Energy 239 (2022) 122191

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Energy
journal homepage: www.elsevier.com/locate/energy

Determination of driving forces for China's energy consumption and

regional disparities using a hybrid structural decomposition analysis
Guanfei Meng a, Hongxun Liu a, Jianglong Li a, *, Chuanwang Sun b, **
a
School of Economics and Finance, Xi'an Jiaotong University, Xi'an, Shaanxi, 710061, PR China
b
China Center for Energy Economics Research, School of Economics, Xiamen University, Xiamen, Fujian, 361005, PR China

a r t i c l e i n f o a b s t r a c t

Article history: China receives great global attention for its energy consumption. To implement effective and fair policies
Received 18 February 2021 to save energy, it is critical to understand what drives China's energy consumption and regional dis-
Received in revised form parities. Most of previous studies failed to include indirect factors embodied in the inter-sectoral and
23 September 2021
regional input-output flows. Therefore, a hybrid structural decomposition analysis is conducted to
Accepted 25 September 2021
Available online 30 September 2021
explore drivers of energy consumption and regional disparities. The results present: (1) energy, directly
or indirectly, is flowing from coastal regions to Northwest, Southwest and Central China. (2) The growth
of residents' income to contribution of energy consumption is by 106.7% and 169.8% during 2002e2007
Keywords:
Energy consumption
and 2007e2012, respectively. Meanwhile, the positive impact of income on energy consumption is larger
Driving forces in urban than rural areas, and the structure effect has a significantly negative impact on energy con-
Regional disparities sumption in Northwest and Southwest regions. (3) By factors, the substitution effect non-energy to
Structural decomposition analysis energy inputs in industry sector might bring more energy consumption. By sectors, the technological
Input-output advancement of the non-industry sectors decreases energy consumption by 31.7% and 174.6% during
2002e2007 and 2007e2012, respectively. Technological advancement of industry sectors plays the most
important role in increasing energy consumption across China.
© 2021 Elsevier Ltd. All rights reserved.

1. Introduction energy structure adjustment [3], energy efficiency improvement

Energy is critical for economic development, but also results in
damage on environment if it is used in an excessive and irrational
way. As presented in Fig. 1, global energy consumption has about
doubled in the last three decades, and about 90% of the primary
energy consumption is supplied from fossil fuels. The rising trend in
global energy demand is estimated to rise sharply over the coming
years [1]. The numerous carbon emissions caused by excessive
consumption of fossil fuels into the atmosphere will increase the
earth's surface temperature approximately 1.5e4
C in the next
30e40 years [2].
To alleviate global warming and achieve a sustainable devel-
opment, many countries and regions have implemented various
measures to save energy. Among the measures, industrial and
* Corresponding author.
** Corresponding author.
E-mail addresses: mengguanfei@stu.xjtu.edu.cn (G. Meng), liuhongxun@mail.
xjtu.edu.cn (H. Liu), lijianglong@mail.xjtu.edu.cn (J. Li), cw_sun@foxmail.com
(C. Sun).
[4], and energy demand management [ [5e7]] gained the greatest
attention. However, driving forces of energy consumption vary a lot
across regions. Therefore, it is critical for policy makers to find out
the main drivers of energy consumption and regional disparities.
Structural decomposition analysis (SDA) based on the Leontief
demand-driven input-output (IeO) model is widely applied to
identify the drivers of energy consumption [8] and regional dis-
parities [9]. On the one hand, it decomposes the driving factors into
various sectors as well as regions and provides more detailed
evidence-based policymaking to achieve the energy conservation
actions set out [ [10,11]]. On the other hand, SDA might capture
direct and indirect impacts of the driving forces on energy con-
sumption embodied in sectoral supply chains [12].
However, most of the existing studies using SDA were based on
monetary IeO tables, in which energy prices in all sectors were
assumed be the same. The assumption is inconsistent with the re-
ality in China, where energy prices vary a lot across different sectors
due to many factors (e.g., the cross-subsidy policy) [ [13,14]].
Therefore, a hybrid SDA model is employing to evaluate and compare
drivers of energy consumption in various regions and sectors.

