Technological Progress, Structural Change and China's Energy Efficiency

China has witnessed rapid economic development since 1978, and during the time, energy production and consumption developed at a tremendous speed as well. Energy efficiency which can be measured by energy consumption per unit of GDP, however, experienced continuous decrease. Theoretically, the change of energy efficiency can be attributed to industry structural change and technological change. In order to explain the transformation of Chinese energy efficiency, we adopt logarithmic mean Divisia index techniques to decompose changes in energy intensity in the period of 1994-2005. We find that technological change is the dominant contributor in the decline of energy intensity, but the contribution has declined since 2001. The change in industry structure has decreased the energy intensity before 1998, but raised the intensity after 1998. Decomposed technological effects for all sectors indicate that technological progresses in high energy consuming industries such as raw chemical materials and chemical products, smelting and pressing of ferrous metals, manufacture of non-metallic mineral products and household contribute are the principal drivers of China's declining energy intensity.