The impacts of technological gap and scale economy on the low-carbon development of China's industries: An extended decomposition analysis

Abstract

In this study, the general production-theoretical decomposition model (PDA) was extended by taking into account technological gap and scale economy. With the application of the extended PDA, changes in China's industrial CO2 emissions intensity (CEI) were decomposed into eleven factors, including four new proposed factors, namely, energy-oriented technological gap, energy-oriented scale economy, output-oriented technological gap, and output-oriented scale economy. Main findings suggest that during 2000-2016, the CEI of China's industry underwent a considerable decline. The potential energy intensity, output-oriented technology, and energy-oriented technology factors were the three largest contributors to this decline. The carbon emissions factor contributed to the reduction of industrial CEI, while the energy structure factor functioned as an inhibitor. The newly identified factors also had important effects on China's industrial CEI. The output-oriented scale economy contributed to the reduction of industrial CEI, while the energy-oriented scale economy was an inhibitor, indicating that China's industry has reached a stage of scale economy that is beneficial to output-oriented performance rather than energy-oriented performance. Furthermore, the energy-oriented and output-oriented technological gap factors have hindered the reduction of China's industrial CEI.