https://doi.org/10.1016/j.energy.2021.122191
0360-5442/© 2021 Elsevier Ltd. All rights reserved.
G. Meng, H. Liu, J. Li et al.
Fig. 1. The changes of global energy consumption during and share of energies in total. Note: Oil comprises crude oil and oil products; renewable energy includes Wind, solar, etc.
and biofuels and waste. Unit is million toe. Data sources: IEA World Energy Balances 2020 https://www.iea.org/subscribe-to-data-services/world-energy-balances-and-statistics.
In the paper, econometric regression [ [15,16]] and index
decomposition analysis (IDA) [17] are not adopted to explore the
topic owing several reasons. Econometric regression can evaluate
impacts of any quantitative indicators, but has two major flaws.
First, econometric regression narrows the hypothesis down to a
conditional-mean function. Thus, the estimated coefficient of an
individual independent variable (i.e., the impact of the independent
variable on energy consumption) is fixed, making it difficult to
explore the dynamic changes in the impacts [ [17,18]]. Second,
econometric regression is likely to omit some important driving
factors, which are included in the error term. Thus, the goodness-
of-fit (i.e., R2 statistics) of a regression usually needs to be very
close to 100% if the regression is used to investigate driving forces of
energy consumption or regional disparities.
Compared to the econometric regression approach, IDA usually
decomposes energy consumption into three factors: energy in-
tensity [20], industrial structure [21], and economic activity [22]. It
provides a framework to capture the multiple factors of energy
consumption changes in each period and region. However, IDA does
not include intermediate input factors and fails to consider inter-
regional influences [ [23,24]].
The contributions of this study are as follow. First, this study
attempts to conduct a hybrid structural decomposition analysis of
energy consumption at sector and regional level in China based on
the latest input-output (IO) tables. Second, this study makes a
comparative analysis on direct effect of energy and indirect effect of
non-energy flows in various sectors owing to technological
advancement. Thus, the potential heterogeneous effect of sectoral
and regional energy consumption is found. Third, decomposition
analysis provides a comprehensive overview of factors influencing
energy consumption from different components of final demand.
Finally, by analyzing the relative contribution of factors driving
energy consumption, insights into the implement of energy policy
targeted at reducing the energy consumption are provided. Un-
derstanding of the relative contribution between the factor pairs is
crucial for optimizing energy structure and improving the devel-
opment model.
The remainder of this paper is organized as follows. Section 2
provides a brief overview on energy consumption and its regional
2
Energy 239 (2022) 122191
disparity in China. Section 3 introduces the method and data used
in this paper. Section 4 presents and discusses our main findings.
Section 5 lists concluding remarks and policy recommendations.
2. An overview on energy consumption and its regional
disparity in China
Energy consumption in China varies a lot from one region to
another owing to the differences in economic growth, industrial
structure, and energy-related policies [25]. Following Mi et al.
(2017) [26], the mainland of China is divided (excluding Tibet, Hong
Kong, Macao and Taiwan for data unavailability) into 8 regions
(Fig. 2). In 2017, primary energy consumption in the central China,
northern coast, northwest, southern coast, southwest, eastern
coast, northeast and Beijing-Tianjin region was approximately 984,
691, 681, 643, 625, 473, 421 and 151 million tons of coal equivalents
(Mtce), respectively. Among the driving forces, economic growth
was evidenced to have the largest impact on energy consumption
[27], followed by energy-related policies [28].
Previous studies usually evaluated driving forces of energy
consumption in each region separately [29]. Actually, energy con-
sumption and its driving forces in each region are not independent
but highly interacted with each other through economic activities,
as input and output factors (including energy) in production are
flowing across regions and sectors. For example, regions rich in
energy resources are likely to foster heavy industries with huge
energy, and trade with other regions for agricultural and light-
industrial products. In addition, regional disparities of energy
consumption and impacts of the driving forces are changing owing
to industrial transfer, technological advancement and population
migration. Therefore, it is important to evaluate the drivers on
energy consumption systematically and dynamically by including
the inter-sectoral and regional input-output flows.
Fig. 3 compares energy consumption and economic develop-
ment in eight regions of mainland China in 2000 and 2017,
including share of energy consumption in total (energy consump-
tion share), share of GDP in total (GDP share), and share of indus-
trial output value in region GDP (industrial share). It was found that
(1) energy consumption share decreased in northeast and eastern
G. Meng, H. Liu, J. Li et al. Energy 239 (2022) 122191

Fig. 2. A division of China into multiple regions.

Fig. 3. Regional disparities of energy consumption and economy in mainland China. Note: Data are collected from the China Statistical Yearbook and China Energy Statistical Yearbook
published in 2001 and 2018.

coastal regions from 2000 to 2017, while GDP share and industrial
share decreased significantly. (2) Energy consumption share, GDP
share, and industrial share increased in the northwestern and
southwestern China. (3) Energy consumption share in the Beijing-
Tianjin region decreased from 4.6% in 2000 to 3.3% in 2017, while
industrial share slightly decreased but GDP share largely increased
in the Beijing-Tianjin region. Policy was a major reason of energy
consumption decrease in the Beijing-Tianjin region in the context
of GDP increase. To fight against the severe air pollution in Beijing,
the Chinese government implemented a large number of policies in

3
G. Meng, H. Liu, J. Li et al. Energy 239 (2022) 122191

the past decade, and achieved great success on energy efficiency

improvement and clean energy transition in Beijing and its sur- DL* ¼ *;1

L L
*;0

rounding areas.  1   1
¼ I  A*;1 I  A*;0  I I  A*;0
Fig. 3 also finds an inter-regional industrial transfer trend, from
the north and east (where industrial shares decreased), to the h i 1
central, south, and west (where industrial shares increased). Such ¼ ðI  A* ; 1Þ1 ðI  A* ; 1ÞA*;0  I I  A*0
industrial transfer led to economic growth and energy demand in  1 h   i 1
 (7)
¼ I  A*;1 I  A*;0  I  A*;1 I  A*;0
the recipient regions. Thus, both GDP shares and energy con-
sumption shares in the northwest and southwest increased from X
n
2000 to 2017. However, for the central region, despite the increases ¼ L*;1 DA*;j L*;0
in both GDP share and industrial share, energy consumption share j¼1
decreased from 2000 to 2017.
P
n
where DA* ¼ DA*(1)þ … þ DA*(j)þ … þ DA*(n) ¼ DA*ðjÞ , DA*ðjÞ ¼
j¼0
2 3
3. Methods and data 0 … Da*1j … 0
6 7
6… … … … …7
3.1. A hybrid structural decomposition analysis (SDA) model 4 5. J is sector.
0 … Da*nj … 0
Suppose that there are two sectors in an economy: Sector 1 (the To explore the impact of technological advancement in different
monetary sector) and Sector 2 (the energy sector). The economic sectors on energy consumption, DL* is further decomposed as
intermediate input flows (Z*), final demand (f*), and total output below [31]:
(x*) in term of money and energy can be formulated as below:
n h
X     i



