1. Introduction
The contradiction between energy demand growth and energy resource scarcity is becoming increasingly prominent. This contradiction also intensifies energy constraints on the economy’s sustainable development. In the new century, global energy consumption increased rapidly. According to the International Energy Agency, global energy consumption in the year 2019 was 606,490 PJ (10
12 J), representing a 44.82% increase versus the year 2000 [
1]. The industrial sector is the largest terminal department of energy use, accounting for about 19.95% of the global energy use [
1]. In addition, the global energy shortage problem is becoming more severe with the rising energy price [
2]. The massive energy use also brings about increasingly severe environmental problems. Consequently, energy and environmental issues have long been an important topic of concern for the international community [
3,
4].
The economic development in China has become more dependent on energy and the environment in the past four decades [
5,
6,
7]. China consumes 3.3 times more energy than India, the world’s third largest energy user [
1]. China’s massive fossil energy consumption is directly responsible for the deteriorating ecological environment [
8,
9]. The main point is that fossil fuels makes China emit more CO
2 than any other country, accelerating global warming [
10]. What’s worse, particulate matter (PM2.5), sulfur dioxide, nitrogen oxides, and other pollutants from energy consumption generate fog and hazy weather in China. The Chinese government has pledged to construct a resource-efficient and environment-friendly society [
11]. But the existing energy and environmental scenario are impeding its sustainable growth.
China’s iron and steel industry (ISI) forms a complete production system, and its industrial output ranks first in the world.
Figure 1 presents that after entering the 21st century, the development of the ISI can be roughly divided into two stages. From 2000 to 2013, it witnessed a period of large-scale and rapid development, and the ISI has gradually transformed to scale reduction and high-quality development since 2014. The important role played by the ISI in China’s economic development cannot be ignored. The contribution rate of the ISI to the national economy was nearly 15% at its peak and above 5% in most years. The ISI shows a more obvious role in promoting the whole industrial economy, with an average annual contribution rate of more than 25%. The rapid progress of this industry is supported by energy and environmental resources. It consumes a lot of energy resources [
12], which is shown in
Figure 2. The energy consumption of the ISI in 2019 was 670.47 Mtce, more than three times of that in 2000. The energy used to produce iron and steel accounts for a large proportion of energy in the whole industrial sectors. In China’s industrial sectors, coal-dominated energy use usually leads to a large amount of CO
2 emissions. China’s ISI has huge potential for energy-saving and CO
2 reduction [
13]. The Central Economic Work Conference held in 2015 kicked off the supply-side structural reform represented by steel production reduction. In April 2019, the government released the Opinions on Promoting the Implementation of Ultra-Low Emissions in the Iron and Steel Industry. It provided policy support for iron and steel firms to achieve ultra-low emissions. According to the China Iron and Steel Association, the ISI will achieve CO
2 emissions peaking by 2025. The ISI faces stricter environmental regulations to control energy use and carbon emission.
The effectiveness of energy conservation and CO2 reduction contributes to green industrial development. The benefits of green production in the ISI can be summarized in two aspects. On the one hand, there is currently a risk of the oversupply of steel products in China. Green development is a key driving force for the transformation and upgrading of the ISI. The green transformation of firms can eliminate outdated capacity and promote China to become a high-quality iron and steel producer. On the other hand, green development requires reducing energy intensity and improving energy structure. It is an important step to address the environmental pollution problem caused by iron and steel production at the source. For these two reasons, the energy and environmentally friendly development of this industry attract stakeholders’ attention. In September 2019, fifteen large Chinese steel firms jointly issued the Declaration on the Green Development of Chinese Steel Enterprises. This practice shows that by taking initiatives in green production, iron and steel firms can achieve harmony with the natural society.
Improving energy efficiency is considered a cost-effective tool to achieve energy and ecological-friendly targets [
14,
15]. Under the 2 °C temperature control target, 40% of carbon reductions by 2050 will come from improved energy efficiency [
16]. Many countries have taken action to reduce energy consumption and improve energy efficiency [
17]. When it comes to energy efficiency and environmental protection, China is more actively involved. However, it is still too early for the Chinese government to link energy efficiency initiatives to the goals of energy conservation. The impact of energy efficiency on energy consumption is uncertain. Energy efficiency improvements control energy use while also stimulating energy consumption. It is mainly because the rebound effect makes the policy effects of energy efficiency uncertain. The energy saved by the energy efficiency is often partially or wholly offset by the rebound effect through substitution and output channels [
18]. Therefore, economic policies and technical measures to improve energy efficiency may deviate from people’s expectations [
19], and the rebound effect prompts the re-examination of the policy perspective of reducing energy consumption. Can energy efficiency achieve goals of saving energy and environmental protection? This is an issue of interest to many policymakers. The extent to which energy efficiency improvements reduce energy consumption depends mainly on the rebound effect size.
