Energy savings potential in China's industrial sector: From the perspectives of factor price distortion and allocative inefficiency

Xiaoling Ouyang and Chuanwang Sun

Energy Economics, 2015, vol. 48, issue C, 117-126

Abstract: China's industrial energy consumption accounted for 70.82% of national and 14.12% of world energy usage in 2011. In the context of energy scarcity and environmental pollution, the industrial sector in China faces unsustainable growth problems. By adopting the stochastic frontier analysis (SFA) framework, this paper analyzes the factor allocative efficiency of China's industrial sector, and estimates the energy savings potential from the perspective of allocative inefficiency. This paper focuses on three issues. The first is examining the factor allocative inefficiency of China's industrial sector. The second is measuring factor price distortion by the shadow price model. The third is estimating the energy savings potential in China's industrial sector during 2001–2009. Major conclusions are thus drawn. First, factor prices of capital, labor and energy are distorted in China due to government regulations. Moreover, energy price is relatively low compared to capital price, while is relatively high compared to labor price. Second, the industry-wide energy savings potential resulted from energy allocative inefficiency was about 9.71% during 2001–2009. The downward trend of energy savings potential implies the increasing energy allocative efficiency in China's industrial sector. Third, a transparent and reasonable pricing mechanism is conducive to improving energy allocative efficiency.

Keywords: Energy savings potential; Shadow price model; Allocative efficiency; Energy price distortion (search for similar items in EconPapers)
JEL-codes: C32 O33 Q48 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (57)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0140988314003168
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:48:y:2015:i:c:p:117-126

DOI: 10.1016/j.eneco.2014.11.020

Access Statistics for this article

Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

More articles in Energy Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().