Consumption substitution and change of household indirect energy consumption in China between 1997 and 2012

With the rapid growth in the Chinese economy in recent decades, household incomes as well as consumption of goods and services have also steadily increased. This has resulted in growing demand for energy consumption across the economy. It has been suggested that consumption upgrades in tandem with substitutions might exert an impact on mitigating this growth. The input-output method was applied in this study to analyze variations in household indirect energy consumption between 1997 and 2012. The impact of consumption substitution on change was also determined using a two-tier structural decomposition analysis, in which the second-tier is a further decomposition based on first-tier results. The results show that the indirect energy use caused by household consumption makes up between 75% and 78% of total household energy demand and that this increased 161.2% over the study period. First-tier decomposition results reveal that this change was mostly caused by household consumption scale and energy intensity effects. Second-tier decomposition results reveal strong evidence for consumption substitution between energy-intensive industries and non-energy-intensive ones and that this can have an impact on reducing household indirect consumption. Household consumption therefore plays a prominent role in total energy consumption. Transforming to non-energy-intensive or services led consumption patterns should therefore be encouraged by the Chinese government in order to achieve conservation goals.