Elsevier

Energy Policy

Volume 26, Issue 11, September 1998, Pages 813-829
Energy Policy

Energy efficiency in China: accomplishments and challenges

https://doi.org/10.1016/S0301-4215(98)00004-4Get rights and content

Abstract

In 1980, the Chinese government made a series of policy decisions to stimulate energy efficiency in a major effort to partially decouple energy and economic growth. These and subsequent policy decisions, combined with a variety of implementation measures, have been exceptionally successful. China is one of the few countries at a relatively early stage of industrialization in which energy demand has consistently — and over many years — grown significantly less rapidly than gross domestic product (GDP). China’s primary energy consumption in 1995 was 1250 million metric tons of standard coal equivalent (Mtce). If energy intensity has remained at the 1977 level, China would have consumed 2700 Mtce in 1996, 2.2 times the actual level. This paper provides a comprehensive overview of the policy measures and implementation approaches that China used to achieve these results. We describe the programs that channeled investment into energy efficiency projects, management systems that encouraged factories to reduce energy demand, research and development programs that produced and applied technology to the problem of energy saving, the creation and widespread use of energy conservation service centers throughout China, and other policies. We also describe the present transition to a system that is much more market oriented, and identify some major challenges that need to be dealt with to maintain the extraordinary efforts in China to reduce energy intensity.

Introduction

In a trend unparalleled in any other country at a similar stage of industrialization, the energy intensity of China’s economy has fallen rapidly since the late 1970s (Fig. 1). It has, moreover, dropped faster than in industrialized nations, where high energy costs, efficiency standards, and structural changes contributed to the decoupling of energy use and economic growth. The consequences are difficult to overstate. China’s actual primary energy consumption in 1995 was 1250 million metric tons of standard coal equivalent1 (Mtce), but if the same amount of output had been produced at the intensity prevailing in 1977 – after which year intensity began to decline – the country would have used 2740 Mtce (Fig. 2). In other words, China was using less than half as much energy by 1995 as it would have if intensity had not changed since 1977. Even with the vast improvement, China has already become the world’s second largest energy consumer and emitter of greenhouse gases, and is poised to become number one by the middle of the next century. How China achieved past efficiency gains, how it can continue to become more efficient, and how China’s experience can be applied to other countries are topics of tremendous importance, with direct relevance for policies aimed at local, regional, and global environmental problems, energy security, and trade issues (see, eg, Joint Study Team, 1994).

In this paper we first analyze the sources of the remarkable decline in China’s energy intensity, ie energy-efficiency improvements, changes in product mix, shifts in the sectoral structure of the economy, and other factors. Next we explore the causes lying behind those factors – where the impetus for efficiency changes and sectoral shifts came from. We show that China’s intensity decline owes a great deal to technical efficiency improvements, and that government policies and programs were critical to their achievement. We then describe some of the most important aspects of the state’s large-scale effort to promote energy efficiency throughout the economy, such as creating a mechanisms for investing in efficiency projects, implementing quotas for and monitoring energy intensity at factories, supporting efficiency research and development, setting up a network of energy conservation service centers, and implementing financial incentives. We point out that the structures and mechanisms to promote efficiency, mostly created in the 1980s under the planning system, still bear the hallmarks of the command economy and are not entirely appropriate to the reformed economic environment. In the final sections of this paper we treat the challenges China faces in continuing to promote efficiency improvements, which are vital to the country’s continued economic growth and environmental well-being, in the transition to a market-based economy.

Section snippets

Energy savings since 19802

China’s macroeconomic energy intensity has declined since the late 1970s, contrary to the experience of developing countries at similar stages of industrialization.3

Causes of Energy Intensity Declines

Difficult as it is to analytically separate the factors that contributed to China’s falling intensity, it is even harder to quantify the role of the causes behind those factors. Which aspects of the economic system reforms were responsible for changes in the sectoral structure of the economy and for shifts in product mix? To what extent was better technical efficiency due to “natural” change in the stock of energy-using equipment (eg replacement of obsolete equipment and construction of new

Major Efficiency Policies and Programs15

Chinese energy researchers and planners realized late in the 1970s that future energy supplies would be insufficient to meet the needs of economic development unless the efficiency of energy end-uses were improved significantly.16

Challenges to continued efficiency improvements in the transitional economy

The upheavals of China’s economic system are reflected in its landscape. In the cities and in much of the countryside, sprawling construction sites crowd views with no apparent coordination, and the old and new are everywhere squeezed together in inharmonious juxtaposition. In its current state of transition, China’s economic system is host simultaneously to features of the centrally planned command economy of the recent past and to elements of a regulated, market-based system. In this world of

Recommendations

The challenges China faces in reorienting its efforts to ensure that efficiency improvements continue are not small. With many seemingly more pressing matters occupying the country’s leaders – threatened declines in agricultural productivity, water shortages, underemployment of a huge and growing population, and political pressures, to name a few – energy issues, and particularly demand-side issues may not receive full attention. Under these circumstances, it is crucial to conduct well-focused

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