Journal of Innovation & Knowledge 8 (2023) 100298

Journal of Innovation
& Knowledge
ht t p s: // w w w . j our na ls .e l se vi e r .c om /j ou r na l -o f - in no va t i on -a n d- kn owl e dg e

The influence of sustainable energy demands on energy efficiency:

Evidence from China
Fengsheng Chiena,b,*, Lihua Huangc,d, Wei Zhaoe
a
School of Finance and Accounting, Fuzhou University of International Studies and Trade, China
b
Faculty of Business, City university of Macau, Macau, China
c
School of Economic and Management, Fuzhou University of International Studies and Trade, Fuzhou, FuJian 350202, China
d
Research Center of Open Economics and Trade, Fuzhou University of International Studies and Trade, Fuzhou 350202, China
e
School of Business, Fuzhou Institute of Technology, Fuzhou, FuJian 350506, China

A R T I C L E I N F O A B S T R A C T

Article History: Recently, there has been a high level of energy demand worldwide, which has piqued regulators and
Received 23 April 2022 researchers’ interest in producing efficient energy. Therefore, this research investigates the impact of multi-
Accepted 28 December 2022 ple energy demands on China’s energy efficiency (renewable energy production). The researchers use sec-
Available online 12 January 2023
ondary data extracted from World Development Indicators for the period 1986 to 2019. They use time series
analysis techniques, such as the ADF test for stationarity, the ARDL model to evaluate the association
Keywords:
between the variables, and the Granger causality test to evaluate the directional nexus amongst the variables.
Sustainable energy demand
The findings show that multiple energy demands have a positive association with energy efficiency in China.
Energy import
Energy use
Several implications and recommendations are made by the study to facilitate future research and regulation.
Fossil fuel energy consumption © 2022 The Authors. Published by Elsevier España, S.L.U. on behalf of Journal of Innovation & Knowledge. This
Renewable energy consumption is an open access article under the CC BY-NC-ND license
Energy efficiency (http://creativecommons.org/licenses/by-nc-nd/4.0/)

Introduction comfort, while installing natural skylight windows or florescent or

light-emitting diode bulbs minimizes the energy required for lighting
High levels of pollution and the exponential expansion of econo- in contrast to traditional bulbs (Nyangon & Byrne 2021; Sadiq et al.,
mies has led to an increased need for energy resources to perform 2022).
domestic and economic activities (Dorahaki et al., 2018; Sadiq et al., There are several ways to increase energy efficiency (EE), such as
2022). The consistent use of energy has depleted resources such as the adoption of more efficient technology, better production pro-
oil, coal, gas, ore, and petroleum, which is a threat to sustainable cesses, reducing energy loss, and using energy resources that can be
development, and the enhanced use of these energy resources could renewed, recycled or replenished (Moslehpour et al., 2021; Tronchin
cause environmental problems such as the emission of greenhouse et al., 2018). The production and use of renewable energy is the most
gases (GHGs), and hazardous chemical wastes. These problems not effective way to achieve energy efficiency. Renewable energy comes
only damage human health but also have a negative influence on the from natural resources that can be renewed, recycled, and replen-
quality of natural resources. An effective instrument to mitigate these ished (Al Mamun et al., 2021; Gyamfi et al., 2018). Energy from solar
issues is efficient energy use, which implies using less energy to per- and wind is cheaper, does not require periodic payment, and does
form tasks, produce products and services, secure resources, reduce not involve waste disposal costs. Hence, it allows maximum output
waste, and protect environmental quality (Ni
zetic et al., 2019; Tan et with minimum input (Ode & Ayavoo, 2020; Royston et al., 2018).
al., 2022; Zhao et al., 2021). Performing tasks with reduced energy Renewable energy, including biodiesel, solar power, biomass, nitrous
has various other benefits. It helps reduce the impact of climate oxide, wind power etc., restricts the emission of GHGs, and leaves no
change, reduces air pollution, increases energy security, reduces harmful waste in the post-production phase. The production of
energy price risk for consumers, and overall improves the quality of renewable energy can overcome environmental issues such as carbon
work (Sadiq et al., 2022; Shove, 2018). For instance, insulation in dioxide, heat, excessive water use, etc., thus saving the environment
buildings means less heating energy can be used to attain thermal and improving the health of living beings (Moslehpour et al., 2022;
Trotta, 2018). The production of renewable energy is an effective way
to secure energy sources for sustainable development, because the
* Corresponding author at: School of Finance and Accounting, Fuzhou University of same amount of energy is replenished, either spontaneously or by
International Studies and Trade, China. some effort (Iris et al., 2019; Moslehpour et al., 2022).
E-mail address: [email protected] (F. Chien).

https://doi.org/10.1016/j.jik.2022.100298
2444-569X/© 2022 The Authors. Published by Elsevier España, S.L.U. on behalf of Journal of Innovation & Knowledge. This is an open access article under the CC BY-NC-ND license
(http://creativecommons.org/licenses/by-nc-nd/4.0/)
F. Chien, L. Huang and W. Zhao Journal of Innovation & Knowledge 8 (2023) 100298

