Uncovering the effects of external demand on China’s coal consumption: A global input–output analysis

Abstract

Abstract China, the world’s largest exporter of goods, burns nearly half of coal worldwide. Moreover, the main fuel source of global carbon emissions is still coal. Therefore, controlling China’s coal consumption is critical to global emissions reductions. Existing production-based accounting principles emphasize on the direct coal use within the geographic territory, while ignoring indirect use driven by external demand in worldwide trading. Through measuring mainland China’s external-demand coal consumption with multi-regional input-output model and decomposing key factors with structure decomposition analysis, this work is aimed to systematically investigate how external demand affects the direct and indirect coal consumption in mainland China. The results show that mainland China is still a net exporter of embodied coal, which means that coal consumption of its own country to meet external demand is much higher than that used abroad to meet final domestic demand. Furthermore, in mainland China’s external-demand consumption, intermediate goods exports account for a large proportion. As for sectoral details, “petroleum, chemical and non-metallic mineral products”, “electricity, gas and water” and “metal products” are top three export departments; as for regional details, the United States, Japan, Hong Kong and Germany are major demanders. Among the composition of external-demand consumption, “household final consumption” consumes the most mainland China’s embodied coal, followed by “gross fixed capital formation”. The decomposition results indicate that the flourishing global intermediate goods trade and the large-scale transfer of external demand to mainland China have become the main impetus to promote the growth of mainland China’s external-demand embodied coal consumption, while the decline in mainland China’s coal use intensity has effectively suppressed this growth. Controlling external-demand coal consumption provides a new perspective for China to control the total amount of coal consumption. This work also provides a reference of the research framework to investigate coal consumption in export-oriented developing economies.