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China's Green Leap Forward

Improving its energy intensity by one fifth would be a proud achievement for any country. Yet in China, such gains are not sufficient to outpace growing demand.
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It is a cold winter morning in Beijing. As I prepare to write this blog about energy efficiency in China, I wonder how efficient my own day will be. I enjoyed a quick shower with warm water from the solar tank on our roof, and prepared our breakfast with appliances that carry energy performance labels. All our lighting fixtures are energy efficient, and none of the electronic equipment is on standby.

Our apartment is heated by a coal-fired plant in the neighborhood, which belches thick smoke into the sky. Our heating bill doesn't reflect the energy we use but the size of our apartment, so we have no financial incentive to save energy. As on most mornings, the concentration of particulates in Beijing's air is an unhealthy 300 micrograms per cubic meter - a level that US cities only reach during wildfires. Our situation is quite typical for a middle class family in Beijing, and reflects the progress and challenges of China's energy policy.

China is the world's factory, and is developing its infrastructure and urban centers at breakneck speed. The country produces more steel than any other economy, and half the world's cement - a fact that is illustrated by huge construction sites in every neighborhood. The industrial sector takes up an astounding 72% of China's energy to feed this demand.

The China Energy Group at the Lawrence Berkeley Laboratory in California has advised China on how to use energy more efficiently for more than 20 years. Lynn Price, a staff scientist with the Berkeley Lab, tells me that many new factories - in the steel sector, for example - are world leaders in energy efficiency. Yet China still has thousands of inefficient local steel mills and cement kilns, some dating from the ill-fated Great Leap Forward in the late 1950s. And because China has limited domestic natural gas resources, much of its industry and power sector rely on abundant but polluting coal.

The Chinese government is making great strides to clean up its industrial legacy. It has defined mandatory efficiency improvements for the 1,000 biggest energy consumers, and has installed officials in the factories who can enforce cuts in energy consumption. The government is also closing down hundreds of old, inefficient factories and thermal power plants. On average, coal-fired power plants are more efficient in China today than in the US.

With transmission losses of close to 7%, China's electric grid is comparatively wasteful. But the state-owned grid companies are making big efforts to build efficient high-voltage transmission lines. In 2008, investment in the electricity network was for the first time higher than in power generation. The Chinese government plans to develop a smart grid - a super-efficient, flexible transmission network that helps to integrate widespread development of renewable energy - by 2020 at an estimated cost of almost $600 billion.

Passenger cars already have to meet higher fuel efficiency standards than cars in the US will need to meet in 2020, and privately owned cars account for only 5% of the country's oil consumption. China has an efficient train system, which carries most of its bulk freight. Yet under pressure to move their products in a timely manner, manufacturers increasingly rely on trucks for transport, which are about one-twelfth as energy efficient than trains.

The government has promoted energy efficiency at home and in the office through financial incentives (for examples subsidized efficient light bulbs and rebates for efficient air conditioners) and mandatory standards. David Fridley, a staff scientist with the Berkeley Lab's China Energy Group, comments that China has "the most dynamic energy efficiency standard program in the world." The country already has 31 mandatory standards for household appliances, lighting and commercial equipment such as copiers. Since it is a major exporter of many of these products, China's efficiency standards spill out to the rest of the world. The Chinese government will introduce seven additional standards this year, including products not covered by mandatory standards in industrialized countries, such as computers and vending machines.

The government has also strengthened building codes for new construction. While these efficiency standards are strictly enforced on the new construction sites, China's existing apartment and office buildings still tend to be leaky. Tenants have little incentive to retrofit their apartments and save energy for heating.

Price is a key factor which influences energy efficiency. While China has liberalized prices for coal and petroleum in recent years, electricity prices are still tightly controlled by the government. On average, retail electricity prices are slightly lower than in the United States, but with big variations according to sector and province. Farmers, residential users and large industrial companies tend to pay lower prices, while other industrial and commercial users pay higher rates. The government has slapped a variety of surcharges on the electricity fees, including for the promotion of renewable energy sources. It has added a punitive surcharge on the electricity fee of companies that it wants to merge or close down, particularly in energy-intensive sectors such as cement, steel and aluminum.

The low power prices for many consumers can encourage wasteful consumption. The government counteracts this with regulations and sometimes heavy-handed interventions. It installs energy commissars in factories, shuts down old plants, and enforces mandatory efficiency standards. Market reforms in the early years of the new century brought about a lapse in China's energy efficiency, which the government quickly reversed. "China has realized that the market will not deliver everything you need, at the time and scale you need it," comments the Berkeley Lab's Fridley.

In 2006, the Chinese government set a target of improving the country's energy intensity - the energy used for producing one unit of economic output - by 20 percent during the current Five-Year Plan. The China Energy Group has calculated that due to its strenuous efforts, the country is on track to meet this ambitious goal. This will not only cut down pollution, but also save the country a lot of money. The challenge will be to keep up the pace of improvements through a new set of mandates and incentives during the next five years. The scientists of the Berkeley Lab will continue to assist China in this task through research, advice and training.

Improving its energy intensity by one fifth would be a proud achievement for any country. Yet in China, such gains are not sufficient to outpace growing demand. From 2005-2020, the country's urban population is expected to grow from 564 to 895 million. As people become more prosperous and move to the cities, they require new apartments, buy more appliances and even cars. They become more like many of us! China's impressive efficiency improvements will not be able to offset the growing energy needs of a country that grows at 8% and more per year. If China's rivers are to get a break from damming, and if we are to breathe healthier air in Beijing ten years from now, this gap needs to be filled by renewable energy sources.

A revised version of this text has appeared in the March 2010 issue of World Rivers Review.

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