Research On Energy Structure In China

Energy efficiency and energy structure are closely related. Coal is the dominant fuel in China's end-use energy consumption, which is a main cause to China's energy inefficiency. It is useful to optimize energy structure to enhance China's energy use efficiency. This thesis explores the interactive mechanism among energy prices, energy structure and energy efficiency, and provides a forecast to Shanghai's preliminary energy structure in the period 2006-2010. Also , the large-scale deployment of renewables is examined. The conclusions of this study are as follows:1. Interfactor substitution(1) The own-price elasticities of capital, labor and energy are all negative. The magnitude of own-price elasticities of energy is the least one, implying that the effect of energy price on its demand is small. (2) Interfactor cross-price elasticities are positive, which means any two factors are substitutes. And, energy is the least substitutable by other two factors. One possible explanation may lie in the rapid development of heavy industry in China; The other explanation may be due to the distortion of energy price, which is so cheap that induces the excessive use of energy.2. Interfuel substitutionThe thesis adopts the trans-log cost share function to empirically investigate the interfuel substitutability in China's manufacturing sector. (1) The own-price elasticity is negative for electricity and are positive for both oil and coal. (2) As concerned with the cross-price elasticity, electricity and oil are substitutes, and coal and oil are compliments. The magnitudes of cross-price elasticity are weak, implying the price effects to demands of different kinds of fuel are small. These results are consistent with the first conclusion about infactor substuitution.3.The impacts of energy price on energy intensityThe rising of relative energy price will decrease the aggregate energy intensity. And, the same results can be seen in oil and electricity. Other factors such as FDI, structure adjustments and ownership shifts also contribute to the decreasing intensity in China's manufacturing sector.4. The future trends of the preliminary energy structure in ShanghaiCoal will be the No. 1 fuel in Shanghai's future energy demands in 2006-2010, and its ratio in the total energy consumption will be reduced significantly at 6 percent. The ratio of oil in energy structure will keep steady; Natural gas will make a leap in its ratio in aggregate energy use. Also, Shanghai will optimize its energy structure to expand the electricity supply source from other provinces. From a perspective of supply security and cost-saving, the role of coal played in the economic development in Shanghai will still be dominant.5. Large-scale deployment of renewablesLarge-scale deployment of renewables is effective to optimize China's energy structure, enhance energy efficiency and reduce waste gas emissions. There are many kinds fo barriers to the adoption of renewable energy sources including market structure, competition in an uneven playing field and various non-marketplace barriers. A successful measure of"green certificate"market in Europe may be introduced in China to promote the use of renewables.In general, deepening energy prices reform will not only be helpful to improve China's energy structure, but also to enhance its energy use efficiency. There are many options to raise the price of energy through economic instruments. The most important amongst them are taxes on energy or energy-intensive products, subsidies for alternative processes or products which consume less energy, and trading schemes in which large energy consumers can trade a limited amount of permits for the emission of energy-related pollutants. It should be noted that price changes alone are most likely unable to bring about declining levels of energy consumption in a growing economy. Energy intensity decreases would have to be paid for with output losses in GDP terms. New technologies and processes offering new possibilities for factor and product substitution are needed to offset these constraints.