Revisiting drivers of energy intensity in China during 1997–2007: A structural decomposition analysis

The decline of China's energy intensity slowed since 2000. During 2002–2005 it actually increased, reversing the long-term trend. Therefore, it is important to identify drivers of the fluctuation of energy intensity. We use input–output structural decomposition analysis to investigate the contributions of changes in energy mix, sectoral energy efficiency, production structure, final demand structure, and final demand category composition to China's energy intensity fluctuation during 1997–2007. We include household energy consumption in the study by closing the input–output model with respect to households. Results show that sectoral energy efficiency improvements contribute the most to the energy intensity decline during 1997–2007. The increase in China's energy intensity during 2002–2007 is instead explained by changes in final demand composition and production structure. Changes in final demand composition are mainly due to increasing share of exports, while changes in production structure mainly arise from the shift of Chinese economy to more energy-intensive industries. Changes in energy mix and final demand structure contribute little to China's energy intensity fluctuation. From the consumption perspective, growing exports of energy-intensive products and increasing infrastructure demands explain the majority of energy intensity increase during 2002–2007.