In March 2006, the National People’s Congress proposed their

11th five-year plan from 2006 to 2010. This plan called for further
crucial energy conservation measures and covered the development
of renewable energy resources and environmental protection. By
2010, the plan proposed a 20% reduction in EU/unit of GDP, and
included a shift from coal to clean energy sources such as renewable
energy, natural gas, oil, and nuclear power (He et al., 2018; Kamaru-
din et al., 2021). Beijing also plans to boost energy efficiency and
apply clean technology.
China is rich in hydropower. The example of the Three Gorges
Dam illustrates its richness (Lan et al., 2022; Zhou et al., 2018). Fur-
thermore, it is predicted that nuclear power may increase its share of
electricity generation from 1% to 5% over the period 2000−2030. Chi-
na’s renewable energy law, which came into force in 2006, demands
that renewable energy account for 10% of the country’s energy by
2020 (Li et al., 2018, 2021). In 2021, China experienced its worst
energy crisis, with companies in the industrial heartland advised to
restrict use, people exposed to rolling blackouts, and yearly light
shows cancelled, according to the Guardian (Ge et al., 2018; Huang et
al., 2021a).
The current study focuses on energy efficiency and the need for a
change from fossil fuel to clean energy, minimizing the use of energy
Fig. 1. Renewable power production. in domestic and commercial areas. The objective is to analyse the influ-
ence of multiple energy demands on energy efficiency. This study
bridges a literature gap by exploring the influence of energy demand
This study examines the influence of multiple energy demands on energy efficiency in detail. Numerous studies scrutinize the impact
such as energy import (EI), energy use (EU), fossil fuel energy con- of various energy demands, such as electrical consumption, fossil fuel
sumption (FFEC), renewable energy consumption (REC), and electric consumption, energy imports etc., but these studies analyse these fac-
power consumption (EPC) on China’s renewable energy production tors separately. Godoy-Shimizu et al. (2018) address the influence of
and energy efficiency. China is an upper-middle-income developing renewable energy consumption on energy efficiency but ignore other
country with a large population (Khalifa et al., 2019; Liu et al., 2021). factors. This study, which addresses the influence of multiple energy
Energy production in China has increased dramatically since 1980 demands such as EI, EU, FFEC, REC, and EPC on renewable energy pro-
and has been used to perform household tasks and economic func- duction and EE simultaneously, greatly contributes to the literature.
tions. The statistics show that 80% of energy is acquired from fossil Being a hub of energy consumption, due to its large population and
fuels and 17% from hydroelectric installations. However, only 2% of economic activity, China is a major source of environmental pollution
power comes from nuclear energy (Clauss et al., 2021; Go € kgo
€z et al., from its giant industries. However, the literature is sparce on energy
2018). China has a great deal of energy potential, but much of it is not efficiency in China. Hence, this study which analyses China’s energy
yet developed. Moreover, it is observed that energy sources are geo- consumption and efficiency removes this gap (Hussain et al., 2021).
graphically far from primary industrial consumers. The northeast is The study is structured in five parts. The second part deals with
rich in oil and coal, the central region of north China has coal, and the the influence of multiple energy demands on energy efficiency from
southwest is rich in terms of hydropower (Ba €r & Voigt, 2019; Peng & previous studies. The third part describes the data collection and
Huang, 2020). However, the Lower Yangtze area around Shanghai analysis. The fourth part presents the results, supported by previous
and the industrialized areas around Guangzhou have insufficient studies. The last part presents the conclusions, implications, and
energy, and heavy industry is sparsely distributed near the key future directions.
energy source regions outside the northeast (Liu et al., 2022; Vasques
et al., 2019). Literature review
China aims to bring change to its present energy mix, away from
its reliance on coal, which accounts for 70−75% of its energy, towards Countries face many environmental issues as they become more
a reliance on renewable energy, natural gas, oil, and nuclear power, populous, with an exponential increase in economic activity (Gyamfi
due to environmental concerns. Over the last 5 to 10 years, China has et al., 2018; Huang et al., 2021b; Mantikei et al., 2020). Most prob-
closed many coal mines to reduce overproduction, resulting in a 25% lems arise due to excessive energy use, which is a critical part of any
reduction in coal production (Dimian et al., 2021; Xiong et al., 2019). society or economy. This not only causes environmental pollution
From 1993, China has been a net importer of oil, with a substantial but may decrease the energy resources available for future use. The
proportion coming from the Middle East (Liu et al., 2022; Song et al., concept of energy efficiency has been introduced to mitigate these
2018). China is engaged in diversifying its oil import sources and has issues and implies the use of the minimum energy to produce prod-
made investments in oil reserves worldwide. It is expanding its Cen- ucts and services, while ensuring the protection of the environment.
tral Asian oil imports and has invested in Kazakhstani oil reserves Clean and renewable energy is encouraged, in both production and
€
(Liu et al., 2018; Ozer et al., 2020). Beijing also aims to increase over- use, as part of efficient energy (Huang et al., 2021; Malinauskaite et
all natural gas production which currently constitutes 3% of the total al., 2019). The multiple demands for energy in a country are all
energy consumption of the country. The city incorporated a natural opportunities for individuals and economists to adopt efficient
gas strategy in its 5 year plan from 2001 to 2005, which aimed to energy technologies and techniques to ensure clean and renewable
increase the use of gas from 2% to 4%.China’s natural gas consumption energy (Chien et al., 2022; Ma et al., 2019). Our study analyses the
more than trebled by 2010 (Mahmood et al., 2021; Ouyang et al., nexus between multiple energy demands such as EI, EU, FFEC, REC,
2018). China is now amongst the top countries producing renewable EPC and EE, which are widely investigated in previous studies.
power. Fig. 1 shows the renewable power production of the top seven Energy import (IE) is the purchase of energy from foreign coun-
countries. tries at the time of need to undertake domestic and economic
2
F. Chien, L. Huang and W. Zhao Journal of Innovation & Knowledge 8 (2023) 100298

