Past as Prologue? Understanding energy use in post-2002 China

From 2002 to 2009, China's energy use nearly doubled, making it the world's largest emitter of carbon dioxide more than a decade ahead of forecasts. Why did energy use in China rise so rapidly after 2002? Using index decomposition analysis, we find that the vast majority of growth in energy consumption in China over the 2000s was due to GDP growth, with a small but important amount due to structural change as a result of China's emergence as a net metals exporter. Changing prices and data anomalies make energy intensity and structural change appear to be more important drivers of energy consumption than they actually were; the infamous reversal in energy intensity in China from 2002 to 2004 may simply be an artifact of difficulties in accurately deflating value added. About half of the growth in energy consumption in China from 2002 to 2007 was driven by heavy industry. Using structural decomposition analysis, we find that growth in heavy industrial output was due primarily to growth in construction and equipment investment, with a small amount due to an increase in net metal exports. In tandem, these two findings suggest that the primary driver of energy consumption in China after 2002 was an acceleration of the country's investment-dominated model of GDP growth. Without rebalancing the economy toward consumption, there are limits to what improvements in energy conversion efficiency and end use energy efficiency can achieve in moderating growth in China's energy use.

► Most growth in energy use in China after 2002 was due to GDP growth. ► Growth in heavy industrial output was the largest driver of growth in energy use. ► Heavy industrial output growth was driven primarily by investment growth. ► Changes in China's growth model are important for tempering its energy demand growth.