ENERGY EFFECTS OF PRODUCTION-TECHNOLOGY CHANGES
It is sometimes useful to think of an economic production system as a machine. At one end, energy and other inputs of productive resources are fed into the machine, where they are combined, processed, and transformed. From the other end, a flow of final goods and services emerges. Machines with different technologies may require different quantities and combinations of energy and other inputs to produce the same set of final goods and services. The amount of energy required in the production system, therefore, will change if there is a technological change, either due to a modification of the existing production machine or due to a complete replacement of the old machine with a new one.
In this chapter, we fix final demand at that of 1987 and examine how changes in production technology--the way firms combine energy with other inputs to produce output--from 1981 to 1987 affected the energy consumption of China's economy. We do so by comparing actual energy consumption in 1987 with the amount of energy that would have been required if China had had to use 1981, rather than 1987, production technology to satisfy 1987 final demand. We describe production technology in terms of production-input mix and define production-technology changes broadly as any changes, from whatever cause, in the production-input mix of an industry. 1 They can result from, for example, changes in the output mix of an industry, changes in production facilities, or changes in the operation/utilization of production facilities.
In this study, we use a production-input mix to describe production technology. The production-input mix refers to a column of direct input or technical coefficients in the input-output model. The technical coefficients are