Effects Of Interfactor/interfuel Substitution On China's Energy Saving And Emission Reduction

For copying with the severe energy and environmental issues China is now facing, the State Council has timely made a work arrangements requiring that China initiates a program called energy saving and emission reduction during the11th Five Year Plan (FYP). With the unremitting efforts of all the society, by the end of2010, China had successfully achieved the specified targets of decreasing its energy intensity by20%or so as well as its SO2emissions and COD discharge both by10%compared with the level in2005.However, in pace with the deeper implementation of related policies, their marginal effects in energy saving and emission reduction are in a declining trend. In particular, parts of the policies even lose power in contributing to the goal of energy saving and emissions reduction for the12th FYP. As a result, finding out another effective way for energy saving and emission reduction becomes the urgent affairs in alleviating the problems of China's energy shortage and environmental degradation. In this context, interfactor/interfuel substitution has attracted more and more attentions from the policy makers.The main purpose of this dissertation is to investigate the potential effects of interfactor/interfuel substitution on China's energy saving and emission reduction, so as to provide some scientific evidences for the subsequent policy-making. Firstly, this paper expounds the concept and formation mechanism of interfactor substitution, and then reviews its evolution rules as well as the measurement methods. Secondly, China's cross-region interfactor/interfuel elasticities of substitution are estimated using translog cost function. Based on this result, the effects of a carbon tax on different regions have been simulated and compared. At last, this thesis examines the effects of substituting energy with capital in economic activity on China's interprovincial environmental-adjusted energy efficiency. The main content of this dissertation is summarized as follows,(1) Revealing the evolution rule of interfactor/interfuel substitutionThis thesis deeply reveals the evolution rule of interfactor/interfuel substitution based on a retrospect of global economic growth from the breakout out of the first industrial revolution. The result indicates that the development history of world economy in modern time is essentially an alternating process comprised of energy substituting for sample labor force (the first industrial revolution)-capital substituting for energy (the second industrial revolution)-intelligence&information substituting for capital (the third industrial revolution), which promotes the transition of the world's leading industrial structures. At the same time, the change of energy utilization patterns (Fire wood-coal-oil&electricity-nuclear power&renewable energy) has also promoted the fundamental revolution of the social development modes.(2) Estimation of China's cross-region interfactor/interfuel elasticities of substitutionSince significant differences in terms of industrial structure, resource endowment and energy mix exist among each province, and these differences will impose some impacts on the results of interfactor/interfuel elasticities of substitution, this paper firstly divides China into six regions. Subsequently, China's cross-region interfactor/interfuel elasticities of substitution during1995-2009are estimated employing a translog cost function. Afterwards, the results are interpreted from the characteristics of both regional industrial conditions and resource endowments.(3) Comparation on the effects of a carbon tax policy among different regionsBased on the results of cross-region interfactor/interfuel elasticities of substitution, the effects of a carbon tax policy among different regions are simulated and compared. The results indicate that a carbon tax at50Yuan/ton in2008will result in202million tons of CO2emissions reduction all over China, which accounts for3%of the total CO2emissions in that year or so. Thereinto, the effect of the carbon tax for the east coast region is the most prominent, which amounts to183million tons CO2emissions reduction. At the same time, the municipality region, the southwest region and the northwest region also achieve CO2emissions reduction by2.4%,1.37%and1.47%, respectively. On the contrary, due to the unique energy-economy system conditions, the total CO2emissions in the northeast and middle regions both increase by a certain proportion. These results show that the effects of a carton tax policy in CO? emissions reduction are greatly influenced by local interfactor/interfuel elasticities of substitution.(4) Evaluating the effects of substituting energy with capital on China's interprovincial energy efficiencyConsidering the fact that a great deal of capital had been put into the field of energy saving and emission reduction in China during the11th FYP, this thesis sets different scenarios on the relationship between capital and energy (one considers substituting energy with capital and the other one not). Subsequently, it measures the interprovincial environmental-adjusted energy efficiency under both of the scenarios employing stochastic frontier analysis method and then compares them. The results demonstrate that substituting energy with capital in economic activity indeed has significant positive effects on China's energy efficiency improvement; and the effects are more obvious for the provinces with lower efficiency scores such as Hunan, Sichuan, and Yunnan than for the provines performing at the efficiency frontier.