 *ðjÞ;1 *ðjÞ;0 *ðjÞ;1 *ðjÞ;0
* ¥ ¥ ¥ ¥ DL ¼ L*;1 AM  AM L*;0 þ L*;1 AE  AE L*;0
Z ¼ ; f* ¼ ; X* ¼ (1) j¼1
tce tce tce tce
(8)
where the superscript * indicates that the matrix is a hybrid matrix,
*ðjÞ;1 *ðjÞ;0
with both monetary value (¥, RMB) and physical quantity of energy L*;1 ðAM AM ÞL*;0 in Eq. (8) refers to technological
(tce, tons of coal equivalents). advancement changes in non-energy inputs, that is, the substitu-
Based on the above matrices, a hybrid Leontief inverse matrix tion effect among monetary and energy inputs. And
*ðjÞ;1 *ðjÞ;0
(L*) is constructed in Eq. (2). L* is formulated by an identity matrix L*;1 ðAE AE ÞL*;0 captures the technological advancement
(I) and a hybrid technological coefficient matrix (A*). It is widely attributed to the substitution among energy sources, for instance, it
used to indicate technological advancement. is likely to investigate whether one region or sector is using each

 energy input more effectively [30].
¥=¥ ¥=tce Similar to DL*, final demand change Df* is decomposed as below
A* ¼ Z * , diagðx* Þ1 ¼ ; L* ¼ ðI  A* Þ1 : (2)
tce=¥ tce=tce [30].
Thus, total output change (Dx*) from period 0 to period 1 is:    
Df * ¼ f *;1  f *;0 ¼ f *;1  f * þ f *  f *;0 (9)
Dx* ¼ x*;1  x*;0 ¼ L*;1 ,f *;1  L*;0 ,f *;0 (3)
!
P P
where f_ ¼ ½rk f *;E  and rk ¼ fi*;E fi*;M
,1 ,0 ,1 ,0 ,1 ,0
where x* (x* ), L* (L* ), f* (f* ) are the hybrid total output  , E and M refer to
matrix in period 1 (period 0), the hybrid Leontief inverse matrix in i i

period 1 (period 0), and the hybrid final demand matrix in period 1
(period 0), respectively. Using the final demand and Leontief in-
verse matrices in either period 0 or period 1 only, the equations are
as follow:
    the right side of Eq. (9) reflects change in final demand magnitude
Dx ¼ L*;0 þ DL , f *;0 þ Df *  L*;0 ,f *;0
¼ ðDLÞ,f *;0 þ L*;0 ,ðDf * Þ þ ðDL* Þ,ðDf * Þ
    quantity (tce) and monetary value (¥), direct adding them up in the
Dx ¼ L*;1 ,f *;1  L*;1  DL* , f *;1  Df *
¼ ðDL* Þ,f *;1 þ L*;1 ,ðDf * Þ  ðDL* Þ,ðDf * Þ
By adding up Eq. (4) and Eq. (5), Eq. (3) can be expressed as
below:
   
Dx* ¼ ð1 = 2ÞðDL* Þ f *;0 þ f *;1 þ ð1 = 2Þ L*;0 þ L*;1 ðDf * Þ
where total output change (Dx*) from period 0 to period 1 is
decomposed into two parts: technological advancement and final
demand. Df* is the change in final denmad in Eq. (6). DL* is the
change in technological advancement in Eq. (6), which is calculated
as below based on Eq. (3) [ [26,30]].
energy sectors and monetary sectors, respectively. Since f * is the
*
same department structure as f *;1 and f_ is also the same total final
P
n P
n
demand (namely, fi* ¼ fi*;0 ) as f *;0 . The first (second) term on
i¼1 i¼1
(final demand structure) with unchanged final demand structure
(4)
(final demand magnitude), and thus is treated as the level (struc-
tural) effect. Owing to the different measure units of physical
decomposition is error. To solve this issue, the approach in Die-
(5)
tzenbacher and Stage (2006) [32] is adopted, which separated the
final demand matrix into physical quantity flows for energy inputs
and monetary value flows for non-energy inputs.
Based on the above equations, Eq. (10) could be obtained, where
energy consumption change from period 0 to period 1 (included in
(6) Dx*) is completely decomposed into 4 driving forces: technological
advancement in the energy sector from period 0 to period 1 (term 1
in Eq. (10)), technological advancement in the non-energy sectors
from period 0 to period 1 (term 2 in Eq. (10)), changes in final de-
mand magnitude from period 0 to period 1 (term 3 in Eq. (10)), and
changes in final demand structure from period 0 to period 1 (term 4
in Eq. (10)). A positive (negative) value of a term indicates that the
4
G. Meng, H. Liu, J. Li et al. Energy 239 (2022) 122191

factor leads to energy consumption increase (decrease) from period the 42 sectors in the IeO tables is downscaled into 11 sectors to
0 to period 1. match the Energy Balance tables. Units of the factors in the 6 sec-

    n h
X   i  
*ðjÞ;1 *ðjÞ;0
DX * ¼ ð1 = 2ÞðDL* Þ f *;0 þ f *;1 þ ð1 = 2Þ L*;0 þ L*;1 ðDf * Þ ¼ ð1=2Þ L*;1 AE  AE L*;0 , f *;0 þ f *;1
j¼1
|fflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflffl{zfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflffl}
1
    X n h   i      
*ðjÞ;1 *ðjÞ;0
¼ þ ð1=2Þ L*;0 þ L*;1 , f *;1 þ f * ¼ ð1=2Þ L*;1 AM  AM L*;0 , f *;0 þ f *;1 þ ð1=2Þ L*;0 þ L*;1 , f *;1 þ f *
|fflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflffl{zfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflffl} j¼1 |fflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflffl{zfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflffl}
3 |fflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflffl{zfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflffl} 3
2
   
þ ð1=2Þ L*;0 þ L*;1 , f * þ f *;0 (10)
|fflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflffl{zfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflffl}
4