functions such as building infrastructure and powering appliances, interviews at 82 institutions in the United States from 2005 to 2008.
machines, and transport vehicles. EI may be required for several rea- They reveal that fossil fuels cannot be recycled or completely dis-
sons, such as the ability to purchase low-cost energy in abundance, posed of, leaving harmful waste. Therefore, efficient energy and effec-
acquire clean energy, purchase high capacity energy in a minimum tive technologies must be used to overcome these issue, which do not
quantity, and address a lack of energy resources within the country leave any waste, and produce renewable energy.
(Chien et al., 2021; Go€ kgo
€ z et al., 2018). Thus, the importing of energy Renewable energy is energy from renewable and sustainable bio-
indicates a country’s demand for low-cost, clean, sustainable, or high logical sources such as food and non-food crops, trees, air, water,
capacity energy, or to use energy more efficiently (Chien et al., 2022; heat, and crop wastes. It is either spontaneously replenished or the
Shao et al., 2019). Zhu et al. (2020) investigate the influence of energy materials can be recycled (Pieloch-Babiarz, 2020; Rojek-Adamek,
import on energy efficiency. Their study demonstrates that when 2021). The consumption and production of renewable energy such as
energy resources are insufficient to meet rising domestic demand, biomass, biofuel, wind power, hydropower, geothermal power, and
economic entities turn to EI, and re-usable energy supplies must be solar power are measures intended to clean the environment. For
developed, resulting in zero waste and cost savings. Mondal et al. example, implementing energy efficiency, the basic objectives of
(2018) examine EI demand scenarios by studying improvements in which are to secure resources for future use and protect the inside
energy efficiency and GHG emission mitigation in the economy of and outside environments, requires renewable energy consumption
Ethiopia. The study posits that when business organizations are and production (Bilan et al., 2020; McCauley et al., 2019). Lydeka &
allowed to import clean energy, and there is a demand for clean Karaliute_ (2021) and Pata (2018) explore the relationship between
energy import, there is a motivation in the economy to produce renewable energy consumption, renewable energy production,
renewable energy within the country to meet demand and control human capital, and economic performance in the Pakistani economy
GHG emissions, which are objectives of efficient energy. in short- and long-term tests, from 1990 to 2016. These tests include
The energy use (EU) within a country for social and economic pur- the augmented Dickey-Fuller generalized least squares (ADF-GLS)
poses affects the implementation of efficient energy (Ainou et al., test for unit root, the Johansen and Juselius (JJ) co-integration test for
2022; Chang et al., 2018). Mills et al. (2019) state that societies and long-term causality, and the vector error correction model (VECM)
economies need to grow as populations increase within countries. for short-run Granger causality. The study concludes that renewable
Hence, the need for energy increases. However, the energy resources energy is produced in maximum quantities in countries with a ten-
available are limited. Thus, efficient energy technologies must be dency to employ renewable energy such as biomass, biofuel, wind
applied to facilitate work using the minimum amount of energy. power, hydropower, geothermal power, and solar power for produc-
Molinos-Senante & Sala-Garrido (2018) investigate the status of tion and transportation. Thus, energy-efficient technologies, which
energy consumption, energy demand, and energy efficiency. They need low voltage power to perform functions, are applied. The use of
argue that most individuals and business organizations use energy renewable energy cleans the environment, meets the increasing
resources, causing GHG emissions and producing harmful waste that need for energy, improves the production of goods and services, and
adversely affects the quality of the natural environment, working reduces costs, all characteristics of improved energy efficiency (He,
conditions and the health of living beings. Therefore, efficient energy Meng, Chen, Yan, & Vasa, 2021; Mazur & Duchlinski, 2020).
should be encouraged to mitigate the negative influence of the The use of electricity for electrical appliances, infrastructure, tech-
energy used, because energy resources that can be renewed do not nology, and building management such as heating, cooling, lighting,
leave harmful waste, or what waste there is can be easily disposed of. and developing comfort, is increasing. The application of electricity
Paramati et al. (2018) investigate the relationship between environ- as an energy source has many adverse impacts, such as the cost (pro-
mental technologies, energy demand, and energy efficiency in 28 duction cost or monthly electricity bills), production of hazardous
OECD economies. Their study applies data from 1990 to 2014 and wastes (highly radioactive fuel rods), thermal pollution, and short cir-
uses a panel estimation method to address cross-sectional depen- cuit risks. The increase in population has resulted in a competitive
dence, fixed effect, and endogeneity. The study finds that various modern world, with concerns about environmental issues, and grow-
types of machinery, plants, infrastructure, and logistics are currently ing economic activity leading to increased demand for electricity
in use, and sufficient energy is needed to run them. It predicts that (Matuszewska-Pierzynka, 2021; Zhang et al., 2017). Hence, renew-
present energy resources are insufficient and will rapidly deplete in able energy should be produced to meet domestic and economic
the future, resulting in the quest for energy efficiency using renew- energy needs cleanly and less expensively. Dogan & Ozturk (2017)
able energy sources. investigate electricity use, demand for energy, and energy efficiency
Fossil fuels, such as natural gas, petroleum, coal, oil, bitumen, tar in the economy of Los Angeles, California. The study posits that the
sand, and heavy oil containing carbon, are the most broadly used increasing need for electricity consumption to perform business
energy sources globally, accounting for 80% of power consumption. operations, administration, production, digital marketing, etc.,
These materials are generated by geological processes acting on the enhances electricity demand. Nonetheless, electricity is a costly
remains of organic substances produced by photosynthesis, begin- source of energy, unaffordable for firms. The production of renewable
ning in the archean Eon (4.0 billion to 2.5 billion years ago) (Dankie- energy from biomass, biofuel, wind power, hydropower, geothermal
wicz et al., 2020; Martins et al., 2018). Fossil fuels are non-renewable power, or solar, could fulfil the enhanced energy need, supplying the
and are expected to diminish over time. Because of their rarity, they same output from cheaper energy sources. Hence, an increased
are also costly. The increase in fossil fuel use for energy purposes demand for electricity improves energy efficiency. Zhang et al. (2017)
motivates governments, environmental regulators, and economists debate the relationship between electricity demand and energy effi-
to design economic and social policies in such a way as to promote ciency. The study implies that rising demand for electricity to power
energy efficiency. Chowdhury et al. (2018) investigate the energy various organizational infrastructure and technology boosts renew-
demand, environmental impact, and energy efficiency of fossil fuels, able energy, resource security, cost reduction, and environmental
and find many negative impacts. They are non-renewable, soon to be pollution reduction, improving energy efficiency.
depleted, dangerous to produce, and cause water, land, and air pollu-
tion, oil spills, smog, acid rain, mercury emissions, and global warm- Research methodology
ing. Hence, the use of fossil fuel energy must be reduced by
enhancing renewable and clean energy. Sovacool et al. (2021) analyse This study investigates the impact of multiple energy demands on
the use of fossil fuels, energy efficiency technologies, and renewable China’s energy efficiency. The researchers use secondary data
energy production. They conducted 181 formal, semi-structured extracted from the World Development Indicators from 1986 to
3
F. Chien, L. Huang and W. Zhao Journal of Innovation & Knowledge 8 (2023) 100298

