How to control China's energy consumption through technological progress: A spatial heterogeneous investigation

Abstract Technological progress has long been recognised as one of the most effective tools for resolving the contradiction between economic growth and energy consumption. However, previous studies assessing the impact of technological progress on energy consumption have been mostly comprehensive. Additionally, knowledge of the mechanisms influencing their relationship is limited, and the role of spatial correlation in determining regional energy consumption has been largely ignored. Using Chinese provincial data from 2000 to 2016, this study employs a slack-based version of the Malmquist-Luenberger index to measure and decompose technological progress. A dynamic spatial panel model is applied to account for spatial correlation and explore technological progress from this decomposition perspective. The estimated results show that before decomposition, technological progress is incapable of effectively decreasing energy consumption. After technological progress has been decomposed into efficiency and technical change, only the direct spillover effect of efficiency change is significant. A further decomposition for efficiency change results in a significant effect of reducing energy consumption, mostly from the direct effect of pure efficiency change. Lastly, we offer some specific recommendations for China's government to implement and better employ technological progress as a powerful tool to control energy consumption.