China: Reforms Could Cut Costs – Analysis


By Michael Lelyveld

China could reap huge savings in energy and emissions from conservation efforts, although it is unclear whether its new leaders will press previously promised reforms.

Earlier this month, the Paris-based International Energy Agency (IEA) introduced a new measure of economic and environmental benefits that could come from energy efficiency as part of its annual World Energy Outlook report.

People's Republic of China
People’s Republic of China

The 690-page study drew a contrast between gains from energy policies that big consuming countries have already promised to implement and extra improvements that are possible in an “efficient world scenario.”

The added benefits would be available if countries commit to taking all economically viable conservation measures, the IEA said.

If they do, the world could prevent 6.5 gigatons (billion tons) in annual carbon dioxide (CO2) emissions from being released into the atmosphere by 2035, a savings of 17.5 percent over currently planned policies.

The extra effort would require massive investments in efficiency and rules to bar wasteful technologies, but the IEA argued that the steps would more than pay for themselves over time.

The efficiency push would “bring substantial energy security and economic benefits, including cutting fuel bills by 20 percent on average,” said the IEA’s chief economist Fatih Birol said in a statement.

By coincidence of timing, the IEA’s annual report was released three days before Xi Jinping was formally named as Communist Party general secretary, ushering in a once-a-decade transfer of power.

The findings also preceded the United Nations Climate Change Conference, which open in Doha, Qatar this week.

China emissions

The study has particular relevance for China, which accounted for nearly one-fourth of the world’s CO2 emissions in 2010. China’s releases of the main global warming gas were 35 percent higher than those of the United States, according to IEA data.

Even if China’s new leaders keep all the energy reform promises of the outgoing government by 2020, the country’s CO2 pollution would rise by nearly 32 percent.

An efficiency drive could cut China’s CO2 growth rate by nearly two-thirds, while saving U.S. $195 billion a year in imported energy costs by 2035, the IEA said.

But there are doubts that China’s new leaders will move quickly on existing reforms, let alone the bolder moves that a new campaign would entail.

“I don’t see any big change,” said Mikkal Herberg, energy security research director at the Seattle-based National Bureau of Asian Research.

“A lot of the targets have already been set in the Five- Year Plan,” said Herberg. “It’s hard to see this leadership, at least in the first five years, moving any faster.”

Some of the moves urged by the IEA could prove politically difficult for the Chinese leadership even in the longer term.

On building codes, for example, the study recommends strengthening efficiency standards and extending them to new and existing structures in small and medium-sized cities.

The measure would cut coal consumption for buildings by 39 percent, compared with a 12-percent reduction expected from efficiency rules promised now.

Although the energy saving promises a payback, Herberg said resistance to the added investment is likely to be strong.

“That’s an expensive thing and they’re fighting a very powerful set of high-growth lobbies that want to build more and not have costs built into that for energy efficiency,” he said.

Stronger enforcement

The potential for energy and emissions savings may be even more dramatic than the study suggests, because current standards are poorly enforced now.

Last November, the chief planner of the Ministry of Housing and Urban-Rural Development complained that 95 percent of China’s new buildings are “energy guzzling,” the official Xinhua news agency reported.

Consumption in buildings accounts for 30 percent of China’s energy use, the official said.

Slapdash construction, which has driven much of the economy, has also been a major source of pollution and energy waste.

In 2010, another senior ministry official warned that over half of the country’s housing structures would have to be replaced within 20 years, according to Southern Metropolis Daily.

Housing Vice Minister Qiu Baoxing has said that Chinese buildings can only last for 25 to 30 years, compared with an average life span of 74 years in the United States, the official English-language China Daily reported.

Other proposals like enforcing minimum energy performance standards for equipment and appliances may run into conflict with manufacturers and popular subsidy programs to boost sales in rural areas.

Herberg said the new government will be too concerned with maintaining social stability to move quickly on promised reforms in energy pricing. Tougher measures that may curb global warming seem even more likely to go by the boards.

Leadership priorities

Rising protests against visible pollution may stop individual projects, but slower economic growth rates are likely to create fewer problems with power shortages, which in turn may weaken motivation for major policy change.

Ample supplies will “take pressure off the leadership” to reform the electricity sector, end subsidies and encourage conservation by charging market rates for energy, said Herberg.

The new government is expected to focus on restoring economic growth and easing the political transition, rather than taking risks with efficiency rules that would raise near-term costs for long-term benefits.

“This does not look like the kind of leadership that is going to be willing to push hard on these issues,” Herberg said.

But criticism of past practices is also coming from some of China’s industry leaders.

A China Daily report this month on Fu Chengyu, the chairman of China Petroleum and Chemical Corp., known as Sinopec, included frank comments on the country’s record of energy waste.

“The extent of waste in China is daunting,” Fu said. The amount of energy used in China per unit of GDP is three times higher than in the United States, four times more than in Europe and five times more than in Japan, he said.

On the eve of the U.N. climate conference, China’s government issued its own report on policies and actions to address global warming, stressing that the country had reduced energy use per unit of GDP by 19.1 percent in 2006-2010.

“This means China has accomplished its energy conservation goals listed in the 11th Five-Year Plan,” Xinhua reported, although the official target was 20 percent.

The report listed steps that the government has taken to improve efficiency and the environment, including shutting small power plants, eliminating obsolete production and requiring environmental impact assessments for new projects.

China has also been trying to reduce its reliance on high-polluting coal for power generation.

On Sunday, Xinhua cited data from the State Electricity Regulatory Commission showing that “clean” energy accounted for 20.4 percent of on-grid power in the first 10 months of the year, up from 16.8 percent a year before.

The report did not list all the forms of energy included in the clean category.


Radio Free Asia’s mission is to provide accurate and timely news and information to Asian countries whose governments prohibit access to a free press. Content used with the permission of Radio Free Asia, 2025 M St. NW, Suite 300, Washington DC 20036.

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