Abstract

The objective of this paper is to explore the structure of how energy productivity in China’s provinces is determined to draw useful energy policy implications for sustainable development. First, energy productivity is decomposed into two attributes; technology; and input factor which is necessary for economic activities such as labor and capital. The paper then estimates energy technology levels as an indicator across provinces in China through 2004 and 2007 using a growth accounting method. The estimation results show that disparity in energy technology level exists across the provinces even after controlling for differences in the contribution of input factor to energy productivity, implying the importance of technology for energy productivity enhancement. We then identify factors that affect the technology level using regression analysis. The regression results indicate that investment in the energy technology and the quality of human and man-made capitals determine the level of energy technology. Furthermore, we show resource abundance and industrial structures affect incentives to make investment, thereby leading to more efficient technology for energy use. Thus, appropriate energy policies including price setting and a better environment for investment is vital to achieve both economic development and energy conservation. The proposed energy productivity analysis system is also applicable to other countries and regions to draw useful implications for policy making.

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