Driving Forces of China’s Energy and Emission Growths Between 2007 and 2010 – A Structural Decomposition Analysis

The Eleventh Five-Year Plan (between 2006 and 2010) is significant for China’s economic development, energy consumption, and CO2 emissions. In 2006, China surpassed the USA to become the world’s largest CO2 emitter, which led to widespread discussions about China’s role in climate change negotiations. The global financial crisis in 2008 resulted in the one and only downturn in China’s exports since 2000. To sustain the country’s economic growth, the government made an investment of four trillion Yuan on infrastructure construction and social welfare improvements. In 2009, China became the greatest energy-consuming country in the world. Therefore, it is important to understand the main drivers of China’s energy consumption and CO2 emission growth in this period.

Using an input–output structural decomposition analysis, this paper analyses the key drivers of China’s energy consumption and CO2 emissions growth between 2007 and 2010. The main findings of this research include: Growth in GDP per capita is the largest contributor to the growth of energy consumption and CO2 emissions between 2007 and 2010, while improvements in energy efficiency largely offset this growth; The four trillion Yuan stimulus package was successful in sustaining China’s economic growth at a relatively high level during the global financial crisis, but it came at a cost – in terms of soaring energy consumption and CO2 emissions; The economic rebalancing towards a consumption-led economy will need longer to reach fulfilment, as the process of investment-driven economic growth was reinforced during the period between 2007 and 2010; There are positive signals from household consumption during this period, as the share represented by service industries in total household consumption experienced significant growth.

By: Xin Li

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