Table 1 unlike other models Therefore, the researchers use the ADF test, with
Measurement of variables. the equation:
S# Construct Instrument dðYt Þ ¼ a0 þ bt þ YYt1 þ dðYt ð1ÞÞ þ et ð5Þ
01 Energy Efficiency Renewable electricity production (%
The stationarity of the constructs is examined individually using
of total electricity output)
02 Energy Import Energy import (% of energy use) the ADF test, and the equations for the individual variables are:
03 Energy Use Energy use (kg of equivalent per Renewable energy production
capita)
04 Fossil Fuel Energy Consumption Fossil fuel energy consumption (% of
dðREPt Þ ¼ a0 þ bt þ g REPt1 þ dðREPt ð1ÞÞ þ et ð6Þ
total)
Energy import
05 Renewable Energy Consumption Renewable energy consumption (%
of total energy consumption) dðEIt Þ ¼ a0 þ bt þ g EIt1 þ dðEIt ð1ÞÞ þ et ð7Þ
06 Electric Power Consumption Electric power consumption (kWh
per capita) Energy use
Source: World Development Indicators. dðEUt Þ ¼ a0 þ bt þ g EUt1 þ dðEUt ð1ÞÞ þ et ð8Þ
Fossil fuel energy consumption
2019. They use the time series analysis techniques, such as the aug- dðFFECt Þ ¼ a0 þ bt þ g FFECt1 þ dðFFECt ð1ÞÞ þ et ð9Þ
mented Dickey-Fuller (ADF) test for stationarity, the autoregressive
distributed lag (ARDL) model to test the association between varia- Renewable energy consumption
bles, and the Granger causality test to check the directional nexus dðRECt Þ ¼ a0 þ bt þ g RECt1 þ dðRECt ð1ÞÞ þ et ð10Þ
between the constructs. The equation for the study is:
Electric power consumption
REPt ¼ a0 þ b1 EIt þ b2 EUt þ b3 FFECt þ b4 RECt þ b5 EPCt þ et ð1Þ
dðEPCt Þ ¼ a0 þ bt þ YEPCt1 þ dðEPCt ð1ÞÞ þ et ð11Þ
where:
The researchers use the ARDL model to test the nexus between
REP = renewable electricity production the constructs. It holds the best estimation when variables are inte-
t = time period grated at 1(0) or 1(1). It is also appropriate for small samples (Sharif
EI = energy import et al., 2020), and this study has 34 observations. For the application
EU = energy use of ARDL, there should be appropriate lag selection and an appropriate
FFEC = fossil fuel energy consumption lag length to solve the possible problem of endogeneity (Ahmed et al.,
REC = renewable energy consumption 2021). Similarly, an appropriate lag length is needed for managing
EPC = electric power consumption. possible multicollinearity (Khan et al., 2019). The ARDL approach
generates the short- and long-run results together. The equation of
the ARDL model is given as:
The study takes energy efficiency as the dependant variable and
X X X
measures renewable electricity production (% of total electricity out- DREPt ¼ a0 þ d1 DREPt1 þ d2 DEIt1 þ d3 DEUt1
put). The researchers use energy demand as the predictor of the X X X
study and measure it through several indicators such as EI (% of þ d4 DFFECt1 þ d5 DRECt1 þ d6 DEPCt1
energy use), EU (kg/capita), FFEC (% of total), REC (% of total energy
þ ’1 REPt1 þ ’2 EIt1 þ ’3 EUt1 þ ’4 FFECt1
consumption), as shown in Table 1.
The study presents descriptive statistics, by year and overall, for þ ’5 RECt1 þ ’6 EPCt1 þ e1 ð12Þ
all variables, explaining the normality of the data by providing mean,
maximum, minimum values and standard deviation. The study uses a where d1, d2, d3, d4, and d5 represent the short-term coefficients, and
correlation test to predict strong/weal associations amongst the vari- ’1, ’2, ’3, ’4, ’5, and Ɛ1 represent the long-term nexus. The equation
ables. To check the multicollinearity the study conducts a variance for ECM for the short-run nexus is:
inflation factor (VIF) test, according to which, if the values are not X X X
greater than 5, multicollinearity is not problematic. The VIF equations DREPt ¼ a0 þ d1 DREPt1 þ ’2 DEIt1 þ v3 DEUt1
X X X
are: þ u4 DFFECt1 þ Y5 DRECt1 þ Y6 DEPCt1
R2Y ! Yit ¼ a0 þ b2 X2it þ b3 X3it þ b4 X4it þ b5 X5it þ eit ð2Þ
þ dECMt þ yt ð13Þ

