What new technology means for the energy demand in China? A sustainable development perspective

Abstract

This paper explores the direct impact of new technology on the energy intensity in China. The autoregressive distributed lag (ARDL) bounds test approach to cointegration is utilised over the extended period of 1985-2013. The variables found cointegrated and confirm the long-run association among all the underlying vectors. Furthermore, the results of long- and short-run analysis reveal that new technology spurs energy intensity in China. A 1% increase in technological innovation boosts energy intensity by 0.4% and 0.03% in the long and short run, respectively. The findings suggest that the establishment of smart grids and solar energy parks followed by the reforms in energy sector is yet to achieve plausible efficiency in China. The existing investment and innovation policy reforms are insufficient to assist the energy sector to cope up with the country's exceptional economic growth trend. Unlike other studies, this paper accommodates structural break in the series. During sensitivity analysis, the model is found stable. Hence, the findings possess important policy implications for China and open up new discussion in the field.