Key Features of China's Energy Efficiency Strategy
The China’s economy has been experiencing rapid growth over the last 40 years, leading to an extreme increase in energy demand and consumption. However, China’s energy efficiency lags behind the developed countries due to extensive infrastructure development. China has made an ambitious commitment for energy conservation and carbon reduction by 2020 in 2009 before the UNFCCC COP15 Copenhagen Climate Conference, to enhance the Nation's energy security and contribute to global climate security.
China started recognizing the need to conserve resources and protect the environment in 1979. Prior to 2006, China set up a quantitative target to reduce energy consumption 20% by 2010, and shifted from supply side to both demand and supply side in the Eleventh’s Five-Year Social and Economic Development Plan.
2005, the effective year of the Kyoto Protocol, was the tipping point for China’s strategy of energy conservation. This paper presents a specific description of China’s 11th Five Year Plan (11th FYP) from the aspects of industry, government, community and academia, as well as, research on results and barriers of the 11th FYP.
In 2010, China is preparing to develop the 12th Five-Year Plan (12th FYP) and is emphasizing the reduction of carbon intensity per GDP. China has ambitious goals for developing ecological low carbon cities. This paper will forecast the 12th FYP, especially the strategy to achieve the 40-45% carbon intensity reduction by 2020, and a long term energy efficiency strategy till 2050 by researching on the articles and interviewing different stakeholders.
1. Energy intensity review in the past 30 years
1.1 Chronological features
Since initiating the reforms and open policy in 1978, China had been experiencing a ambitious achievement in the energy intensity, declining by 70% from 1978 to 2007 (fig.1-1); the increase of energy consumption slowed down from 1997 to 1999; industrialization was speeding up from 2003 to 2006, the amount of energy consumption increased quickly, even faster than economic increase.
To cope with the growth tendency of energy consumption and energy intensity, Chinese central government proposed the target in 2006, which is to reduce by 20% in energy intensity for 11th FYP, by implementing effective measures. Regarded as an important indicator for political performance evaluation, the target was divided into the specific goals of local governments. With all the efforts combined, energy intensity declined sharply from 2007 to 2009. However, in 2009, Chinese government released a package of economic stimulus policy to spur investment, and as a result, the increasing fixed asset investment led the quick development in energy consumption. In the first season of 2010, high energy-intensity industry was accelerated, and energy intensity increased by 3.6% comparing to 2009. Till then, the accumulative decrease in energy intensity over past 4 years is 15.6%, hopefully, the target for 11th FYP is expected to be achieved, but with a huge cost.
Fig. 1-1 Energy Intensity from 1978 to 2009 in China
Resources: China Energy Report (2010): Energy Efficiency Research
1.2 Regional characteristics
Due to diverse characteristics in economic and industry development, the energy intensity varies in different regions. Meanwhile, energy efficiency has been improved gradually recently, which contributes to an impressive reduction in energy intensity (fig. 1-2～1-6). In 1990, the highest energy intensity is over 10 tce per 104 Yuan GDP in Ningxia and Shanxi province, while the lowest is less than 3 tce per 104 Yuan GDP existing in Zhejiang, Fujian, Guangdong, Guangxi, and Hainan provinces. In 1995, the energy intensity was reduced on a large extent, so that it was less than 3 tce per 104 Yuan GDP in 18 provinces. In 2009, the energy intensity in all the provinces except one is less than 3 tce per 104 Yuan GDP, 9 provinces even less than 1 tce per 104 Yuan GDP. In comparison to 1990, energy intensity was reduced by more than 80% in Beijing, Tianjin, Liaoning province, Jilin province, Heilongjiang province, Shanghai, and Jiangsu province.
Provincial Level Energy Intensity, 1990-2009
Fig 1-2 (1990) Fig. 1-3 (1995)
Fig. 1-4 (2000) Fig. 1-5 (2005)
Fig. 1-6 (2009)
2. Overview the history before 2005
1.
2.
2.1 Relevant regulations, policies, incentives and laws since 1979
The Five-Year Plan (FYP) was the key plan running through all the development stages over past 60 years. In addition to the FYP, specific regulations and plans design a mid or long term development plan while sticking to the FYP. Once the significant events or problems emerged, the government was able to respond with relevant regulations or laws.
