The effect of industrial structure adjustment on China’s energy intensity: Evidence from linear and nonlinear analysis

Abstract

Abstract Given that the sustainable economic development in China is severely restrained by a rapid increase in energy consumption, an industrial structure adjustment can act as an effective and feasible measure to reduce China s energy intensity. This study empirically analysed the linear and nonlinear relationships between industrial structure adjustment and energy intensity, using a Chinese provincial panel dataset for 1997–2016. In case of the linear analysis, the regressions suggest that a 1% increase in the tertiary industry’s proportion could lead to an approximately 0.03% decline in energy intensity, whereas a 1% increase in industrial structure optimisation could lead to an approximately 0.02% decline. Unfortunately, the development of high energy-consuming industries has contributed towards an increase in energy intensity. In case of the nonlinear analysis, we used the industrial structure optimisation as a threshold variable in the dynamic threshold panel model. The results indicate that a change in the industrial structure optimisation leads to a change in the relationships among the industrial structure adjustment, technological progress, and energy intensity. This study also shows that the energy intensity in China’s central and western regions has a huge potential downside, through the optimisation of industrial structure. These results provide valuable information for reducing energy intensity from the perspective of industrial structure adjustment.