Optimal path of China's economic structure and energy demand to carbon neutrality

Ying Peng, Hua Liao, Fangzhi Wang and Huiying Ye

Energy Economics, 2025, vol. 141, issue C

Abstract: The changing economic structure may impact future trends in energy demand and carbon emissions since various economic production sectors have differentiated energy dependencies. Compared to consumer goods sector, investment goods sector usually has higher energy intensity, and its energy is weakly substitutable with other input factors. This paper constructs an energy-economy dynamic optimization model (EED) with heterogeneous energy dependences between investment and consumer goods sectors, and applies it to analyze the structural transformation of the Chinese economy and energy prospect. The optimization model generates a drop of investment share in GDP to 27 % in 2060, 15 percentage points lower than in 2020. Along the above transformation path, the peak demand for energy is expected to be between 6.1 and 6.3 billion (tce) in the baseline scenario, and overall energy intensity by 2060 will be 54 % lower than in 2020. The forecasting results also subject to uncertainties including technological progress. Moreover, we find that macroeconomic policy to promote consumption can help alleviate energy and environmental pressures. Thus, the development of the Chinese economy in the future needs to combine multiple channels such as promoting consumption and improving investment efficiency.

Keywords: Economic structure; Energy demand; Dynamic optimization model (search for similar items in EconPapers)
JEL-codes: O11 Q43 Q47 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:141:y:2025:i:c:s0140988324007552

DOI: 10.1016/j.eneco.2024.108046

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