Macro-Economic Impact of Policies for Controlling Fossil Energy Consumption in China

Abstract

This paper analyzes the macro-economic impact of controlling fossil energy consumption in China by using a social accounting matrix framework. The empirical results show that, first, restricting the exploitation of fossil energy resources will lead to a decline in the output of other production activities, thereby reducing the factor income and the living standards of residents. Second, improving energy efficiency can promote increased output in other production sectors, and raise factor returns and residents’ living standards. Third, raising the price of energy products will result in higher costs of the entire society. The stronger the dependence on the energy sector, the greater the increase in the industrial cost. Therefore, the government should increase investment in energy efficiency, keep to energy intensity constraints, restrict the extraction amount of energy resources, and reasonably control energy prices based on market environmental factors.