China's Energy Strategy: Economic Structure, Technological Choices, and Energy Consumption

By Xiannuan Lin | Go to book overview

We identified three macroeconomic factors that appeared to be primarily responsible for the energy-efficiency increases in China's economy between 1981 and 1987. They were (1) the extensive energy-conservation programs and policies implemented by the Chinese government since 1979, (2) the increase in overall economic efficiency, as a result of China's economic-reform program, which reduces central planning and increases the role of market mechanisms and incentive structures in the economy, and (3) the increase in energy prices, which provides additional incentives for energy-conservation practices and for investing in energy-saving technologies. We argued that the first two factors were much more important than the third one because despite energy-price increases, energy expenditures comprised a very small percentage of the total production cost in most sectors in the 1980s and were not that important in the overall scheme of production.

In the next chapter, we will conduct a case study of energy-efficiency improvements in China's iron and steel industry to complement our macro-level analysis of production-technology changes and to illustrate how the three macroeconomic factors identified were translated into energy savings. We will see that even in steel manufacturing, where energy represents about 10 to 15 percent of total production costs, many energy-efficiency gains achieved between 1981 and 1987 were not the result of direct efforts to reduce energy costs but of the indirect pursuits of other economic goals, such as capacity expansion, improved product variety and quality, and higher productivity.


NOTES
1.
As we indicated in chapter 3, this definition of production technology is an economist's one and differs from that of engineers. We define production technology in terms of input mix, while engineers define it primarily in terms of the operations and equipment used in the production process.
2.
Quality is defined in terms of ease of use, convenience/flexibility, and energy content.
3.
In 1978, China entered a new period in its development. Under the leadership of Deng Xiaoping, China initiated dramatic economic and institutional reforms, fundamentally departing from the all-encompassing emphasis on revolutionary struggle and ideological transformation that had characterized the Cultural Revolution era. See Barnett and Clough ( 1986), Lampton ( 1987), Reynolds ( 1987), and the World Bank ( 1985c; 1990) for excellent discussions of China's economic reform policies and their implementation.
4.
The main reason for choosing an open, rather than a partially closed, input- output model is that in China's economy we cannot assume the relationship between labor income and household consumption and that between capital depreciation and gross capital investment to be linear and have fixed proportions.
5.
Fundamentally, we seldom observe all technical input coefficients changing in

-126-

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China's Energy Strategy: Economic Structure, Technological Choices, and Energy Consumption
Table of contents

Table of contents

  • Title Page iii
  • Contents vii
  • Tables and Figures ix
  • Preface xv
  • 1 - Introduction 1
  • Notes 11
  • 2 - Energy in China's Economy, 1981 and 1987 13
  • Notes 36
  • 3 - Accounting for Energy-Use Changes: A Structural Decomposition Analysis 39
  • Notes 94
  • 5 - Energy Effects of Production-Technology Changes 95
  • Notes 126
  • 6 - Energy Conservation in Action: A Case Study of the Iron and Steel Industry 129
  • Conclusion 158
  • Notes 161
  • 7 - Summary and Conclusion 163
  • APPENDICES 173
  • Bibliography 185
  • Index 199
  • About the Author 204
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