Energy Efficiency Transitions in China: How Persistent are the Movements To/From the Frontier?

Abstract

This study examines the energy efficiency transitions in China, using provincial data covering the period 2003-2015. Sustainable progress in energy efficiency achievements is beneficial to energy insecurity and the achievement of the Paris Agreement. This article combines the stochastic frontier method with the panel Markov-switching regression to model energy efficiency transitions. Estimated energy efficiency scores showed significant regional and provincial heterogeneity. While human capital development, urbanisation, and foreign direct investment promote energy efficiency, price and income per capita reduce it. The transition probabilities indicate that the high energy-efficient state is less sustainable, and the movement towards the frontier seems less persistent than from the frontier. Thus, China seems not to be making a sustainable progress in energy efficiency. The unsustainable nature of the high energy-efficient state suggests weaker energy efficiency efforts and less robust energy efficiency policies in China.