3.2. Data sources and processing tors are RMB and thus the 6 sectors are identified as monetary
sectors in the hybrid IeO tables (S1eS6 in Table 1). Second, 5 en-
Data are collected from the Chinese provincial IeO tables (in ergy sectors from the Energy Balance tables are included, i.e., the
2002, 2007, and 2012, as the tables were published every five years coal sector, the oil sector, the natural gas sector, the fossil-fired
and 2012 is the most recent one available) and provincial Energy electricity sector, and the renewable energy sector. Units of en-
Balance tables of 30 provinces in mainland China. Tibet is not ergy are all in the form of Mtce and thus the 5 energy sectors are
included due to data unavailability and its low share of energy identified as physical sectors in the hybrid IeO tables (S7eS11 in
consumption to the total energy consumption in China). Table 1). Sectors in the hybrid IeO tables and the original Chinese
As the IeO tables divide the Chinese economy into 42 sectors, provincial IeO tables are listed in Table A1, Appendix. The hybrid
while the Energy Balance tables divide the economy into 11 sectors, IeO tables provide both monetary flows and physical flows of
the sectoral division need to reorganize to ensure that the IeO ta- different energy, thus driving factors and regional disparities for
bles and Energy Balance tables are comparable before setting up each individual energy can be evaluated as well.
the hybrid SDA model. There are two ways to fix the difference: the
first method is adjusting the IeO tables to suit the Energy Balance
tables. However, some information might miss as the more detailed 4. Results and discussions
division in the IeO tables (with 42 sectors) is downscaled to have
only 11 sectors. The second way is to split the 11 sectors in the 4.1. Energy consumption changes and regional disparities in China
Energy Balance tables to match the IeO tables. However, the dif-
ficulty in the second method is how to set the sectoral weights on Energy consumption in the coastal regions and the central China
inputs and outputs of Energy Balance tables and coefficients in the in 2007e2012 significantly decreased in comparison with
hybrid model for dis-aggregating. As there is no prior information 2002e2007, especially in eastern China; while energy consumption
on the weights so far, it is likely to result in biases or even errors in the western China had a dramatic increase trend (Fig. 4). There
using irrational setting. are two potential reasons to explain the decline trend in coastal
Therefore, the first method, a more popular method in previous regions and the central China. First, implementation of energy
studies, is adopted to construct a hybrid IeO table [ [33e35]]. First, conservation policies decreased energy consumption in the coastal
regions and central China. For example, substantial energy

Table 1
A frame of the developed hybrid input-output table.

Outputs Intermediate Demand Final demand in rural areas Final demand in urban areas

Monetary Enegy sectors Monetary sectors (RMB) Physical sectors (Mtce)

sectors (RMB) (Mtce)

Inputs S1 … S6 S7 … S11

Intermediate Inputs Monetary sectors (RMB) S1 ZijM firural M fiurban M

…
S6
Energy sectors (Mtce) S7 ZijE firural E fiurban E

…
S11

Note: S1eS6 and S7eS11 indicate monetary flows and energy flows from sector i to sector j, respectively (i, j ¼ 1,2, …11). To get more details, final demand in the residential
sector is separated into urban and rural areas.

5
G. Meng, H. Liu, J. Li et al. Energy 239 (2022) 122191

Fig. 4. Changes in energy consumption in 2007e2012 over 2002e2007.

Fig. 5. Impacts of final demand and technological advancement on energy consumption and regional disparities in China. Note: NE, J-J, NeC, E-C, SeC, Cen, NW, SW represents
Northeast, Beijing-Tianjin, Northern coast, Eastern coast, Southern coast, Central China, Northwest, Southwest, respectively.

consumption in Shandong and Jiangsu were likely to reduce owing
to the implementation of Action Plan for Industrial Transformation
and Upgrading [36]. Second, numerous energy consumption and
associated air pollution in the coastal regions and central China
resulted in a heavy environmental pressure. It implies the need to
accelerate upgrading of industrial technology, increase investment
in R&D of energy-saving technologies, and improve energy-saving
incentives and constraints. The dramatic increase trend in western
China is likely a result of energy-intensive industrial transfer from
the coastal regions to the western region [37].

6
G. Meng, H. Liu, J. Li et al.
4.2. Driving forces of energy consumption changes and regional
disparities in China
4.2.1. Driving forces of aggregated energy consumption changes and
regional disparities
Energy consumption changes in the 8 regions of China are
decomposed into four driving forces, including final demand and
technological progress (Fig. 5). The results indicated that final de-
mand led to energy consumption increases while technological
advancement decreased energy consumption across China from
2002 (2007) to 2007 (2012). Impacts of final demand were larger
than technological advancement, thus energy consumption
increased from 2002 (2007) to 2007 (2012) in all the regions. In
addition, impacts of final demand and technological advancement
were larger during 2007e2012 than 2002e2007, indicating a faster
economic development as well as technological advancement after
2007 than before in China.
As technological advancement is further decomposed into
technological advancement of energy sectors and non-energy
sectors, the results indicate that technological advancement in
the energy sectors is the major driving force of energy consumption
decrease across China. The northwest was an exception, where
technological advancement in the energy sectors led to energy
consumption increases during 2002e2007 potentially because of
an energy rebound effect. Technological advancement in the non-
energy sectors led to energy consumption increase in most of the
regions. This is similar with the research of Bai and Meng (2017)
Fig. 6. Impacts of technological advancement and final demand on individual energy changes during 2002e2007 and 2007e2012 in each region of China. Note: 1e5 in the x-axes
denote impact of technological advancement on coal (1), oil (2), natural gas (3), fossil-fired electricity (4), and renewable energy (5). 6e10 denote impact of final demand on coal (6),
oil (7), natural gas (8), fossil-fired electricity (9), and renewable energy (10).
7
Energy 239 (2022) 122191
[38], for example, the service sector is not greener than
manufacturing industry, the energy efficiency gap between the two
sectors is mainly caused by output structure effect and technical
efficiency. Moreover, Auda [39] also proposed that the impacts of
efficiency technologies on energy consumption varied by technol-
ogy type.
As final demand is further decomposed into a level effect and a
structure effect, the result indicates that level effect (i.e., increase in
final demand magnitude) is the major driving force of energy
consumption increases while the structure effect (i.e., changes in
final demand structure) has a minor impact on energy consumption
for all the regions. Particularly, in the eastern coast, structure effect
was negative during 2002e2007 but turned to be positive during
2007e2012. Oppositely, in the northern coast, northwest and
southwest, structural effect was positive during 2002e2007 but
turned to be negative during 2007e2012.
4.2.2. Driving forces of individual energy consumption changes and
regional disparities
In spite of energy consumption across China increased signifi-
cantly during 2002e2012, few evidence discussed the changes of
various energy. Thus, the hybrid SDA model was applied to further
evaluate changes in individual energy (including coal, oil, natural
gas, fossil-based electricity, and renewable energy) and how final
demand and technological advancement influenced the changes for
each region during 2002e2007 and 2007e2012 (Fig. 6).
G. Meng, H. Liu, J. Li et al. Energy 239 (2022) 122191

