technical efficiency improvements in the various sectors of the economy, and shifts in economic activity among these sectors. The formulas incorporate the interdependence between sectoral shares, and establish a one-to-one relation between sectoral output and energy shares. This helps to eliminate future energy intensity decline scenarios which involve implausible values of either sectoral share. An illustrative application of the formulas is provided, using within-sector efficiency improvement estimates suggested by Lightfoot–Green and Harvey.     

China's ongoing energy efficiency drive: Origins,progress and prospects

In 2004 China's government launched a vigorous programme to reverse the trend of rising national energy intensity and to reduce intensity by 20% over the period 2006–2010. The aim of this paper is to examine this programme in the context of nearly 30 years of measures to enhance energy efficiency in China, and thus to evaluate the likelihood that today's policies will yield improvements over a longer period. The country achieved a sustained decline of energy intensity in the period 1980–2001 but this trend was reversed in 2002. This reversal arose from a shift in the structure of the economy to more energy-intensive industries and from a decline in the rate of technical innovation. The measures taken since 2003 have been directed principally at energy-intensive industries, but have also addressed other sectors of the economy. Though the energy intensity target for the year 2010 may be achieved, greater efforts will be needed to address a number of constraints which include: the reluctance to use economic and financial instruments; the dependency of energy policy on industrial and social policies; the nature of political decision-making and of public administration; a shortage of skills; and social attitudes to energy.     

The relationship between energy consumption structure,economic structure and energy intensity in China

This paper investigates the long-run equilibrium relationships, temporal dynamic relationships and causal relationships between energy consumption structure, economic structure and energy intensity in China. Time series variables over the periods from 1980 to 2006 are employed in empirical tests. Cointegration tests suggest that these three variables tend to move together in the long-run. In addition, Granger causality tests indicate that there is a unidirectional causality running from energy intensity to economic structure but not vice versa. Impulse response analysis provides reasonable evidences that one shock of the three variables will cause the periods of destabilized that followed. However, the impact of the energy consumption structure shock on energy intensity and the impact of the economic structure shock on energy consumption structure seem to be rather marginal. The findings have significant implications from the point of view of energy conservation and economic development. In order to decrease energy intensity, Chinese government must continue to reduce the proportion of coal in energy consumption, increase the utilization efficiency of coal and promote the upgrade of economic structure. Furthermore, a full analysis of factors that may relate to energy intensity (e.g. energy consumption structure, economic structure) should be conducted before making energy policies.     

Determinants of China's energy imports: An empirical analysis

Sustained economic growth in China has triggered a surge of energy imports, especially oil imports. This paper investigates the determinants of China's energy import demand by using cointegraiton and VECM techniques. The findings suggest that, in the long run, growth of industrial production and expansion of transport sectors affect China's oil imports, while domestic energy output has a substitution effect. Thus, as the Chinese economy industrializes and the automotive sector expands, China's oil imports are likely to increase. Though China's domestic oil production has a substitution effect on imports, its growth is limited due to scarce domestic reserve and high exploration costs. It is anticipated that China will be more dependent on overseas oil supply regardless of the world oil price.     

Analysis of China's energy utilization for 2007

China is the world's second-largest energy producer and consumer, so that it is very necessary to analyze China's energy situation for saving energy consumption and reducing GHG emission. Energy flow chart is taken as a useful tool for sorting out and displaying energy statistics data. Energy statistics data is the premise and foundation for analyzing energy situation. However, there exit many differences between China and foreign energy balance. Based on the international criterion of energy balance and some advices given by related experts, the author properly adjusts China's energy balance. And the purpose of this paper is to draft China's energy flow chart for 2007, which is used to study the characteristics of energy production and consumption in China. We find that: (1) coal is the main energy in China, which accounted for 73.2% of total energy supply in 2007; (2) thermal power accounted for 83.2% of the total electricity supply, and 78.43% thermal power was based on coal; (3) in 2007, the secondary industrial sector consumed about 69.93% of energy; (4) China's energy utilization efficiency was about 33.23% in 2007.     

Decomposition of aggregate energy intensity changes in two measures: ratio and difference

Decomposition analysis has been popular in energy demand analysis and has been found useful in policy-related studies. Past studies include decomposition of changes of an aggregate indicator, measured in terms of either ratios or differences, into several pre-defined contributing factors. Aggregate indicators that are often studied include total national energy demand, energy demand in specific consuming sectors, aggregate energy intensity and energy-related carbon dioxide emissions. However, the possible linkages between the ratio measure and the difference measure, including their decomposition results, have seldom been analysed. This paper examines this issue using the Divisia decomposition technique and a unique pair of decomposition formulae. Numerical examples based on Singapore and Taiwan industrial electricity demand data are presented.