Energy structure, marginal efficiency and substitution rate: An empirical study of China

Energy efficiency is an important factor in developing energy policies as it represents the extent to which resources support economic output. In recent literature, relevant studies have mainly focused on aggregate energy efficiency, but rarely touched on the marginal efficiency of diverse energy resources and their comparative substitution rate. During 1978–2003, China's energy efficiency continually increased; and consequently became a hot topic in contemporary literature. However, there is no empirical study on the relationship between energy structure and energy efficiency. In order to close the gap, this paper reports the empirical study of the impact of China's energy structure on its energy efficiency from 1978 to 2003. The work covered primary estimation of the marginal efficiency of coal and petroleum in China, as well as the comparative substitution rate. Results indicate that the substitution rate between petroleum and coal is a factor of 5.38.