Research On The Problems And Solutions For The Increase Of Energy Consumption In China

With the development of China recently, the energy consumption grows quickly and hasexceeded the energy production capacity in China. In2012, the consumption of coal, oil andnatural gas in China is much more than that in the most countries in the world, especiallythe consumption of coal in China is almost half of the total coal consumption is the world.At the same time, the energy production is not enough for energy consumption in China,especially half of the oil consumption is imported from other countries. In addition,according to “BP Statistical Review of World Energy”, the reserve of coal in China is thethird most in the world, while the consumption of coal in China is the most in the world,and the reserve-production ratio is31. The rank of oil reserve of China is Number14in theworld, while the rank of oil consumption of China is Number2in the world, and thereserve-production ratio is11.4. The natural gas reserve of China ranks13in the world,while the natural gas consumption of China ranks4in the world, and the reserve-productionratio is28.9. Apparently the energy consumption in China has exceeded the capacity ofenergy supply in China. Therefore, if there is no new finding of energy in China in thefuture, we have to slow down the increase of energy consumption or even to decrease theenergy consumption in China.Using decomposition analysis methods, based on the data from1997to2010, weanalysed the reasons for the increase of energy consumption in China by dividing the wholeenergy consumption into commercial energy consumption and residential energyconsumption.Using structural decomposition analysis, we decomposed the commercial energyconsumption during1997-2007in to five driving forces consisting of energy intensity,Leontief, sector structure, demand allocation (the shares of consumption, investments andexport in final demand) and final demand effects. The results show that the final demand effect was the most important driving force behind the increase of commercial energyconsumption in China. Leontief effect increased commercial energy consumption in Chinaby increasing the portion of intermediate output. By further analysis we propose that overcapacity in some sectors is the important reason behind the increase of commercial energyconsumption. Sector structure changed toward energy intensive structure, which increasedcommercial energy consumption in China. Demand allocation effect indicated that theincrease of investment and the decline of consumption increases the commercial energyconsumption. Among all driving forces, the energy intensity effect is the only one whichplayed negative role on the increase of commercial energy consumption in China.According to further analysis, technological progress is the main reason behind the declineof energy intensity. Furthermore, based on the analysis above, we undertook a scenarioanalysis on commercial energy consumption of China in the next decade. The resultsshowed us that: if the driving forces behind the commercial energy consumption keepconstant trend as before, the commercial energy consumption of China in2017will reach5.324billion tce,2.13times of that in2007. However, if the economic transition works, theproblem of over capacity was solved, the sector structure was shifted, the demand allocationwas changed toward consumption intensive, and the pace of economic growth was limitedbelow5percent, the commercial energy consumption of China in2017will be reduced to1.693billion,67.8percent of that in2007.Adopting index decomposition analysis method, we decomposed the increase ofresidential energy consumption of China in the period2002-2010into four driving factorscomprising changes from appliances, change in floor space, population and energy mix.According to our results, the increase in energy-using appliances is the biggest contributorto the increase of residential energy consumption during2002-2010but the effect declinesover time, due to energy efficiency improvements in those appliances. The second mostimportant contributor is floor space per capita. Of the four factors, population is the moststable factor and energy mix is the least important factor. Firstly, the changes of energy mixis due to the increase of the biomass consumption and the decline of coal consumption.Secondly, the constant growth of the population of China would keep the residential energyconsumption increasing. Thirdly, the increase of house space per capita would use moreresidential energy for heating, cooling and lighting. Fourthly, the increase of electricity usefor household appliances is due to the constant increase of the ownership of household appliances and the extension of the use time of household appliances. According to ourprediction, until2020the ownership of household appliances will continue increasing,though the pace of the increase will slow down along with the increasing saturation. Inaddition, due to the technological progress in China, the energy efficiency of the householdappliances will be improved year after year. If the efficiency of appliances was improved by2%each year, the electricity use for appliances will keep on increasing until2020; unlessthe efficiency of appliances was improved more than3.45%each year, the electricity use forappliances won’t be decline before2020.Based on the analysis above, we gave some suggestions to policy makers in theperspective of improving energy efficiency, reducing overcapacity, optimizing sectorstructure, adjusting demand allocation, controlling economic grows, improving energy mixand decreasing energy demand from appliances. To improve energy efficiency in China, thegovernment should develop a rational energy pricing system, encourage the enterprises toconduct technological innovation, which is benefit to reducing energy waste and improvingenergy efficiency. To reduce overcapacity, the government should increase consumption andreduce investment, encourage competition and eliminate backward capacity, control theentry criteria strictly, and publish industrial information. To optimize sector structure, thegovernment should give priority to the development of non-energy intensive sectors, focuson light industry, and develop strategic emerging industries according to regionalcharacteristics. With regard to demand allocation, the government should improve residents’overall income level, improve the social security system, and narrow the income gap. Interms of economics growth, the government should slow down the economic growth rate,balance the relationship among economic growth, energy consumption and environmentprotection. In the perspective of residential energy structure, the government shouldencourage the conversion of biomass, such as pyrolysis, gasification or liquefaction,converting the biomass into biogas, bio-ethanol, bio-diesel or other form of energy. Withregard to energy use from household appliances, the government should encourage theenterprises to produce energy saving household appliances through energy saving subsidyand other related policies, meanwhile encourage the consumers to buy and use moreenergy-efficient products, adapt the current trade policy and accelerate the updating ofenergy-consuming appliances, then improve the energy efficiency of household appliancesin China.