Energy consumption in China: past trends and future directions

In 2003, China's energy consumption amounted to 1678 million tonnes coal equivalent (MtCE), making China the world's second largest consumer behind only the United States. China is now also one of the largest oil importers in the world. With an economy that is expected to maintain a rate of growth of 7-8% for decades, China's role in the world energy market becomes increasingly influential. This makes it important to predict China's future demand for energy. The objective of this paper is to apply the Bayesian vector autoregressive methodology to forecast China's energy consumption and to discuss potential implications. The results of this paper suggest that total energy consumption should increase to 2173 MtCE in 2010, an annual growth rate of 3.8%, which is slightly slower than the average rate in the past decade. The slower growth reflects expected slower economic growth and a decline in energy consumption due to structural changes in the Chinese economy.