Enhancing China’s energy efficiency:

the policy challenges

Philip Andrews-SpeedCentre for Energy, Petroleum and Mineral

Law and Policy, University of Dundee

Energy supply & demand

0.00

500.00

1,000.00

1,500.00

2,000.00

2,500.00

1980 1984 1988 1992 1996 2000 2004

mm

tce

Consumption

Production

Energy intensity

-50.00100.00150.00200.00250.00300.00350.00400.00450.00500.00

1980 1984 1988 1992 1996 2000 2004

kg

ce

/1,0

00

19

95

Y

Questions

• How do energy conservation and energy efficiency fit with wider energy policy making and implementation?

• What is the past record of the government in this field?

• What is the outlook?

Apparent energy policy 1995-2005

1996 1998 2000 2002 2004/5

Energy conservation XXX XXX XXX XXX XXX

Energy production XXX XXX XXX XXX XXX

Energy structure XX XX XX XX XX

Geography/transport X XX XX XX XX

Overseas Energy X XX XX XXX XXX

Environment X X XX XX XX

Emergency storage X X X XX

Reform/liberalisation XX X XX X

Energy policy-making and implementation

• Nature of policy:– Disjointed, industry-specific, target focused

– Lacking coherence and specific measures

– Focus on energy supply

• Policy making– Driven by industry players and interests

– No powerful government agency for energy

• Policy implementation– Shortage of resources; institutional weaknesses

– Resistance from vested interests

Energy efficiency:the record 1980-2004

• 1980 - late 1990s– Substantial investment, in industry– Quotas of energy supply to industry– Energy conservation technology centres– Financial incentives– Structural shifts

• 2000 - 2004– Reduced investment and incentives– Growth of energy intensive industry

Why is continued energy inefficiency so costly?

• Cost to the national economy and competitiveness• Drain on domestic primary energy resources• Energy import requirement: forex and

implications for international markets• Security of energy supply• Environmental damage: local, regional, global• Enhancing efficiency is cheaper than producing

more energy

What are the requirements?

• Indirect: structural changes in industry, shift industries ‘offshore’

• Appliance standards and labelling• Public transport policy; building standards• Economic signals: especially end-user pricing• Guidance, information centres• Other incentives to invest in energy efficiency

appliances: tax, subsidies, DSM• Massive investment: 10’s billions RMB p.a.

What are the potential obstacles?

• Policy framework: coherence• Social policy: pricing• Institutional: structures and political power• Vested interests: energy companies, local government• Resources: agencies and direct investment• Legal: allocation of responsibility; penalties• Incentives: suppliers and users• Regional disparities• Lack of real commitment and funding

• Target of 20% energy intensity reduction by 2010

• ESCOs established, and ‘Guiding Committee’

• New standards for buildings, lighting & air-conditioners

• New supervisory mechanisms for major energy users

• ‘Green power’ mechanism

• Energy conservation products ‘licensing’

What has been started in Shanghai in 2006 and 2006?

Reasons for favourable outlook in Shanghai?

• Administratively concentrated

• Rich– can afford costs– nature of the energy demand

• Education level

• Reputation risk as international city