Currently, policies are often formulated focusing on the technical aspects of the potential for energy savings, ignoring the linkages between a firms’ production behaviors and the socioeconomic system. As a result, the prospect of energy conservation is often overestimated, and energy-saving and environmental-friendly policies are not working. Reliably quantifying the rebound effect is essential to estimate the actual energy savings resulting from energy efficiency policies. To present a practical plan to minimize energy usage, this research measures the energy rebound effect of the ISI from the producer’s perspective. The study aims to answer three questions concerning the ISI. (1) What is the present state of industrial energy efficiency? What are the features of energy efficiency performance and influence factors in different regions? (2) Is there an energy rebound effect in the context of energy efficiency, and what is the influence mechanism? In particular, how do factor substitution and output growth contribute to the rebound effect? (3) Does the energy rebound present heterogeneously in different regions of China, where economic and industrial development patterns range greatly? The quantitative investigation of the energy rebound effect aids in explaining energy use in the ISI.
The innovation of this article includes three layers. (1) Most earlier research estimates energy price elasticity as the rebound effect because of limited data on energy efficiency and energy services. However, if the energy price is strictly regulated, the variation range may be negligible. The use of energy price elasticity estimates may be biased. Drawing on the improved method of Liu et al. [
20], this study estimates the rebound effect regarding the elasticity of energy services consumption concerning their prices. This method is derived from the concept of the rebound effect and has the potential to increase the estimation validity. (2) Existing studies mostly describe the industrial rebound effect in terms of factor substitution [
21], but ignore the minor effect of the output expansion [
22]. Figuring out the mechanism of the rebound effect is more important than calculating its magnitude [
23]. This study estimates channels of factor substitution and output expansion. It enables us to accurately identify the impact mechanism of the rebound effect and provide timely empirical support. (3) In reality, the rebound effect has not been incorporated into designing energy conservation policies in China’s industries, and the government ignores this problem when implementing energy policies. The ISI is essential in energy saving and environmental protection. Therefore, the research on the industrial rebound effect can provide more targeted suggestions. Additionally, the findings of this study provide an important reference for energy conservation in energy-intensive industries.
The study’s following chapters are structured as follows.
Section 2 revisits the classical literature on the energy rebound effect.
Section 3 builds the econometrics model and presents variables and data. The results are analyzed and discussed in the next chapter; the final chapter concludes the research and gives suggestions.
5. Conclusions and Suggestions
5.1. Conclusions
Energy efficiency is an essential means of energy saving and environmental protection. However, the energy efficiency will bring about a rebound effect. This article explores the energy rebound effect of the ISI with the improved method proposed by [
20]. The study is conducted in two steps. We construct the DEA model to measure energy efficiency in the first step; in the second step, we calculate the industrial energy rebound effect between 2000 and 2019. The research draws the following conclusions.
(1) The dynamic energy efficiency of the ISI is 1.08. Its improvement is driven by energy technology progress. The best energy efficiency performance in eastern China is driven by the combination of energy use efficiency improvement and energy technology progress. The central region has the second-best energy efficiency performance while the western region has the lowest energy use efficiency, resulting in their energy efficiency performance lagging behind other areas. The green transformation of the ISI needs to pay attention to improving energy efficiency. It requires great effort in energy utilization and energy technology. On the one hand, efficient energy utilization can be realized by adopting modern production management. On the other hand, firms can strengthen the invention and promotion of new metallurgical technology in production.
(2) The energy rebound effect does exist in iron and steel production. It means that energy efficiency improvements do not bring about the expected energy use reduction. The average rebound effect is 0.4297, showing a partial rebound effect. Potential energy savings from improved energy efficiency reached 57.03%. Although energy efficiency improvements lead to the rebound effect, the energy backfire does not occur. It indicates that in most cases, the amount of energy saved by efficiency improvement is greater than the amount of energy rebound. Thus, improving energy efficiency remains an effective way to save industrial energy use. As for the decomposition, factor substitution is more critical in promoting the rebound effect, with a value of 0.3279, and the impact of an output increase on the rebound effect is 0.1018. This finding highlights the role of the rebound effect in the green economy of the ISI. Ignoring the rebound effect will greatly diminish the effectiveness of green transition policies and actions. A market-oriented reform of production factors, especially energy prices, will help promote high-quality development of the ISI.