Fig. 7. Direct and indirect effects of technological advancement in various sectors on individual energy consumption across China. Note: The direct impact indicates that technical
progress of energy inputs exerts energy consumption for total production structure, which is embodied by the hybrid direct consumption coefficient matrix
Pn
*ðjÞ;1 *ðjÞ;0
½L*;1 ðAE AE ÞL*;0  ; and indirect impact indicates that technical progress of non-energy inputs, such as capital, labor, etc., exerts energy consumption for total production
P
n
*ðjÞ;1 *ðjÞ;0
j¼1
structure, which is embodied by the hybrid direct consumption coefficient matrix ½L*;1 ðANE ANE ÞL*;0  , as discussed in Section 3.1.
j¼1

It was found that technological advancement led to decreases in
almost all individual energy consumption during 2002e2007 and
2007e2012 across China. There were a few exceptions, where
technological advancement slightly led to energy consumption
increases, potentially caused by energy rebound effect [40]. For
example, in the northern coastal region, technological advance-
ment led to increases of natural gas and renewable energy from
2007 to 2012. But energy rebound effect didn't occur in coal or oil
consumption, as the Chinese government implemented a large
number of policies to control coal and oil consumption for air
pollutant and carbon emission reduction. Particularly, China has
included “energy conservation and emission reduction” into the
national economic and social development five-year plan since
2006. Thus, impacts of technological advancement on coal and oil
consumption decreases were much larger during 2007e2012 than
2002e2007 (Fig. 6).

8
G. Meng, H. Liu, J. Li et al. Energy 239 (2022) 122191

Table 2
Further decomposition of final demand.

Unit: Mtce

Population effect Income effect Structure effect Total

Rural Urban Rural Urban Rural Urban Rural Urban

2002e2007

Northeast 0.93 5.14 13.49 109.19 7.30 16.50 19.85 130.83

Beijing-Tianjin 0.07 9.36 1.66 35.47 0.27 1.66 2.00 46.49
Northern coast 6.43 28.24 27.37 150.75 10.79 14.98 31.74 193.97
Eastern coast 5.31 26.77 20.75 105.97 14.82 1.81 0.62 130.94
Southern coast 4.62 29.09 7.62 80.67 4.08 5.28 1.09 115.04
Central 6.44 17.37 46.40 175.55 0.76 13.60 39.20 206.52
Northwest 1.56 15.71 34.05 100.09 13.35 22.39 45.84 138.18
Southwest 2.13 7.18 19.05 106.89 15.20 8.42 32.13 122.49

2007e2012

Northeast 1.04 7.96 35.83 142.30 2.07 0.95 36.86 151.21

Beijing-Tianjin 1.19 20.35 4.49 56.89 0.04 0.04 5.72 77.28
Northern coast 1.14 28.77 56.40 125.82 0.26 3.58 55.01 151.01
Eastern coast 4.17 35.75 50.27 140.71 8.30 4.48 54.39 180.93
Southern coast 2.31 13.95 27.38 118.62 1.57 4.05 31.27 136.62
Central 2.78 2.86 94.32 254.76 6.77 6.25 103.86 251.36
Northwest 2.89 29.90 67.62 148.30 6.15 13.33 58.58 164.87
Southwest 4.14 27.46 61.23 125.67 1.24 0.83 55.85 152.30

