Sectoral demand and supply-driven fossil fuel consumption

What is it about?

Our research quantified the coal, petroleum, and gas embedded in China's demand-and-supply chains. We propose that modifying current carbon taxation and credit mechanisms to include energy embedded in demand and supply can aid in the achievement of SDG 7.

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Photo by Gab Pili on Unsplash

Photo by Gab Pili on Unsplash

Why is it important?

Despite extensive research on energy consumption and material/environmental connections across sectors, the following research gaps persist in the related literature. Few study energy consumption in general, particularly sectoral energy linkages, separately estimate coal, petroleum, and natural gas links. Second, little is known about the world’s largest energy consumer, China’s, demand-and-supply chain embedded in various fossil fuel sectoral linkages. Rather than that, the majority of related studies have estimated sec-toral energy linkages (chains) by aggregating the different types of fossil fuel (energy) linkages. Furthermore, the energy linkage studies did not further decompose the backward and forward linkages in inter-and intra-sectoral links. This study uses the Leontief inverse model to estimate the Chinese intra- and inter-sectoral demand-chain embedded fossil linkages of various significant types, including coal, natural gas, and petroleum. The study uses the Ghosh supply model to calculate China’s sectoral supply chain’s induced fossil links. Additionally, the study dissects the inter-sectoral demand-and-supply chains for fossil fuels into their sectoral origins and destinations. Quantifying the under-investigated intermediate inter-sectoral demand-and-supply-chain embedded primary fossil energy consumption, such as coal, petroleum, and natural gas, has several methodological and policy implications for domestic and international researchers and policymakers. The estimation and decomposition of the rarely estimated key fossil fuel demand-and-supply-side sectoral linkages can assist in revealing differences in embedded energy usage patterns across different fossil fuel types. Furthermore, the calculation can identify the leading sectoral suppliers (pushers) and demanders (pullers) of embedded energy consumption. That can assist Chinese, and more broadly, other countries and UN climate-related policymakers (such as those responsible for the SDG 7 achievement) in simply reallocating energy consumption responsibility from traditional direct consumers to diverse stakeholders. In addition to policymakers, our research also holds notable methodological significance for related future works. There are several ways to estimate the intermediate linkages under the classical multiplier approaches. However, due to scattered definition and estimations procures of linkages, there is still a need to present a comprehensive but straightforward approach for estimating sectoral ecological linkages. This paper shows that the intermediate energy flows matrix (IEFM) can be obtained by diagonalizing the final demand and the environmental intensity multipliers. After obtaining the IEFM, the estimations of the total, forward, backward, and net energy linkages are straightforward.

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