j ¼ R2Y ; R2X1 ; R2X2; R2X3; R2X4; R2X5 ð3Þ To evaluate the association between the variables, the study con-
ducts a Granger causality test, which is appropriate for predicting
1 bilateral, unilateral or no relation amongst constructs. The Granger
Tolrance ¼ 1  R2j VIF ¼ ð4Þ
Tolerance causality expressions are:
The study uses a stationarity test to evaluate the unit root. If all X X
Y t ¼ b0 þ b1j Yt1 þ b2h Ytp þ et ð14Þ
variables are stationary at the level, then the pooled ordinary least j¼1 h¼1
square (POLS) method is appropriate. However, if all variables are
X X
stationary at the first difference, the error correction model (ECM) is Xt ¼ a 0 0 þ a0 1s Yts þ a0 2t Xtm þ et ð15Þ
suitable. In contrast, if some constructs are stationary at the level and s¼1 t¼1
some are stationary at the first difference, the ARDL model is appro-
priate. This technique is used for three main reasons. Firstly, the test
has a simple procedure. Secondly, it allows the cointegration rela- Study results
tionship to be tested and estimated through the ordinary least square
(OLS) method, where the model’s lag order is identified. Lastly, the The study presents descriptive statistics by year in Table 2. The
requirement for pretesting the variables for unit root is not required, maximum renewable electricity production (REP) is 24.291% in 2019,

4
F. Chien, L. Huang and W. Zhao Journal of Innovation & Knowledge 8 (2023) 100298

Table 2 Table 3
Descriptive statistics (year). Descriptive statistics.

