Retrospective and prospective decomposition analysis of Chinese manufacturing energy use and policy implications

The industrial sector dominates the China's total energy consumption, accounting for about 70% of energy use in 2010. Hence, this study aims to investigate the development path of China's industrial sector which will greatly affect future energy demand and dynamics of not only China, but the entire world. This study analyzes energy use and the economic structure of the Chinese manufacturing sector. The retrospective (1995–2010) and prospective (2010–2020) decomposition analyses are conducted for manufacturing sectors in order to show how different factors (production growth, structural change, and energy intensity change) influenced industrial energy use trends in China over the last 15 years and how they will do so up to 2020. The forward looking (prospective) decomposition analyses are conducted for three different scenarios. The scenario analysis indicates that if China wants to realize structural change in the manufacturing sector by shifting from energy-intensive and polluting industries to less energy-intensive industries, the value added average annual growth rates (AAGRs) to 2015 and 2020 should be more in line with those shown in scenario 3. The assumed value added AAGRs for scenario 3 are relatively realistic and are informed by possible growth that is foreseen for each subsector. •Analysis of energy use and economic structure of Chinese manufacturing sector.•Retrospective (1995–2010) and prospective (2010–2020) decomposition analyses.•Analysis of production growth, structural change, and energy intensity effects.•Prospective decomposition analyses are conducted for three different scenarios.•Policy implications of the decomposition analyses are discussed.