2.2 Review of the Specific strategies in different areas
Before the 11th FYP, energy efficiency was not highlighted in FYP levels, but embodied in a series of environment regulations. The organized energy conversation started in 1979 when the first Environment Protection Law was released. Prior to 2005 the intention and motive of energy conservation strategy was the regional environment problem, instead of global climate change.
- From 1980 to 1986, a series of relevant environment protection laws on water, industry, and city pollution came into effective.
- In 1986, China's State Council released the first overall regulation on energy conservation, Interim Regulations on Energy Conservation Management. This regulation played a key role in enforcing the relevant regulations before the Energy Conservation Law was effective in 1997.
- The announcement and execution of the Energy Conservation Law determined the essential role of energy conservation in China's national economic and social development.
- Confronting the serious energy shortage 2004, Medium and Long-Term Energy Development Plan Outline (2004-2020) was released in perspective of specific renewable energy development target and energy efficiency.
2.3 Key Drivers and Features
The increase in energy efficiency before 2005 was driven by a set of reforms and ambitious policies, not only in energy sector but also in relevant fundamental areas. i.e.: As a strategic plan, China began to implement a sustainable development strategy to address energy security, emphasizing that conservation and development should both be important, putting conservation first. The reform of electricity pricing in the power industry led to actual actions to decrease energy consumption in power plants. As an effective approach to enforce the strategy, from 1980-2005, many ambitious energy-efficiency programs were proposed and implemented by the central government in cooperation with local governments and authorities. Meanwhile, environmental laws were developed to regulate the industrial performance in energy consumption.
The main features of the energy efficiency policy were achieved as follows:
- Industrial energy efficiency improvement with supply-based perspective. In the 1990s, industrial sectors, supporting market-based economy development and infrastructure construction, accounted for most of the primary energy use. In 1997, the industrial sector consumed nearly 76% of China’s primary energy. The policies in industry energy efficiency impacted significantly the total amount of energy consumption, the energy intensity dropped dramatically from 3.98 tce in 1980 to 1.22 tce in 2005 per 104 Yuan GDP (NBS, 2005).
- Technology improvement and economy restructuring. Technological change is confirmed as the dominant contributor in the decline of energy intensity, especially in the electric power sector, the biggest energy consumer in China. Till 2005, the technology applied in China’s electric power plants were developed to be world class advanced. Meanwhile, the change in industry structure has decreased the energy intensity before 1998, but raised the intensity after 1998 (Wang Jun-Song, et al., 2009).
- Financial incentives and investment. During the 1980s, China promoted investment in energy efficiency by approving low interest loans to energy conservation projects, by lowering taxation for energy-efficient products, and subsidizing monetary energy conservation by enterprises with rewards. The China Energy Conservation Investment Corporation (CECIC) was established to fund energy-efficiency investments. During this period, energy-efficiency funding for capital construction, retrofits, and transformation projects was equivalent to $16.5 billion (Sinton, et al. 1998).
3. Key features of policies and performances from 2005-2010
3.
3.1 Background
- Since 2002, the overheated economy has resulted in fixed assets scaling up with an extreme increase in energy demand. Annual construction of power plants increased from less than 20 GW in the 1990s to an average of 66 GW per year 2003-2005 (Wang Qing-Yi, 2008), the most rapid expansion of electric power the world has ever seen. Due to the high dependence of GDP development on energy, it was deemed urgent to address economic security and energy security which were being threatened.
- Confronted with the challenges of WTO membership and rapidly growing energy consumption, state-owned companies took a series of steps to strengthen their competitive advantage by enhancing energy efficiency.
- Conflict between limited resources and environment self-purification and the massive energy demand from 2002 to 2005, forced China to take actions in energy efficiency improvement (State Council, 2007a). The Kyoto Protocol became effective in 2005 establishing a global commitment to tackle climate change through cooperation of both developed and developing countries.
3.2 Key features
In 2005, the last year of the 10th FYP, the Chinese central government agreed that energy demand had to be controlled and set the national target to reduce energy intensity by 20% in five years. This was the first time China had set energy conservation as a national development goal. The 11th FYP was launched in 2006, establishing specific targets for primary energy consumption areas such as industry, appliances and transportation. Statistics show that in 2003, the proportion of energy consumption of these three areas was respectively 69.98%, 11.27% and 7.45%, accounting for 88.7% of the total. As a developing country, the energy consumption of industry hovered around 70% and the appliances has gradually been reduced since 1980; but transportation began to increase from 1997.
