The Research On The Substitution Between Capital And Energy In Chinese Industrial Sector

In decades, China’s economy develops rapidly, and energy consumption alsoincreases dramatically at the same time. As energy external dependency rises andconstraint on economic growth from environmental protection increases, China’seconomic sustainable development in future needs Chinese economic sectors,expecially industrial sector to reduce energy intensity, and improve the efficiency ofenergy utilization. The macropolicy of energy conservation and emissions reductionstarting from the "11th five-year plan" does not materially reduce the sharp increaseof energy consumption. So it can provide reference for our country to improve energyefficiency that researching the substitution principle and flexibility between capitaland energy of industrial enterprise production function from the micro perspective.Following the logic of historical study-theory analysis-empirical test-policySuggestions, the paper does research on the substitution between capital and energyin Chinese industrial sector. The history datas of energy consumption and capitalgrowth show that: excessive energy consumption makes our country become theworld’s second-largest economy and aiso the world’s largest energy consumer at thesame time，and the development of economy and finance in decades results in alarge number of capital accumulation. So there is necessity and feasibility insubstitution between capital and energy.On the basis, the paper puts energyparameters into the enterprise cost, establishes an enterprise translog cost functionscontaining energy consumption, and then works out elasticities of substitutionbetween factors in enterprise cost functions. Using1990-2011China’s industrialsector data,the paper empirical test China’s elasticity of substitution between energycapital.The empirical results show that:(1) capital and energy are substitutable interms of absolute inputs;(2) labor and energy are complementary in terms of absoluteinputs;(3) the substitution between factors in relative inputs is uncertain.Finally,combining with theoretical analysis and empirical conclusions, the paper puts forwardpolicy suggestions from the market-oriented price of factors, promoting technologyprogress and policy guidance to promote the substitution between capital and energy.