ISSN 2330-717X

China Downplays Energy Efficiency Gain – Analysis


By Michael Lelyveld

While China’s economic growth continues to lag, the country is making greater gains in energy efficiency, at least according to official reports.

On Jan. 19, the National Bureau of Statistics (NBS) announced that China’s “energy intensity” index dropped 5.6 percent last year, marking the largest decline in well over a decade.

The index, which tracks total energy consumption per unit of gross domestic product (GDP), has been a closely-watched measure of efficiency and pollution-causing energy waste since the 1980s.

Although China missed many of its economic goals last year, its progress in energy efficiency exceeded Premier Li Keqiang’s annual target of 3.9 percent by a substantial margin.

Last year’s strong performance on energy-saving also pushed China past its five-year goal of lowering energy intensity by 16 percent compared with 2010.

Calculations based on past reports suggest that energy intensity declined by over 20 percent under the 12th Five- Year Plan, including the NBS estimate for 2015.

If the estimate is accurate, it could represent a major step toward controlling emissions that contribute to climate change and smog.

China has struggled for years to improve its energy efficiency, which trails far behind rates in other countries.

In 2011, China used 3.3 times more energy than the United States per unit of GDP, despite lower consumption on a per capita basis. China’s energy intensity was 5.4 times higher than Japan’s, according to U.S. Department of Energy figures for the most recent year available.

Buried in a press release

So, given the importance of conservation and the scarcity of other good news, it seems remarkable that the government hasn’t done more to hail its success in curbing energy waste last year.

The achievement was nearly buried in an NBS press release on 2015 economic performance, which announced the GDP growth rate of 6.9 percent, the slowest pace in 25 years.

The suspense over the GDP estimate may partly account for the unusual lack of state media attention to the conservation accomplishment.

By contrast, official coverage was widespread when the government pulled out all the stops to meet its previous five-year energy intensity goal in 2010, even to the extent of cutting power to some factories, homes and hospitals to keep consumption down.

In the end, the government claimed it had “basically met” the 2006-2010 target of a 20-percent cut in energy intensity after recording a reduction of 19.1 percent.

So, why hasn’t China trumpeted its success with the latest results?

David Fridley, staff scientist at the China Energy Group of the DOE’s Lawrence Berkeley National Laboratory, cited several possible reasons.

“This pretty much flew under everyone’s radar, but probably rightly so,” he said.

Fridley said the efficiency ratio relies on a GDP estimate that is “simply too preliminary.” The underlying energy figures, which are also preliminary, may not be known until an annual statistical communiqué is released, probably later this month.

Even after that, both the GDP and energy intensity estimates may be open to question.

On its normal schedule, the NBS will issue a “preliminary verification” of GDP by the end of September and a “final verification” the following January, Fridley said by email.

If the GDP figure varies, so would the intensity ratio, assuming the energy figures remain constant.

Special challenge

Last year’s GDP estimate may present a special challenge on several counts.

The NBS changed its quarterly GDP accounting system in the third quarter to mirror international practices, but it is unclear whether the “reform” will require retroactive revisions, Fridley said.

A bigger question is whether the GDP estimates accurately reflect the extent of China’s slowdown.

Analysts have discounted the NBS data for years, but the slump in heavy industry, trade and the property market have added to doubts as the government promotes China’s transition from an investment-led to a consumption-driven economy.

Fridley pointed to the NBS claim that consumption accounted for 66.4 percent of 2015 GDP, adding 15.4 percentage points from the previous year. The huge increase “seems unprecedented for a one-year change,” he said.

Available energy figures have presented analysts with a hard choice of what to believe.

Electricity consumption rose only 0.5 percent last year, suggesting either that energy efficiency made an enormous gain or that GDP was overstated by a substantial amount.

Power use by the industrial sector fell 1.4 percent while climbing 7.5 percent in the service sector, the National Energy Administration (NEA) said.

The question is…

The question is whether the single-digit increase for services was high enough to make the 6.9-percent GDP growth rate credible.

The preliminary nature of the energy intensity estimate could partly explain the government’s apparent silence over the positive result.

Controversy over the GDP figures and the government’s economic policies may also have eclipsed the relatively good environmental news.

But whatever the reason, the lack of attention to the exceptional over-target performance may send a message that the government has little confidence in the results.

Adding to the questions, China’s anti-corruption authorities announced that they had placed NBS director Wang Baoan under investigation for “severe disciplinary violation” one week after the 2015 economic report came out.

The frequency of urban smog crises last year may also have made the government wary of exaggerated environmental claims.

Even with improvement in the per-unit-of-GDP ratio, China’s total energy use and emissions last year were still expected to rise.

In December, inspectors from the Ministry of Environmental Protection (MEP) found that “excessive emissions were a big problem” in all 59 cities that were visited that month, the official English-language China Daily reported.

Bouts of severe smog caused over half of China’s 74 major cities to fail national air quality standards for two weeks in December, the paper said in a separate report.

Although the MEP found that the average density of fine particulates fell 14.1 percent in big cities last year, the plague of smog suggests that the major statistical gain may be the result of economic weakening rather than a breakthrough in efficiency.

“‘Success’ through recession is not the same as success through energy efficiency improvements,” Fridley said.

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