A Study On The Differences In Regional Energy Efficiency In China

Due to the implementation of Reform and Opening-up Policy, China’s national economy keeps a rapid growth and has achieved remarkable achievements. In 2012, China has become the second-largest economic entity after United States. Meanwhile, the energy consumption keeps increasing rapidly annually and China ranks at the top 1 energy consuming country. Extensive mode of economic growth and contradiction between energy supply and demand has resulted in some constraints on national development. Due to imbalances in economic development, energy endowment, industrialization process, industrial structure and other aspects, there exist a big difference in China’s regional energy efficiency. Therefore, it makes great theoretical and practical sense to propose strategies based on differences in regional energy consumption in order to improve energy efficiency according to regional conditions.Differences in regional energy efficiency and factors impacting on it have been a hot research topic in the field of energy economics. Current research paper concerned with energy efficiency focuses on three issues. The first is the definition on energy efficiency, and it includes single-factor energy efficiency and total-factor energy efficiency. The second is the factors compacting on energy efficiency, including economic development level, structural influences, technological progress and pricing policies, etc. The third one is convergence of differences in regional energy efficiency. Most of the literature discussed factors affecting energy efficiency, however, regional differences in energy efficiency play a more important role in China.Specifically, based on China’s panel data during 1995 to 2012, this paper first studies the differences in China’s regional energy efficiency and the factors which have influences on it. Results show that narrowing the gap between regional economic development has led to the convergence of differences in regional energy efficiency. However, differences in the structure of regional energy consumption have different impacts on regional energy efficiency. Meanwhile, foreign direct investment in different regions results in different energy efficiencies, which improves the energy efficiency in the middle region while reduces that in the western region in China. Therefore, foreign direct investment in western region matches the "Pollution Haven" hypothesis. The article suggests that the middle and western region should improve the production efficiency of advanced industries while promoting industrial structures. In addition, it is an effective solution to make the R&D investment into production in order to reduce energy consumption and to narrow down the differences in energy efficiency with developed areas. Then this article applies LMDI method in decomposition of regional energy efficiency changes from 2003 to 2012. Results claims that energy efficiency in all the provinces has improved significantly in the last decade. The reduction speeds in energy intensity from high degree to low degree are western part, central part and eastern area. Meanwhile, technical effect and energy substitution effect are the main factors in improving energy efficiency, and industrial structure effect plays different roles in different regions due to imbalances of regional economic development and regional energy endowment. Finally, this article proposes some policy suggestions to improve regional energy efficiency and to enhance development of energy-saving economics.