REP EI EU FFEC REC EPC Variable Obs Mean Std. Dev. Min Max

1986 18.987 6.556 671.21 72.225 33.954 391.352 REP 34 19.322 2.868 15.037 24.291
1987 19.087 4.354 694.422 73.236 33.970 426.554 EI 34 5.649 7.646 6.556 15.399
1988 19.710 2.968 720.341 74.235 33.990 461.798 EU 34 1424.076 639.044 671.21 2237.478
1989 20.408 1.166 766.995 75.709 34.084 510.620 FFEC 34 82.682 5.644 72.225 88.898
1990 18.471 4.566 736.852 74.832 33.258 548.954 REC 34 22.131 9.179 11.338 34.084
1991 17.585 3.098 752.629 75.432 32.931 604.694 EPC 34 2033.085 1404.68 391.352 3927.72
1992 18.125 0.442 788.129 76.469 31.678 662.637
Source: Authors estimations.
1993 18.088 1.37 816.163 77.045 31.249 727.107
1994 19.214 1.919 866.834 78.428 29.472 770.28
1995 17.552 1.637 881.654 78.986 30.537 821.081
1996 17.512 0.695 871.756 78.935 30.183 852.741 Table 4
1997 18.061 0.071 869.359 78.994 29.740 870.617 Matrix of correlations.
1998 16.681 2.255 878.525 79.4 30.506 913.963
1999 16.639 0.548 898.987 79.841 29.603 992.943 Variables REP EI EU FFEC REC EPC
2000 18.959 0.674 928.811 80.197 28.335 1076.549
2001 17.619 1.501 984.811 81.202 26.978 1194.856 REP 1.000
2002 15.037 3.090 1118.432 83.23 23.841 1379.485 EI 0.587 1.000
2003 16.223 4.895 1268.133 84.796 20.161 1585.839 EU 0.622 0.989 1.000
2004 15.593 7.858 1515.174 86.828 16.385 2039.015 FFEC 0.368 0.955 0.936 1.000
2005 15.263 8.422 1630.171 87.408 14.884 2325.927 REC 0.434 0.967 0.970 0.980 1.000
2006 17.737 8.436 1672.904 87.224 14.138 2446.369 EPC 0.662 0.987 0.997 0.922 0.953 1.000
2007 17.864 10.361 1778.434 87.636 13.432 2612.457 Source: Authors estimations.
2008 18.623 11.446 1954.723 88.255 12.261 2943.59
2009 16.762 11.86 2086.487 88.898 11.338 3298.004
2010 19.966 14.36 2155.165 88.419 11.537 3474.988
2011 20.296 14.756 2213.759 88.237 11.522 3773.405 Table 5
2012 22.609 15.022 2236.73 87.67 12.061 3927.044 Unit root test.
2013 23.927 15.092 2236.901 87.771 12.245 3927.142
2014 23.951 15.103 2237.12 87.901 12.590 3927.201 Augmented Dickey-Fuller Test (ADF) Level t-statistics p-values
2015 23.987 15.202 2237.25 88.23 12.864 3927.39 REP I(1) 6.500 0.000
2016 23.990 15.299 2237.39 88.342 13.124 3927.44 EI I(1) 5.713 0.000
2017 24.013 15.301 2237.41 88.37 13.191 3927.53 EU I(1) 5.476 0.001
2018 24.106 15.367 2237.45 88.39 13.195 3927.61 FFEC I(1) 3.372 0.015
2019 24.291 15.399 2237.478 88.402 13.213 3927.72 REC I(0) 7.548 0.020
Source: Authors estimations. EPC I(1) 5.867 0.000
Source: Authors estimations.

while the minimum REP is 15.037% in 2002. Energy import (EI) is values, indicating that the ARDL model could be used. Table 6 shows
minimum in 1986, at only 6.556%, but maximum in 2019 at the values of the ARDL bound test.
15.399%. The results indicate that the minimum energy use (EU) is The ECM results indicate that multiple energy demands (EI, EU,
671.21 kg per capita in 1986, while the maximum EU is 2237.448 kg FFEC, REC, and EPC) have a positive association with energy efficiency
per capita in 2019. Fossil fuel energy consumption (FFEC) is minimum (renewable energy consumption) in China. The R square value
in 1986, at only 72.225%, but maximum in 2019 at 88.442%. The (0.446651) indicates that 44.6651% of changes in the REP are due to
results indicate that the maximum renewable energy consumption all selected predictors. Table 7 shows these values.
(REC) is 34.084% in 1989, and the minimum in 2009 is 11.338%. Elec- The results of the ARDL model also indicate that multiple energy
tric power consumption (EPC) is minimum in 1986, at only demands (EI, EU, FFEC, REC, and EPC) have a positive association with
391.352 kWh per capita, and maximum in 2019 at 3927.72 kWh per energy efficiency (renewable energy consumption) in China. Table 8
capita. shows the ARDL results.
The study presents descriptive statistics for the mean values, stan- The Granger causality results indicate that unidirectional relation-
dard deviation, minimum and maximum values, and observations in ships exist amongst EI and REP, EU and REP, and FFEC and REP. The
Table 3. The results indicate a mean value of REP of 19.322%, a mean results also indicate bidirectional relationships between REC and
value of EI of 5.649%, a mean value of EU of 1424.076 kg per capita, a REP, while no relationship is noted between EPC and REP. The values
mean value of FFEC of 82.682%, a mean value of REC of 22.131%, and a are shown in Table 9.
mean value of EPC of 2033.085 kWh per capita.
Table 4 gives the correlation matrix between the predictors. It
only provides the direction of the association, not the significance. Discussion and implications
The results indicate that all predictors (EI, EU, FFEC, REC, and EPC)
have a positive association with REP. The VIF is used to test the multi- The results reveal that energy import has a positive association
collinearity, and the results indicate that all VIF values are lower than with renewable energy production, which determines the energy
5, suggesting no multicollinearity issue in the model. efficiency within a country. These results align with the previous
This study uses the ADF stationarity test to evaluate the unit root. study by Murshed (2020), who analyse the impact of increasing
The findings indicate that REC is stationary at the level while REP, EI, energy import facilities on energy efficiency. The study implies that
EU, FFEC, and EPC are stationary at the first difference, indicating that energy is imported because domestic energy resources are only avail-
the ARDL model is appropriate for the study. The values are given in able at a high rate due to scarcity. When the demand for energy
Table 5. imports increases, it becomes necessary to seek other ways to pro-
To apply the ARDL model, the co-integration amongst the con- duce cheap energy. Renewable energy is cheaper than non-renew-
structs is examined using the ARDL bound test. The results indicate able energy and is a tool to control the excessive use and waste of
that the calculated f-statistics (5.68) are bigger than the critical energy. These results are supported by Yao et al. (2019), who reveal
5
F. Chien, L. Huang and W. Zhao Journal of Innovation & Knowledge 8 (2023) 100298

