Towards decoupling in chemical industry: Input substitution impacted by technological progress

Abstract

The chemical industry is one of the fundamental industries of economic development. Coordinating the relationship between economic growth and carbon emissions (EGCE) is crucial in realizing the carbon neutrality target. The Tapio model and decomposition models are used to assess the degree of decoupling within the Chinese chemical industry and identify pivotal factors impeding progress. The energy efficiency decomposition model explores the crux of failure to achieve strong decoupling. This framework further decomposed the energy intensity to uncover how technical efficiency, technological progress, and input substitution changes affect energy intensity and CO2 emission. The paper found that the EGCE of the chemical industry were stable in a weak decoupling mode from 2009 to 2019. The reliance on technological progress to reduce energy intensity and emissions is insufficient (accounting for only 18.2%), far below the cumulative contribution from economic growth (accounting for 57.76%), which has become the crux of the strong decoupling failure. Technological advancements drive energy substitution for labour, resulting in 244.41 Mt of cumulative carbon emissions. The improper factor input allocation hinders the desired reduction in energy intensity and carbon emissions. A series of policy implications are proposed based on the insights derived from the decomposition analysis to foster sustainable practices in the chemical industry.