This chapter delves into China’s Residential Energy Consumption (REC), covering its current state, trends, influencing factors, and drivers. It aims to inform energy policy and promote sustainable development. Using data from 2002–2010 and 2001–2012, the study applies Index Decomposition Analysis (IDA), particularly the Logarithmic Mean Divisia Index (LMDI), to analyze changes in REC. Findings reveal a significant rise in China’s REC during the study period, with appliance energy demand being the top growth driver, contributing 53.04% between 2002 and 2010. Increased per capita floor space and energy mix changes also impacted REC, though the latter’s contribution was minor. The analysis further identifies climate, energy prices, expenditure structure, energy cost share, income, and population changes as key drivers of urban and rural REC changes. Notably, climate effects have more prominently driven REC growth since 2007, while rising energy prices and a shift from low—to high-priced energy have somewhat curbed consumption. The study highlights the complexity and diversity of REC, showing how different factors affect consumption across periods and regions. The results are valuable for crafting targeted energy policies, optimizing the energy mix, enhancing efficiency, and addressing climate change. They help guide China’s REC toward a more sustainable path.