Econometric Study On The Effects Of Capital-energy Substitution: From The Perspecitive Of Energy Consumption

Now China is confronted with severe energy shortage and ecological environmentdeterioration， it has become an inevitable requirement of sustainable economic development tomake some coordination to achieve the dual goal of balance the economic growth and the energysaving and emissions reduction. However， with the deeper implementation of the relatedpolicies to promote economic growth， Non-technical ways of energy saving have appearedsome adverse effects on economic growth， and the marginal benefits of the energy conservationand emissions reduction policy are in a declining trend. It has become very limited to achieveenergy conservation and emissions reduction targets of the12th Five-Year Plan and after onlyrelying on administrative means and the engineering technology. Therefore， it is very importantto find an effective new path on how to maintain sustainable economic growth under the energyconstraints， and synchronously reduce energy consumption and pollution emissions. In thisbackground， guiding actively the non-energy production factors to substitute energy， so as topromote the optimization and upgrading of industrial structure and to improve the efficiency ofenergy use has become an effective way of the transformation of economic growth mode inChina.Just basing on the huge energy constraints China is facing in its economic growth and onthe advantage of relative capital abundance， the main purpose of this dissertation is toinvestigate the effect of capital and energy substitution， initiated by factors substitutionmechanism caused by energy price change， in the theoretical support of factor substitutiontheory， economic growth theory and production and elasticity theory， with energyconsumption as a starting point， so as to provide some scientific evidences for subsequentpolicy and give a new thinking perspective.To begin with，China’s special characteristics of the relationship between economic growthand energy demand are firstly examined， with the realistic and logic starting point for furtherstudying the questions of capital and energy substitution effects， It firstly employs the Divisiaindex method to aggregation heterogeneous energy consumption， and introducing theToda-Yamamota test to comparatively study the relationship between energy consumption economic growths. The empirical results demonstrate that strong bidirectional causality remainsbetween China’s economic growth and energy consumption，showing that economic growth stillcan be explained by energy consumption， energy demand being in great pressure， and it isimperative to improve the efficiency of energy use. Then， a smooth transfer vectorautoregressive model (LSTVAR) is established， and by using the generalized impulse responsefunction (GIRF) to respectively demonstrate asymmetric effects of energy consumption oneconomic growth under high-speed and slow-speed growth state， and vice versa. The resultfinds that in the high-speed economic growth period， with the acceleration of economicgrowth， the energy consumption also constantly increases， and the improvement of economicgrowth rate has long-term requirement for the increase of energy consumption， while In thenon-high-speed economic growth period， the economic growth caused by energy demand ismore significant， bring about a greater and more long lasting effect on the energy consumptionrate.After that， basing on the perspective of economic regions， considering the differences offactor endowments and industrial structure， it examines the regional heterogeneity of capitaland energy substitution caused by energy price changes because of energy shortage. Firstly， inthe framework of production function with three inputs， this chapter uses the translog costfunction to construct the cost share equations， and defines the elastic model as well. Significantspatial correlation in the data is then been proved through spatial correlation test on the cost ofcapital and energy share index， Geary C and G global index level， which means that if hevariables space effect in the model is ignored， the estimated results of the factors substitutionelasticity will not be appropriate. Furthermore， by adopting Panel space model， coefficientestimation of capital-energy substitution elasticity is done to examine the characteristics anddifferences of capital and energy substitution among China’s eight major economic regions. Theresearch results indicate that capital and energy substitution show significant regional differencesbecause of their regionally-specialized industrial structure and factor endowments. That meanslong-term mechanism of substituting energy with capital has not been formed in Chineseeconomy as a whole. The research and development of energy-saving technology and utilizationdegree needs to be improved according to different regional emphasis. The overall performanceof substitution between capital and energy indicates that it is feasible to relieve energy supplyand reduce the energy intensity by increasing capital investment to substitute energyconsumption.Then， further studies are set into analyzing the differences and asymmetric effects of capital and energy substitution in manufacturing industry and its divisions because of theirtechnological heterogeneity， by entering a more microscopic level and taking the heterogeneityof energy into account. It firstly adopts translog cost function and MES model， by usingirrelevant (SUR) estimation method to estimate elastic coefficients and analyze the intensity anddirection of the substitution between capital and coal， electric power， oil in manufacturingindustry and its divisions. The empirical results show that the substitution degree and directionare significantly different between capital and coal， electric power， oil， and among differentmanufacturing devisions， particularly， when they are grouped into capital-intensive industriesand labor-intensive industry. And it goes on to analyze the asymmetric effect of capital andenergy substitution triggered by energy price changes. The results show that there exist asignificant asymmetry between capital substituting energy and energy substituting capital， andthat the substitution intensity in capital-intensive industry is slightly lower than that in thelabor-intensive industry. This asymmetric characteristic is very significant， and the asymmetryalso further performance of differences in capital with different energy types. This kind ofasymmetric embodies the differences of capital and energy substitution in manufacturingindustry and its divisions， which provides the basis for industrial energy efficiency as from themicro level of industry investigation. But at present the overall energy consumption still remainsstrong in manufacturing industry， especially in capital-intensive industries.In the end， this paper discusses the effect of substituting energy with capital on China’sregional energy efficiency and emissions reduction. Firstly， under the framework of distancefunction and the double output production function， translog forms of cost function is adoptedto establish the mathematical model in two different scenarios. By using stochastic frontieranalysis method， it gives a comparative analysis and a future discussion on the capital-energysubstitution effects on the regional energy efficiency and emissions reduction.The results indicate that，in addition to several individual provinces，the energy efficiencyis generally higher when within capital-energy substitution scenario than without， and theenergy saving and emissions reduction potential with the capital-energy substitution scenario arehigher than those without. This proves the realistic feasibility of improving energy efficiency andreducing pollution emissions by way of substituting energy with capital. Then， capital-energyratio and energy structures are included into joint regression model to analyze their impacts onenergy efficiency. The results show that the ratio of capital stock to energy consumption trends tomove together with the improvement of regional energy efficiency. Therefore， the authoritiesneed to increase the capital investment to substitute energy consumption， so as to improve the energy efficiency and relieve the dependency of economic development on energy use， jumpingout of the “energy curse”， which is an effective way to alleviate and eventually solve energyand environmental constraints in China.