Powering up China: Uncovering the Drivers of Domestic Electricity Consumption

Energy demand in China has grown at an alarming rate over the past fifteen years. In 1995, the Chinese economy consumed 33.25 quadrillion Btus of energy, and by 2011, that number had more than tripled to 109.62 quadrillion Btus (EIA, 2013). China surpassed the U.S. in terms of greenhouse gas emissions in 2006 and in terms of total energy consumed in 2009. Though forecasts vary about how quickly China’s energy demand will grow in the future, even at half of the recent rate, China’s energy use would double in 18 years. Existing forecasting models appear to have underestimated China’s recent growth in energy demand. For example, in its 2000 International Energy Outlook, the Energy Information Administration of the US Department of Energy predicted that China would consume 55 quadrillion Btus of energy in 2005, just 5 years later. China’s actual consumption was nearly 25 percent higher, at 67.92 quadrillion Btus. Similarly, some academics have noted that one factor contributing to the spike in oil prices in 2008 was higher than expected demand for oil from China (Hamilton, 2013). It is important to understand factors that drive energy demand in China in order to improve forecasts and to evaluate policies that might alter the path of energy consumption. Given the level of central planning in the country, a first-order question is how well neoclassical models of householdor firm-level energy consumption apply to China. In this paper, we focus on residential en-