The implications of China’s investment-driven economy on its energy consumption and carbon emissions

In this paper, we aim to fill the research gap by analyzing the relationship between China’s domestic investment and energy consumption, as well as related carbon emissions. First, we use an expenditure-approach-based framework to qualitatively examine the effects of China’s domestic investment on its energy consumption. Based on this framework, we define and differentiate the investment-driven energy consumption and carbon emissions from that which is driven by other economic activities. Second, we establish an allocation model to quantify China’s investment-driven energy consumption and carbon emissions. The results reveal that in 2007, China’s domestic investment contributed one third of both its energy consumption and carbon emissions. Further results show that a majority of this investment-driven energy consumption and carbon emissions, namely nine tenths of the total, is attributable to the construction and manufacturing sectors. Finally, we use the construction sector as a case to discuss how to determine the energy-saving and emission-reduction potential of improving investment-driven energy consumption practices.