China Needs to Move Quickly on Energy Savings

In its World Energy Outlook 2006, the International Energy Agency (IEA) projected that China will pass the United States to become the world’s largest emitter of carbon dioxide by 2010. The IEA predicts that developing countries, led by China and India, will account for more than 70 percent of the estimated 53 percent increase in global primary energy demand by 2030. But this discouraging energy future could be turned into a “clean, clever, and competitive” one if governments take strong policy actions, the IEA noted.

China, in particular, is envisioning a sustainable energy future to meet its rising demand and has high hopes to ramp up energy production while simultaneously cutting back on energy use. Yongsheng Xu, vice director general of the Bureau of Energy with China’s National Development and Reform Commission (NDRC), noted recently that China will likely pass the United States as the world’s top energy producer in the next two years, with more than 10,000 billion yuan (US$1.23 trillion) invested in the domestic energy market by 2020. NDRC chief Kai Ma confirmed China’s role as an energy powerhouse in a recent article on the nation’s energy security, noting that in 2005, China accounted for 37.4 percent of world coal production and was the sixth largest oil producer (at 181 million tons), the second largest electricity producer, and the largest hydropower producer. Ma stressed that China also has huge potential for energy savings by adjusting its economic structure and growth model-for example, by moving from a dominance in manufacturing to the less-energy-intensive service sector, and by applying energy-efficient technologies in all areas of commercial and household consumption. In its recent 11th five-year plan, the State Council (China’s parliament) set a clear goal of reducing energy consumption per unit of gross domestic product (GDP) by 20 percent by 2010, reflecting an annual reduction of 4 percent. China also plans to boost the share of renewable energy in its total energy use from the current 7 percent to 16 percent by 2020. To reach this ambitious goal, the NDRC signed agreements in July with all provincial and municipal governments, as well as with 14 major state companies, laying out their specific responsibilities for energy saving. The agency also urged all governments to include energy efficiency as a key index in their project evaluations. Starting this year, the NDRC, together with the National Bureau of Statistics (NBS) and the National Energy Office, will announce publicly the energy consumption per unit of GDP of all local administrative units, according to People’s Daily. In addition, the central government has launched a variety of energy conservation projects, such as the use of energy-saving light bulbs nationwide and the construction of energy-efficient buildings. Although most Chinese policymakers believe the 20-percent energy-reduction goal is achievable in the long run, few are optimistic about reaching the 4 percent annual reduction for this year. According to NBS, in the first half of 2006, China’s energy consumption grew faster than its economy, with energy consumption per unit of GDP rising by 0.8 percent. More than 80 percent of the increase in GDP was generated in the oil, electricity, coal mining, and nonferrous metal industrial sectors, with the remainder shared by other 30 industries. Reducing energy use from these energy-intensive industries will require substantial investment from both the finance and technology sectors, says Zhouyuan Zhang, an economist and senior researcher at the Chinese Academy of Social Science’s Institute of World Economics and Politics. “The energy-saving task is very challenging. It requires a large amount of investment and usually takes a while to see the outcome.” Zhang recommends that the Chinese government adjust energy prices as a way to push industries to adopt more energy-efficient technologies in their production, reports Shanghai Security Journal. Coal-powered heat, China’s predominant energy source, is another obstacle to achieving the nation’s energy-saving goal. At a minimum, many Chinese industrial facilities would need to replace their aging boilers with technologies that process coal more efficiently. In 2004, according to Xinhua News, at least 70 million tons of coal could have been saved if related technology and management were upgraded. Claude Mandil, executive director of the IEA, noted in an October 2006 speech on “Bridging the Energy Gap” that world coal use is expected to increase significantly due to rising pressures on oil and gas resources, resulting in a significant growth in carbon dioxide (CO2) emissions in the absence of more-efficient coal combustion technologies and carbon capture and storage. This will put an even greater burden on China, in light of the country’s rapidly rising CO2 emissions. However, China is also playing a leading role in the global carbon market, according to World Bank. From January to September of this year, it held a dominant 60 percent share in the Clean Development Mechanism (CDM), an arrangement under the Kyoto Protocol that allows industrial countries to offset their own releases of greenhouse gases by investing in emissions-reducing projects in developing countries.

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