(3) In terms of provincial distribution, the rebound effect shows regional heterogeneity. It is relatively concentrated in the central provinces. The reason is that the central provinces have better resource endowments and the convenience of accepting industrial transfer. The rebound effect of the western region is the lowest, which is related to the small scale of steel production and the lagging technology in this region. Economic development, resource endowment, and industrial policy are the critical factors leading to regional differences. This reveals that the high-quality and green development of the ISI needs to optimize the regional layout. Market demand, resource guarantee, and environmental capacity are key factors for firms to consider in the future.
5.2. Policy Suggestions
This paper explores the energy efficiency and rebound effect of China’s ISI. According to the conclusion, we put forward suggestions to address the energy conservation and environmental protection challenges.
First, it is urgent to enhance industrial energy efficiency through technological advances. The energy savings are the result of the combined effect of the theoretical energy saving and the rebound amount brought by energy efficiency. Technical innovation is responsible for current production efficiency and energy consumption. Therefore, iron and steel firms need to improve their independent innovation capability in the low-carbon economy. Firms should strengthen investment in energy-saving production technology research and development. Firms can further update advanced technology equipment and eliminate high energy-consuming obsolete equipment to improve energy efficiency. In addition, firms should pay attention to management innovation, system optimization, and other soft technological advances for effective resource allocation. This is because it can better raise awareness of energy conservation and promote energy efficiency improvements by managing the optimal use of energy elements. For the country, the government should watch out for the technology spillover effect between regions and technology transfer [
83,
84]. The government can guide iron and steel firms to bring advanced technologies from the east to the other areas and promote energy efficiency in the west region.
Second, the government should improve the policies’ effectiveness and focus on energy prices in the ISI. This study finds a high rebound effect in the ISI. Governments and firms need to become aware of the rebound effect gradually. The rebound effect affects how energy efficiency improvements reduce energy consumption [
85]. It also closely relates to the effectiveness of energy policies [
21]. If the ISI focuses on enhancing energy efficiency and does not involve energy price reform, the policy effect will be less than expected. The development and evaluation of policies in China often ignore the elasticity of energy services by industry. In this case, the effectiveness of the policy is reduced. The decrease in the price of energy services is responsible for the energy consumption rebound, so the rebound effect can be reduced by adjusting the energy services price. The primary concern is to rationalize energy prices so that they can reflect the cost and scarcity of energy. The current low energy price policy is contrary to the goal of energy conservation [
82]. Therefore, it is necessary to accelerate the energy price and taxation reform. From the market means, the government needs to adjust energy prices moderately to mitigate the energy rebound effect. From the administrative means, the government should expand the energy tax policy regulation space. Through taxation, energy consumption can be regulated to suppress the rebound effect [
86].
Third, the ISI should consider regional differences in developing energy efficiency policies. The rebound effect in the ISI is regionally heterogeneous, and improving energy efficiency generates different levels of demand for energy services. Differentiated energy conservation policies should be formulated in the context of regional development. High energy-consuming equipment should be restricted in the central region with a rich resource endowment. Meanwhile, the central area should change the energy structure dominated by coal consumption and strengthen clean energy utilization. The additional energy consumption will be added, provided the rebound effect exists. The problems of resource depletion and environmental pollution are expected to be ameliorated if the energy mix is rationalized so that non-fossil energy sources are the main component of the increased energy consumption. Iron and steel firms can establish a clean production system and introduce more renewable energy generation through energy storage [
87]. As the receiving region of industrial transfer, the western region should learn from the development experience of the eastern region and improve energy efficiency while focusing on the energy rebound effect.
This research provides a useful reference for future research on the energy rebound effect of China’s industrial sectors. At the end of the article, we need to point out that there may be some flaws and limitations in the study. First, coal energy and capital prices are regulated by the Chinese government and not fully determined by the market. Limited by data availability, this study cannot obtain data on the energy and capital prices of the ISI. We apply the provincial fuel and power purchase price index and capital price as the proxy. These data may affect the result of energy efficiency and the rebound effect. Second, the estimation of energy efficiency is the basis for the rebound effect. There are other alternative methods, such as the stochastic frontier approach, that can estimate energy efficiency. Moreover, the selection of different production functions and input factors may also affect the rebound effect estimation. These questions need to be considered in future research. With the deepening of market-oriented reform, more comprehensive data will provide new support for the research. Additionally, with new methods, the industrial rebound effect estimation will be more accurate and closer to the actual situation. In future studies, calculating the rebound effect of different energy types in the ISI may yield more findings.