Efficiency improvement, structural change, and energy intensity reduction: Evidence from Chinese agricultural sector

Abstract

China is now facing the challenge of modernizing its agricultural sector while reducing agricultural energy intensity to slow down the growth of agricultural energy consumption. This paper aims to investigate the determinants of changes in agricultural energy intensity (CAEI) in China. Specifically, this paper first uses the Log-mean Divisia Index method to decompose CAEI into changes in efficiency component (CEC) and changes in structure component (CSC) based on national time-series data during 1981–2017 and then employs panel data models with fixed effects to discern the determinants of CAEI, CEC, and CSC based on provincial data during 1991–2015. The results are as follows: (1) CEC dominates CAEI with a correlation coefficient of 0.9927, while the impact of CSC is limited; (2) an inverted U-shaped relationship exists between CEC and income. Capital and labor significantly improve CEC, while the impact of energy price is significantly negative; (3) a U-shaped relationship is observed between CSC and income. Capital and labor significantly decrease CSC; (4) a U-shaped relationship exists between CAEI and capital. Energy price and income significantly reduce CAEI, while labor has the opposite effect. Finally, it is suggested to improve farmers' environmental awareness, deepen agricultural capital accumulation, and deregulate rural energy prices.