Abstract
Based on stochastic frontier analysis and translog input distance function, this paper examines the total factor energy efficiency of China’s industry using input-output data of 30 sub-industries from 2002 to 2014, and decomposes the changes in estimated total factor energy efficiency into the effects of technical change, technical efficiency change, scale efficiency change and input-mix effect. The results show that during this period the total factor energy efficiency in China’s industry grew annually at a rate of 3.63%; technical change, technical efficiency change and input-mix effect contributed positively to the change in total factor energy efficiency; while scale efficiency change contributed negatively to it.
Highlights
China has to optimize its energy consumption structure and improve energy efficiency in order to reduce environmental pressure, ensure energy security, and fulfil its international obligations of dealing with global climate change
The value-added of the manufacturing accounts for one-third of China’s GDP, and the energy consumption of the industrial sector accounts for 60% of China’s total energy consumption in 2015. This situation implies that, for China, improving industrial energy efficiency should be the main means of reducing its greenhouse gas (GHG) emissions related to energy consumption
The results show that the annual growth rate of total factor productivity averages 7.96% during this period, and that technical change is the main source of this growth
Summary
China has to optimize its energy consumption structure and improve energy efficiency in order to reduce environmental pressure, ensure energy security, and fulfil its international obligations of dealing with global climate change. The state-owned enterprises still predominate in asset size, in terms of output and employment, private and foreign investment enterprises have already surpassed the state-owned significant change in China’s industry sector should be the change in ownership structure. The factor prices and capital-labor ratio have been evolving along with the structural change of this sector, influencing the energy efficiency of China’s industrial sector. We find that the scale effect associated with output changes is the key factor to deteriorating productivity, while the scale effect linked to changes in input-mix makes a positive contribution to productivity growth This finding may provide some insight into how China can improve its industrial energy efficiency in the future
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