Decomposition Analysis of Aggregate Energy Consumption in China: An Exploration Using a New Generalized PDA Method

As the largest energy consumer, China is facing greater pressure to guarantee energy supply and energy security. Investigating the driving factors of energy consumption is very important. Decomposition analysis is an analytical tool for decomposing an aggregate indicator into its contributing factors. This paper introduces index decomposition analysis (IDA) into production decomposition analysis (PDA) and provides a new decomposition framework for analyzing energy consumption. Two application studies are presented to illustrate the use of our proposed approach. The first deals with the decomposition of aggregate energy consumption from 1991 to 2012; the second application studies seven sectors of China from 2001 to 2012. The empirical studies result in four meaningful findings: (1) the rapid economic growth has already resulted in severe energy supply crises; (2) China’s energy sector consumption structure has changed significantly; (3) potential economic effect is the largest driving factor for energy consumption growth; (4) potential energy intensity effect and technical change of economic output effect were the two primary driving factors in reducing energy consumption.