It was also found that final demand mainly increases fossil fuels It is found that the direct effects of technological advancement
(including fossil-fired electricity) during 2002e2007 and are significantly negative for almost all individual energy con-
2007e2012 across China. Final demand led to renewable energy sumption across China (Fig. 7 (a)). However, there are a few ex-
consumption increases as well, in the central and western inland ceptions. For example, technological advancement of energy factors
regions, eastern and southern coastal regions. It is because those from the coal sector led to increases in all individual energy con-
regions are rich in renewable energy resources. Thus, they are sumption in the northwest in 2007e2012. Technological advance-
targeted as pioneers by the Chinese government for deploying ment in energy factors from the oil & gas sector also led to increases
renewable energy. The renewable energy of northeast and northern in all individual energy consumption across China during
coast only slightly increased with large final demand, due to 2007e2012. In addition, technological advancement in energy in-
shortages in local renewable energy resources and limitation in puts from the non-industry sector led to oil consumption increases
China's long-distance electricity transmission. in the northwest, southern coast, and northern coast during
2002e2007.
However, the indirect effects of technological advancement on
4.3. Further discussions on technological advancement: direct and
energy consumption varied from sectors (Fig. 7 (b)). The techno-
indirect effects
logical advancement in non-energy inputs from the non-industrial
sectors decreased energy consumption. With energy price rising
So far, it has been found that technological advancement
and constrain of carbon emission, the substitution of labor for en-
(especially in the energy sectors) led to the aggregated energy
ergy in non-industrial sector decreased energy consumption. This is
consumption decreases in all the regions except the northeast, and
because a plenty of highly-free migrant labor (which is usually
the impacts occurred in almost all the individual energy during
named as “migrant worker”) makes factories to prefer to substitute
2002e2012. But it is not clear yet how technological advancement
energy with labor, but in the future, the substitution of labor for
in energy and non-energy input factors from various sectors affect
energy might decline due to China's disappearing demographic
individual energy consumption. Thus, the research further analyzes
dividend. The technological advancement in non-energy inputs
direct and indirect impacts on individual energy consumption in
from the industrial sectors increased energy consumption across
each region of China during 2002e2007 and 2007e2012. The direct
China during 2002e2007 and 2007e2012. This is probably due to
and indirect impacts refer to technological advancement in energy
the development of technology brings the mechanization and
and non-energy input factors, respectively.
automation of industrial sector, the substitution effective between
To better present the results, the 11 sectors in Table 1 are clas-
energy and non-energy inputs might be achieved. For example, as
sified into 5 sectors according to their characteristics: S1eS6 (the
technology develops, this substitution may bring more energy
monetary sector) are split into 2 sectors (the industry and non-
consumption and less non-energy inputs such as labor in industry
industry sectors), S7 (the coal sector) remains unchanged, S8 and
[41]. Moreover, it also indicates that technology advancement
S9 (the oil and natural gas sectors) are merged into 1 sector (the oil
embodied in capital are probably more carbon intensive than
& gas sector), S10 and S11 (the fossil-fired electricity sector and
before because the lagged adjustment process might actually “drag
renewable energy sector) are merged into 1 sector (the electricity
down” carbon emission [42].
sector). In the end, 5 sectors are in total: the non-industrial sector,
the industrial sector, the coal sector, the oil & gas sector, and the
electricity sector.

