Energy rebound effect in China's Industry: An aggregate and disaggregate analysis

- We estimate the energy rebound effect in China's industrial sectors.
- Output growth proves the major factor promoting industrial energy consumption.
- Energy intensity decline and structure shift help cut industrial energy consumption.
- The average energy rebound effect reaches 39% in China's Industry during 1995-2012.
- Energy rebound effect in Industry has overall decreasing trend over time in China.

Considering the crucial role of industrial sectors in energy conservation, this paper investigates the impact of output growth on energy consumption in China's industrial sectors with an index decomposition model and the energy rebound effect in the industrial sectors with a panel data model using the annual data during 1994-2012. The empirical results indicate that: first, industrial output growth is proved to be the major factor in promoting industrial energy consumption, while energy intensity reduction and structure shifts across industrial sub-sectors play the dominant roles in slowing down industrial energy consumption. Second, there does exist energy rebound effect in China's aggregate Industry, which ranges from 20% to 76% during 1995-2012 (or 39% on average). In particular, the energy rebound effect in Manufacturing is relatively smaller during the sample period (i.e., 28% on average). Finally, the energy rebound effect in both China's aggregate Industry and Manufacturing exhibit an overall decreasing trend over time.