The Implication of Limited Conventional Fossil Fuels and Declining EROI on Economic Growth in China

EROI represents the ratio between energy output and input during the process of energy production. EROI evaluation, as a new method, gives a fresh view to solve some problems related to the economy and society. In this paper, we have calculated the EROI of Chinese fossil energy in detail and analyzed the implication on China’s economic Growth. By using the C-D production function and the energy production function, the paper forecast the economic growth of 2011-2025 in China. Taking the energy consumption during the production process into consideration, we improve the energy production function. We selected the known parameters of the historical data from 1980 to 2011, and taking the use of the first-order equation of the residual to get the unknown coefficients according to the method of the least squares criterion. The final equation—with 14 unknown parameters—is a nonlinear equation. To solve this kind of simulation, we build a first-error equation to search for the value of the parameters. The program we use is run by Lingo. The declining EROI of China’s conventional fossil fuels not only means decreasing energy quality and increasing energy costs, but also a drop in net energy that is available to 2 the economic system; the implication being a change in the conventional optimistic perspective for energy supply. This paper proposes the definition of available net energy consumption as “domestic energy production equals net energy imports minus energy consumption”. Even though the ratio of energy consumption to energy production is minus 4% to plus 5%, we cannot ignore its impact on economic growth in China.