The role of intermediate products in the changes of China's energy use: index decomposition of the MRIO model.

Abstract

From the perspective of supply chain, energy consumption is an aggregation of energy intensity, intermediate input ratio, and final demand. However, research on the role of intermediate input on energy consumption is rare. This paper disaggregates the complete demand model of China based on MRIO (multi-region input-output model) into final demands and intermediate demands, and applied a decomposition approach combining LMDI (logarithmic mean Divisia index) and SDA (structural decomposition analysis) to evaluate the contribution of intermediate intensity, integrating the respective advantages of SDA and LMDI. The results show that both domestic and international intermediated intensities promote China's energy consumption growth in most years. The reasons are as follows: (1) the intermediate efficiency enhanced; (2) the final consumption structure shifted toward the more complex pattern; (3) the market demanded more energy-intensive final goods. Alleffects are positive except the energy intensity effect. Based on the consistency in aggregation of LMDI, we found that the aggregation of international effects is bigger than the aggregation of domestic effects, illustrating that international factors are the main driving force of China's energy consumption. The research implies that the intermediate process deserves more attention for the mitigation of energy consumption and greenhouse gas emissions. Improvement of intermediate efficiency and structure will be effective.