- Target
China pronounced the policy with a clear target in 11th FYP in three different ways: the goal of energy conservation and reduction of pollutant emission, which is to reduce energy intensity by 20% and emission reduction by 10% from 2006 to 2010, got clear support from Premier Wen Jiabao, confirmed by the National People’s Congress, and then revitalized by the energy efficiency policy apparatus of the National Development and Reform Commission (NDRC).
Tab. 3-1 Some Energy Efficiency Targets in 11th FYP
Electricity generation / Unit / 2000 / 2005 / 2010Coal-fired / gce/kWh / 392 / 370 / 355
Small & medium generations / % / 87 / 90-92
Wind turbine / % / 70-80 / 80-85
Industry
Raw steel / tce/t / 0.906 / 0.760 / 0.730
Avg 10 non-ferrous metal / tce/t / 4.809 / 4.665 / 4.595
Aluminum / tce/t / 9.923 / 9.595 / 9.471
Cement / tce/t / 0.181 / 0.159 / 0.148
Copper / tce/t / 4.707 / 4.388 / 4.256
Appliances
Room air conditioner / %(Energy efficiency rate) / 2.4 / 3.2-4.0
Refrigerator / %(energy efficiency indicator) / 80 / 62-50
Household cookstoves / %(heat efficiency) / 55 / 60-65
Household gas water heater / % / 80 / 90-95
Transportation
Railways / ton/mt km / 10.41 / 9.65 / 9.4
Average automobile fuel economy / Liter/100 km / 9.5 / 8.2-6.7
Source: NDRC, 2004.
- Institutional arrangement
Since the Energy Conservation and Emission Reduction has been considered as the most important issue for China’s development, on June 12, 2007, the Chinese State Council established the National Leading Group for Energy Conservation and Emission Reduction as the coordinating institute to strengthen the leadership capacity of reducing emissions and energy consumption.
The main task of the Leading Group to address energy efficiency is to research and establish major strategies, policies and measures to address energy conversation, to coordinate with different ministries and departments for the implementation of energy saving policies, the unified arrangements of energy conservation, the study and evaluation of the major policy suggestions, and the coordination work for solving the major problems. This Leading Group is a high level coordinating institute. Chinese Premier Wen Jiabao serves as Director of the Leading Group while the Vice Premier Li Keqiang and State Councilor Dai Binguo have served as the two Deputy Directors of the Leading Group since 2008. In this group, there are more than 10 ministers and directors involved including from the Ministry of Science and Technology, Ministry of Construction, Ministry of Finance, Ministry of Transport and Ministry of Railway, Ministry of Agriculture, and the State-owned Assets Supervision and Administration Commission of the State Council and etc.
The Leading Group established two offices for both climate change and energy conservation and emission reduction within the National Development and Reform Commission (NDRC). Therefore, NDRC serves as the competent authority and the core coordinator, is in charge of all the national coordination work with other ministries to accomplish China’s target for energy conservation and carbon intensity per GDP. In the national level, each ministry appoints one division to coordinate and work with the office for specific implementation. The Division of Environment Protection and Resource Conservation of NDRC (DEPRC) is the one responsible for the national wide energy conservation strategies. Its task is to work with each ministry and commission to develop related regulations, policies, and strategies and distribute to local governments or related governmental entities. However, DEPRC is not responsible for detailed strategy establishment. Each ministry or commission works with professional research institutions or organizations to accomplish each sector’s energy efficiency target, incentives, policies or regulations. Once those governmental documents were approved by the State Council, they are published by the Office of Energy Conservation and Emission Reduction. Performance evaluation of each city or each region is based on the evaluation report from NDRC. NDRC, as the main coordinator, organize an evaluation group with members from each ministry and commission to estimate each city or region’s energy consumption statistics data.朗读 The regional or city level’s institutional arrangements for energy conservation are similar with the national level.
NDRC also works with SASAC, the Electricity Regulatory Commission (ERC), and the National Standardization Management Committee (NSMC) etc. to develop regulations, policies, and strategies for large corporations’ energy conservation. For stated-owned companies, the State-owned Assets Supervision and Administration Commission of the State Council (SASAC) are in charge of all those companies implementation of energy conservation.