9
G. Meng, H. Liu, J. Li et al.
Fig. 8. Relative contributions of the driving forces to energy consumption in each region.
4.4. Further discussions on final demand: population, income and
structure effects
As discussed above, final demand can be further decomposed
into level and structure effect. To obtain more details, here the
authors further decompose level effect into population and income
effect [30]. The population (income) effect indicates how rural-
urban population migration (income increases in urban and rural
areas) affect energy consumption and its disparity. Table 2 presents
the decomposition results of final demand, i.e., how income, pop-
ulation, and consumption structure affect energy consumption
across China.
It was found that income played a leading role in energy con-
sumption across China among the three effects. The impact of in-
come on energy consumption in urban areas was much larger than
that of rural areas. The regional disparities regarding the income
effect can be attributed to two reasons. The first reason is that
residents’ income in the developed regions and urban areas are
usually higher than that in the undeveloped regions and rural areas.
Thus, residents living in the developed regions and urban areas are
more affordable to energy-efficient products compared to their
peers in the underdeveloped regions and rural areas. Besides, Yang
et al. (2019) [43] indicated that middle-income residents had a
stronger sense of energy conservation than low-income residents
in the process of urbanization. The second reason is that the
developed regions and urban areas are more likely to apply
advanced energy-saving technologies compared to the underde-
veloped regions and rural areas [24].
Population effects in urban and rural areas were quite different
in most regions. It reflected that during the population urbaniza-
tion process, urban (rural) population were increasing (decreasing)
and thus led to energy consumption increase (decrease) in urban
(rural) areas. In addition, the rising energy consumption caused by
population urbanization of coastal areas was the most prominent
during 2002e2007, while population urbanization of costal and
western regions played an important role in increasing energy
consumption during 2007e2012. The Beijing-Tianjin region was an
exception, where population urbanization increased energy con-
sumption in both urban and rural areas.
Population urbanization actually increases energy consumption,
whether the eastern coastal regions or inland of China. However,
the impact magnitude might exist huge differences owing different
population urbanization. For example, the population urbanization
of the eastern region accounted for 61.0%, while that of the central
and western regions accounted for 47.0% and 43.0% in 2011,
respectively. Thus, the heterogeneous population urbanization
caused different energy consumption increase across China.
Moreover, over the surveyed period, more than 20 million Chinese
10
Energy 239 (2022) 122191
residents living in rural areas migrate into urban counterparts each
year.1 Due to the unevenly distributed administrative power across
regions, public services (such as education, medical care, and public
facilities, etc.) are much better provided in cities, especially
comparing to villages. This leads to further concentration of pop-
ulation to cities and outflow from villages. This migration process
has affected the spatial distribution of population and related ac-
tivities, which could generate large positive impact on urban en-
ergy consumption in China.
Impacts of final demand structure on energy consumption were
less than income and population in most regions during
2002e2007 and 2007e2012. Besides, the energy consumption
caused by structure effects almost decreased a lot after 2007 in both
urban and rural areas across China. Particularly, the mid-western
decreased more than 1.29 times in 2007e2012 over 2002e2007.
Among the rest of regions, the underdeveloped western regions
(including the northwest and southwest) had positive structure
effects before 2007, which turned to be negative after 2007 in both
urban and rural areas. The structure effect of developed eastern
coast was negative before 2007 and minor positive after 2007. One
possible reason is that final demand structure was changing from
relatively energy-intensive to energy-conservative in China starting
from the 11th Five-Year Plan (2006e2010). This is because that the
most important point of China's 11th Five-Year Plan firstly proposed
energy-saving and emission-reduction as constrain targets of
environmental protection.
4.5. Relative contributions of the driving forces to energy
consumption
Fig. 8 depicts relative contributions of the driving forces to en-
ergy consumption in each region.
During 2002e2007, income effect had the largest impact on
energy consumption form the view of final demand, accounting
totally for 106.7%. And in terms of income effect, the central and
northern coastal regions contributed the most, by 22.9% and 18.4%,
respectively. Energy consumption was partly offset by technolog-
ical advancement. Especially, technological advancement of the
non-industry sectors decreased totally by 31.7% energy consump-
tion decreases in China. Concerning the decline trend attributed to
technological advancement of the non-industry sectors, the central
and northern coastal regions contributed 9.6% and 6.7%, respec-
tively. However, technological advancement of energy sectors
increased energy consumption in some regions, indicating an en-
ergy rebound effect.
1
Data sources: http://cpc.people.com.cn/18/n/2012/1104/c351073-19488915.
html, accessed by August 28, 2021.
G. Meng, H. Liu, J. Li et al.
During 2007e2012, income still kept a leading role in increasing
energy consumption, contributing totally 169.80%. The prominent
increase of energy consumption was mainly derived from the
central and northwest regions, by 39.2% and 24.3%, respectively.
However, different form 2002e2007, impact of technological
advancement of industrial sectors significantly increased energy
consumption, contributing 84% and second by the income effect.
Among regions, the northwest and northern coastal regions
contributed the most, by 25.4% and 16.6%, respectively. The tech-
nological advancement of non-industry sectors still plays an
important role in the decline of energy consumption, decreasing
totally by 174.6%. Especially in the central and northwest regions,
they accounted for 30.5% and 32.5%, respectively.
5. Conclusions and policy implications
Uncovering driving forces of energy consumption and regional
disparities are crucial to design and implement policies to save
energy and reduce emissions. In this paper, a hybrid structural
decomposition analysis is conducted to investigate how techno-
logical advancement and final demand affected energy consump-
tion in various regions of China during 2002e2007 and 2007e2012.
To dig more information, technological advancement is further
decomposed into technological advancement in energy inputs and
non-energy inputs. In addition, final demand is decomposed into
level effect (including population effect and income effect) and
structure effect. Moreover, the relative contributions of the driving
forces to energy consumption are investigated to discuss the
effectiveness of energy policies and to guide adjustments of energy
structure. There are four key conclusions from this study.
First, technological advancement significantly reduced energy
consumption in all regions, decreasing totally by 285.01 Mtce in
2002e2007 and 777.25 Mtce in 2007e2012, respectively. However,
the impact of technological advancement on energy consumption is
different across regions, inputs and sectors. By regions, techno-
logical advancement of energy inputs in all regions decreases en-
ergy consumption except for the northwest. By inputs factors, the
substitution effect energy to non-energy inputs in industry sector
might bring more energy consumption. By sectors, the technolog-
ical advancement of the non-industry sectors decreases energy
consumption by 31.7% and 174.6% during 2002e2007 and
2007e2012, respectively. Technological advancement of industry
sectors plays the most important role in increasing energy con-
sumption across China.
Second, final demand prominently increased energy consump-
tion in all regions, increasing totally by 1254.77 Mtce in 2002e2007
and 1667.14 Mtce in 2007e2012, respectively. Meanwhile, energy
consumption, directly or indirectly, is flowing from coastal regions
to Northwest, Southwest and Central China. Income effect played a
leading role in increasing energy consumption. The impact of in-
come on energy consumption also varied across sectors and re-
gions. Income effect of the developed areas such as Beijing-Tianjin
is lower than that of the undeveloped areas such as the north-
western China. Additionally, the population effect of the undevel-
oped regions contributes more to increase of energy consumption
than that of the developed regions. The urbanization in developed
regions achieves easily energy conservation by scale effect of public
facilities and environment-friendly industry. The income effect is
much greater than the structure effect, thereby decreasing the
negative impact of the structure effect on energy consumption.
Finally, there is significant regional disparities on relative con-
tributions of the driving forces over time. Concerning rising energy
11
Energy 239 (2022) 122191
consumption, income exerted the largest impact on energy con-
sumption, accounting totally for 106.70% and 169.8% during
2002e2007 and 2007e2012, respectively. Among, the central,
northern coastal regions and northwest contributed the most.
About the decline of energy consumption, the technological
advancement of non-industry sectors always played an important
role in decreasing energy consumption in almost all regions.
Based on the above conclusions, several policy recommenda-
tions might be proposed. First, although technical progress gains
much achievement in energy conservation, however, the pressure
in energy consumption caused by substitution effect of non-energy
to energy inputs is likely to increase. Accordingly, policymakers
could adjust properly energy plans and environmental protection
measures other than always much attention to heavy industry and
energy sectors.
Second, with rising income and the continuous improvement of
living standards, the consuming behaviors and lifestyle influence
energy consumption. Therefore, the energy structure of the rural
and urban residents could be adjusted, i.e., accelerating the con-
struction of natural gas stations, encouraging the use of renewable
energy, and installation of energy efficiency projects. For example,
reductions of gas consumption for cavity wall insulation and new
condensing boilers are broadly equivalent with savings in the range
13.5e19.5% in England owing to installation of energy efficiency
measures [44]. Furthermore, it is crucial to optimize the urban
transportation distribution system and advocate the buses and
subways as commuting ways.
Finally, different regions may make differentiation strategies.
The developed regions such as Beijing-Tianjin and coastal regions
could attach importance to the development quality of the econ-
omy as well as energy use efficiency from space planning and
consumption guidance. The central China may improve the in-
dustry screening mechanism to reduce excessive energy con-
sumption. The undeveloped regions such as western and northeast
regions may adhere to the baseline of ecological and environmental
protection and upper limits for resource utilization, and rationally
undertake the transfer of energy-intensive, highly polluting, and
resource-based industries, thereby avoiding “polluting first and
then treating”.
In future, the exploration of energy consumption and regional
disparities within carbon emission constraints and environmental
regulation also might be considered to improve the understanding
of regional disparities regarding implementation of energy policies.
Furthermore, our study has still certain limitations. On the one
hand, a hybrid SDA is only one of the possible decomposition; on
the other hand, as put forward by Su et al. (2010) [45], sectoral
aggregation may lead to inaccuracy of decomposition, about 40
sectors might be necessary, whereas in our IeO table were inte-
grated into 11 sectors. Thus, the design of appropriate weight and
decomposition in sectoral material flow might be further studied.
Credit author statement
Guanfei Meng: Methodology, Software, Experiment design and
data analytical methods, Visualization, Writing e original draft,
review & editing. Hongxun Liu: Conceptualization, Investigation,
Supervision, Methodology, Writing e review & editing.Jianglong
Li: Conceptualization, Investigation, Funding acquisition, Project
administration, Supervision, Methodology, Writing e review &
editing. Chuanwang Sun: Investigation, Funding acquisition, Proj-
ect administration, Supervision, Methodology, Writing e review &
editing
G. Meng, H. Liu, J. Li et al. Energy 239 (2022) 122191

