Unleashing China's coal conservation potentials by analyzing efficiency of energy intensive industries: A Logarithm Mean Divisia Index (LMDI) model

Abstract

Considering China's ambitions for carbon peaking as of 2030 to ensure environmental protection and energy security, the present study is intended to explore sustainable pathways to reduce coal consumption by enhancing energy efficiency. The current article estimates coal consumption efficiency and radial super-efficiency by applying DEA-CCR and radial super-efficiency models. In the second stage, the Logarithm Mean Divisia Index (LMDI) and DEA-Malmquist models were used to explore the components of coal consumption in China's six key energy-intensive industries from 2000 to 2020. Findings indicate that (1) there is a substantial coal consumption efficiency gap among these industries, and they are working well below the production frontier. (2) Findings of DEA-Malmquist indicate that technological changes positively contributed to total productivity changes, while technical efficiency negatively impacted coal consumption growth. (3) The results of the LMDI model reveal that industrial output growth and structural changes are the key factors accelerating coal consumption. In contrast, the coal intensity had deaccelerated the coal consumption in the energy intensive industries. The current study provides several policy proposals to enhance coal conservation and consumption efficiency to achieve the aspiring goals of sustainable development.