The relationship between energy consumption and economic structure in China

Abstract

This paper investigates the influence on energy consumption by economic structure in China using panel cointegration and Granger causal test with panel vector error correction (VEC) model. The panel cointegration test reveals the long equilibrium relationship between energy consumption and economic structure in China. The Granger causal test with panel VEC model reveals the unidirectional causality from economic structure to energy consumption and the bidirectional causality between energy consumption and economic growth in the short and long run. The influence on energy consumption by economic growth is greater in the short run and the influence by economic structure is greater in the long run. Thus when the “energy saving and emission reduction” are in work in China, more attention should be paid to the measures involving the economic structure adjustment. The measures include decreasing the proportion of the high energy consumption industries and supporting the development of the service industries. Thus the target of “energy saving and emission reduction” will be achieved without influencing the economic growth.