What are the main factors that influence China’s energy intensity?—Based on aggregate and firm-level data

Abstract

Understanding the main factors influencing energy intensity in China is important to reduce total energy consumption and protect the environment. Based on the OECD–WTO Database of Trade in Value-Added, we subdivide the secondary sector and employ the LMDI method to analyze how much changes in industrial structure and intra-industry energy intensity contribute to the overall change in energy intensity. The results prove that the change in intra-industry energy intensity is the main factor that influences the overall change in energy intensity in recent years. Furthermore, we use firm-level energy consumption data that cover various regions, scales and kinds of energy consumption, and employ firm fixed effects regression to analyze intra-industry influencing factors and find that the scale effect exists for coal, oil and electricity efficiency; foreign-invested firms have lower energy intensity; and firms in coal-rich areas have higher coal intensity. Our results show that if firms’ energy intensity decreases to the level of firms with lower energy intensity within the industry, total energy consumption will decrease considerably without changing the output or industry structure. This paper will give implications for developing countries, where it is difficult to make industrial structural changes to reduce energy consumption.