Beijing's Declining Industrial Energy Intensity Trend: A Decomposition Analysis

The cause of the significant decline in China's energy intensity has been investigated by a number of decomposition studies, but most of them ignore the contribution of China's market-oriented economic reforms and the complicated difference among the provinces in China. This paper chose one city which is Beijing (the capital of China) to study the cause of the decline in energy intensity and carried out a decomposition analysis on a consistent set of data at three levels of 24 industrial departments: among the structural change, the technological change and the capital-efficiency which is the contribution of China's market-oriented economic reforms. From 2000 to 2010, Beijing experienced a decline in energy intensity of industry. Most previous studies attribute the decline to general technological effect or the role of structural. In this paper, we separate the capital-efficiency effect from the general technological effect, discuss the effect of the behavior of the government, and apply input-output techniques-structural decomposition analysis (SDA) to decompose overall energy intensity into three parts: technology, structure and capital-efficiency. We find that: (1) the contribution of market-oriented reform in China could decrease the energy intensity; (2) technological change plays the dominant role; (3) the effect of structure change is not consistent; (4) the behavior of the government is very important.