Declaration of competing interest
The authors declare that they have no known competing
financial interests or personal relationships that could have
appeared to influence the work reported in this paper.
of China (Grant no. 72173095, 71703120), China Postdoctoral Sci-
ence Foundation (Grant no. 2016M602784), Special Foundation of
China Postdoctoral Science (Grant no. 2018T111027), Postdoctoral
Science Foundation in Shaanxi Province (No. 2017BSHTDZZ07).

Appendix A
Acknowledgments

The paper is supported by National Natural Science Foundation

Table A1
Sectors in our developed hybrid IeO tables and the original Chinese provincial IeO tables

Sectors in our developed hybrid IeO tables Sectors in the original Chinese provincial IeO tables

Monetary S1: Agriculture, forestry, animal husbandry, 1. Agriculture, forestry, animal husbandry and fishery sector
sectors fishery and water conservancy
(RMB) S2: Industry 2. Mining and washing of coal
3. Extraction of petroleum and natural gas sector
4. Production and supply of gas sector
5. Processing of petroleum, coking, and nuclear fuel
6. Production and supply of electric power and heat power
7. Management of water conservancy, environment and public facilities sector
8. Mining of metal ores
9. Mining of non-metal ores and other ores
10. Manufacturing of food, beverage and tobacco
11. Manufacturing of textiles
12. Manufacturing of textile wearing apparel, footwear and caps
13. Processing of timber
14. Manufacturing of wood and furniture, manufacturing of paper and paper products
15. Printing
16. Reproduction of recording media
17. Chemical industry
18. Manufacturing of non-metallic mineral products, smelting and pressing of metals
19. Manufacturing of metal products
20. Manufacturing of general purpose machinery and special purpose machinery
21. Manufacturing of transport equipment, manufacturing of electrical machinery and equipment
manufacturing of communication equipment, computers and other electronic equipment
22. Manufacturing of measuring instruments and machinery for cultural activity and office work
23. Manufacturing of artwork
24. Other manufacturing
25. Recycling and disposal of waste
26. Production and supply of water
S3: Construction 27. Construction
S4: Transportation, storage, and postal 28. Transport and storage sector, post sector
S5: Wholesale and retail accommodation and 29. Wholesale and retail trades sector
catering 30. Hotels and catering services sector
S6: Other service industries 31. Information transmission
32. Computer services and software
33. Financial intermediation
34. Real estate leasing
35. Business services
36. Scientific research and technical services
37. General technical services
38. Services to households and other services
39. Education
40. Health, social security and social welfare
41. Culture, sports and entertainment
42. Public management and social organizations
Physical S7: Coal
sectors S8: Oil
(Mtce) S9: Natural gas
S10: Fossil-fired electricity
S11: Renewable energy

12
G. Meng, H. Liu, J. Li et al. Energy 239 (2022) 122191

Table A2
Changes in energy consumption in each region of China and their driving forces.

Unit: Mtce

Energy consumption Final demand Level effect Structure effect Technological advancement Energy sectors Non-energy sectors

2002e2007

Northeast þ96.84 þ150.69 þ126.89 þ23.80 53.84 53.80 0.04

Beijing-Tianjin þ33.25 þ48.49 þ46.56 þ1.94 15.24 33.55 þ18.31
Northern coast þ152.55 þ225.71 þ199.93 þ25.78 73.16 85.81 þ12.65
Eastern coast þ122.60 þ131.56 þ148.19 16.63 8.96 51.05 þ42.08
Southern coast þ109.96 þ113.96 þ112.76 þ1.20 3.99 12.25 þ8.26
Central þ203.21 þ245.73 þ232.89 þ12.84 42.52 59.44 þ16.92
Northwest þ159.15 þ184.03 þ148.29 þ35.73 24.87 þ11.67 36.54
Southwest þ92.20 þ154.62 þ130.99 þ23.62 62.42 43.10 19.32
Total þ969.76 þ1254.77 þ1146.50 þ108.27 285.01 327.33 þ42.32

2007e2012

Northeast þ97.87 þ188.07 þ185.05 þ3.02 90.20 173.98 þ83.78

Beijing-Tianjin þ46.81 þ83.01 þ82.92 þ0.09 36.19 29.94 6.26
Northern coast þ106.72 þ206.02 þ209.86 3.84 99.30 179.94 þ80.64
Eastern coast þ67.98 þ235.32 þ222.55 þ12.77 167.34 151.94 15.40
Southern coast þ70.15 þ167.89 þ162.26 þ5.63 97.74 94.01 3.73
Central þ154.39 þ355.23 þ354.71 þ0.52 200.84 310.34 þ109.50
Northwest þ211.34 þ223.45 þ242.93 19.48 12.11 108.04 þ95.93
Southwest þ134.62 þ208.15 þ210.22 2.07 73.53 119.12 þ45.59
Total þ889.89 þ1667.14 þ1670.50 3.37 777.25 1167.30 þ390.05

Appendix B. Supplementary data
Supplementary data to this article can be found online at
https://doi.org/10.1016/j.energy.2021.122191.
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