Table 6
ARDL bound test.

Model F-statistics Lag Level of significance Bound test critical values

I(0) I(1)

REP/(EI,EU,FFEC,REC,EPC) 5.68 4 1% 5.91 5.97

5% 4.17 4.49
10% 3.03 3.09
Source: Authors estimations.

Table 7 domestic activities to improve lives. Hence, sufficient energy is

Short-run coefficients. required to run these processes. It is feared that the available energy
Variable Coefficient Std. Error t-Statistic Prob. resources may not be enough in the coming decades as they are
decreasing rapidly. Hence, there is a struggle for energy efficiency
D(EI) 0.520860 0.130242 3.999171 0.0210
through renewable energy production. These results are supported
D(EU) 0.676452 0.121029 5.589173 0.0023
D(FFEC) 4.701202 1.311072 3.585769 0.0328 by Gielen et al. (2019), who demonstrate that the increasing use of
D(REC) 1.090552 0.148634 7.337164 0.0000 energy from fossil fuels enhances carbon emissions into the air, dam-
D(EPC) 1.321462 0.232542 5.682681 0.0022 aging the quality of natural resources, reducing the resources for
CointEq(1)* 1.284823 0.143171 8.974045 0.0000
future use, and affecting the health of humans. Therefore, economists
R-squared 0.446651 Mean dependant var 0.050852
Adjusted R-squared 0.415255 S.D. dependant var 2.225322
encourage the production of renewable and clean energy with the
intention of achieving energy efficiency and avoiding the negative
Source: Authors estimations.
social and environmental impacts of using non-renewable energy
resources.
Table 8 The study results reveal that fossil fuel energy consumption posi-
Long-term coefficients. tively impacts renewable energy production and, thus, energy effi-
Variable Coefficient Std. Error t-Statistic Prob. ciency. Seyedzadeh et al. (2018) support this idea, saying that fossil
fuels have been used for energy purposes in residential and commer-
EI 1.188623 0.319853 3.716154 0.0022
cial areas for centuries. During the combustion of fossil fuels, harmful
EU 3.992114 1.044177 3.823216 0.0019
FFEC 1.185651 0.161687 7.333001 0.0000 gases are released, adding to global warming, initiating health prob-
REC 3.262038 0.743211 4.389114 0.0005 lems, raising ocean levels, causing floods, and damaging the quality
EPC 2.362782 0.923915 2.557359 0.0415 of natural resources. The increasing demand for fossil fuels motivates
C 0.855174 0.178095 4.801786 0.0003
the production of renewable energy to save the economy. These
Source: Authors estimations. results are supported by Mensah et al. (2019), who state that fossil
fuels take years to form and cannot be re-used or recycled. As
reserves of fossil fuels are limited and can be diminished with consis-
Table 9 tent use, while the demand for energy increases with increases in
Granger causality test. production and population, the use of renewable energy sources
Null Hypothesis F-Statistic Prob. Decision such as biomass, biofuel, wind power, hydropower, and solar power,
which are not likely to be diminished, are encouraged. These results
EI does not Granger cause REP 4.04058 0.0072 Unidirectional
agree with Griffin & Hammond (2019), who indicate that biomass
REP does not Granger cause EI 0.40206 0.8860
EU does not Granger cause REP 4.01466 0.0099 Unidirectional and biofuel must be encouraged for energy efficiency, to substitute
REP does not Granger cause EU 0.02800 0.2057 for fossil fuels that cannot be recycled and leave toxic wastes that are
FFEC does not Granger cause REP 6.18391 0.0003 difficult to dispose of.
REP does not Granger cause FFEC 1.04492 0.3616 Unidirectional
Renewable energy consumption has a positive association with
REC does not Granger cause REP 4.55981 0.0024
REP does not Granger cause REC 5.08623 0.0054 Bidirectional
renewable energy production and energy efficiency. These results are
EPC does not Granger cause REP 0.3521 0.1247 in line with Saint Akadiri et al. (2019), who indicate that organiza-
REP does not Granger cause EPC 1.3251 0.1231 No tions are aware of the environmental impacts of non-renewable
energy such as fossil fuels and nuclear power as well as the costs of
traditional energy sources, and tend to use renewable and clean
that when the energy resources are scarce, individuals and organiza- energy with minimum environmental influence. Clean energy needs
tions move to import energy to meet domestic demand. In order to to be produced at large scales to meet the demand and achieve
fulfil the domestic energy demand for households and economic pro- energy efficiency. These results are similar to Chel & Kaushik (2018),
cesses, energy must be produced with resources which can be reused, who posit that non-renewable energy resources are more costly
leaving no waste and saving costs. because they cannot be recycled, and there are costs associated with
The results show that energy use positively correlates with handling harmful waste. Therefore, firms prefer to use biomass, bio-
renewable energy production, which is critical to energy efficiency. fuel, hydropower, and solar power, which are renewable and do not
These results agree with Ni
zetic et al. (2019), who state that the use produce waste, to reduce the cost of non-renewable energy. The
of energy resources is increasing rapidly both at the domestic and demand for clean and waste-free energy leads the government to
commercial level with increasing population and technological facili- focus on forestry, agriculture, and the installation of solar panels.
ties. It is understood that energy resources taken from nature are Thus, energy efficiency can be achieved within the economy.
finite, meaning technologies are introduced which use minimum The results indicate that electric power consumption positively
energy to give maximum output in order to replenish and sustain correlates with renewable energy production, ensuring energy effi-
resources. These results are in line with Jia & Lee (2018), who note ciency. These results are supported by Zhou et al. (2018), who show
that various types of machinery, plants, infrastructure, and logistics that a rise in electricity use to carry out operations in various business
have been invented to perform economic activities, meet the require- departments enhances energy demand. Moreover, due to the high
ments of the global competitive market, and undertake social or cost of electricity, which business organizations cannot afford, they
6
F. Chien, L. Huang and W. Zhao Journal of Innovation & Knowledge 8 (2023) 100298

