Does increasing income have a positive impact on energy consumption? New evidence from China

Abstract

Using data from 30-province/autonomous in China, this study systematically examines the impact and transmission mechanism of increased income and climate change on energy consumption. This study innovatively uses urbanization and industrial structure upgrade indicators to examine the indirect mechanism of income impact on energy consumption. The findings indicate that income has direct and indirect impacts on energy consumption. Income can directly affect energy consumption and the impact has an inverted U shape. In addition, income can indirectly reduce energy consumption by promoting urbanization and industrial structure upgrading. Climate change also has a significant negative effect on energy consumption; however, the climate effect of energy consumption is smaller than the income effect. Additionally, the impact of income on energy consumption has significant temporal and regional differences. Temporally, income shows a significant upward trend in reducing energy consumption. Regionally, in the developed eastern region, income has a negative impact on energy consumption. In the underdeveloped western region, income has a significant positive impact on energy consumption. Considering the characteristics of China's energy consumption, we should resist the “one size fits all” energy policy and focus on improving energy consumption on income growth, urbanization, and industrial structure, enhancing the efficiency and targeting.