China's energy consumption change from 1987 to 2007: A multi-regional structural decomposition analysis

Increasing use of energy has helped to stimulate China's economy. Despite central planning, China has great differences in economic development, energy endowment and energy consumption across its regions. This paper uses the structural decomposition approach to uncover the regional disparities in energy consumption from 1987 to 2007. We also examine six possible key factors for the change in energy consumption by region. We find that final demand change outpaced efficiency improvements to drive up energy use in all regions between 1987 and 2007. More surprisingly, from 2002 to 2007, it appears that changes in production structure enhanced energy consumption in most regions. China produced more energy-intensive goods for capital investment and export. We contend that improving the energy efficiency of key energy-intensive sectors would lead a significant decline in energy intensity. Energy, directly or indirectly, is flowing from Northwest, Central and North China to coastal regions. Regional-specific policies should be designed to promote production structure change and curb energy demand.