apply energy-efficient technologies and focus on producing renew- energy production and efficiency. The authors adopt a quantitative
able energy. Likewise, Shi et al. (2018) indicate that electrical energy research method and analyse the influence of energy demand (EI, EU,
has many disadvantages, such as the high cost of designing and FFEC, REC, and EPC) on REP and EE in the Chinese economy. The
establishing nuclear power stations, waste production in the form of results indicate that fossil fuels and electricity, used to meet the
highly radioactive fuel rods, thermal pollution, and short circuit risks. increasing demands for energy in domestic and commercial areas,
Therefore, clean and renewable energy production must be encour- could be costly and negatively impact the environment, society, and
aged to meet energy needs in place of electricity. These results are in the economy. However, increasing energy demand encourages
line with Sinha & Shahbaz (2018), who show that a rise in the energy efficiency. Likewise, the results highlight that renewable
demand for electricity for organizational infrastructure is a motiva- energy consumption in production and operational processes indi-
tion for the economy to produce renewable energy for resource secu- cates higher energy demand than the resources available, which
rity, cost reduction, and reduction of environmental pollution. could be addressed by efficient energy.
The current study has both theoretical and empirical implications. The current study has some limitations, besides its theoretical and
The study has remarkable significance because of its contribution to empirical implications. The study only analyses certain factors of
green literature. It is a detailed description of energy efficiency and energy demand, which limits the generalizability of the results.
its social and economic significance. Technology or technological pro- Addressing only energy demand as a driver of energy efficiency mini-
cesses are taken as energy efficiency indicators in most literature mizes the study’s effectiveness. Simultaneously, many other factors
concerning energy efficiency. In contrast, few studies take renewable affect energy efficiency. Future authors are recommended to analyse
energy production as a measure of energy efficiency. The current more factors of energy efficiency. The study collects data about the
study analyses renewable energy production as a measurement of influence of EI, EU, FFEC, REC and EPC on EE in the Chinese economy.
energy efficiency, examines the nexus between energy demand and This study may not apply to other economies, because of its focus
energy efficiency, and explores the influence of energy imports, only on China, with its particular population, geographical features,
energy use, fossil fuel energy consumption, renewable energy con- and economic conditions.
sumption, and electrical power consumption on renewable energy
production and energy efficiency. Although past studies analyse the
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