China's history of battling energy waste

China's efforts to improve energy efficiency and reduce energy intensity have been concerted, long-running and far reaching.

This is the second of a three part series of articles on China's efforts to improve energy efficiency. It is partly a response to an article in Climate Spectator by Tristan Edis questioning the Chinese Government's likelihood of delivering on a 2015 target that would cap coal consumption. The first article in this series explained that China’s efforts to improve its energy efficiency and reduce energy intensity have delivered significant results.

Chinese government involvement in energy efficiency commenced in the 1980s with the establishment of energy conservation agencies with managerial functions at various levels of government.  Energy engineers and energy administrative bodies were also introduced into large- and medium-sized state-owned enterprises, and special personnel were assigned to manage energy conservation.

Over 200 Energy Conservation Centres were set up by local governments and sectoral agencies; their mission was to assist enterprises design energy-efficiency projects, use energy efficient equipment appropriately, and provide training and information.  The Centres were originally supported with government funds, but later became dependent on revenues from sales of their services.  In 1998, prior to a major government reorganisation, there were 180 Centres employing 3,200 people.  During the reorganisation some Centres were closed or merged but many Centres continued and are still active today.

In 1982, parallel with the establishment of the Energy Conservation Centres, work began on drafting an Energy Conservation Law.  Worked continued on developing the Law for 15 years until it was finally passed by the National People’s Congress (China’s Parliament) in 1997.  Establishing legislation notoriously takes a long time in China, but the time taken to pass Energy Conservation Law was exceptional.  The major reason for this lengthy process was bureaucratic in-fighting among government agencies about which agency should be responsible for what was then a new functional area.

Chinese legislation comprises policy principles rather than specific provisions.  The 1997 Energy Conservation Law provided a policy framework that enabled China’s 33 provincial-level governments to promulgate detailed local bylaws and regulations on energy conservation. In particular, the Law required all levels of government to arrange funds to implement energy conservation measures and to set limits, in terms of energy consumption per physical unit of product, for products which are energy-intensive to produce.

The Law also required local governments to establish a system for discontinuing backward, over energy-intensive energy-consuming products and equipment.  This led to major programs to close down old, small-scale and inefficient energy-intensive industrial capacity, including the progressive closure of old, emissions-intensive power stations. These programs continue to this day.  In 2010, the total capacity of emissions-intensive power stations closed down in China exceeded Australia’s total installed electricity generating capacity.

The 1997 Energy Conservation Law identified key energy-using entities as those with an annual energy consumption equivalent to more than 10,000 tons of standard coal equivalent.  These entities were required to appoint an energy manager and to submit periodical reports to government on energy consumption, energy use efficiency and the energy conservation measures they implemented.

The Law also authorised various levels of government to “supervise and manage” energy conservation work in their jurisdictions.  This led to the establishment of Energy Conservation Supervision Centres – in effect “energy efficiency police” – by many provincial-level governments, with powers to inspect facilities, to levy fines on offenders, and even to close down offenders. In some jurisdictions, energy conservation supervision personnel are organised in squads along paramilitary lines, complete with uniforms.

In 2004, in response to the increase in energy intensity commencing in 2002, the national planning body in China issued the Medium and Long-Term Energy Conservation Plan.  The overriding goal of the Plan was to reduce national energy intensity by 20% between 2005 and 2010.  The Plan specifically defined “Ten Key Energy-Saving Projects”, including: coal-fired industrial boiler retrofits, residual heat and pressure utilization, petroleum saving and substitution, motor system energy saving, and energy system optimization.

The Plan set energy intensity targets for the years 2010 and 2020 for individual energy-intensive industries, including cement, steel, petrochemicals, oil refining, and electricity generation.  The Plan also specified raising energy efficiency standards for major energy-using appliances to international levels by 2010.

In 2007, many of the same targets, objectives and policies appeared in both the 11th Five-Year Plan and the China National Climate Change Program.

In 2007, the National People’s Congress passed an amended Energy Conservation Law to strengthen the provisions of the 1997 Law, which by that time was largely ignored.  The 2007 Law significantly increases the importance of energy efficiency by specifying: “The state implements an energy strategy of promoting conservation and development concurrently while giving top priority to conservation”.

The 2007 Law includes a provision that the state,

“will implement a system of accountability for energy conservation targets and a system for energy evaluation whereby the fulfilment of energy conservation targets is taken as one part of the evaluation of local people’s governments and their responsible persons”. 

The Law therefore makes achievement of energy efficiency targets a component of the performance evaluation of local governments and their officials.  Individual government officials may be subject to sanctions if energy conservation targets in their areas of responsibility are not met.

The 2007 Law requires reports to government by key energy-using entities to be made annually.  In addition to the requirements under the 1997 Law, these reports must also contain information about whether the entity’s energy conservation targets were achieved.  The Law authorises the imposition of penalties on key energy-using entities that fail to achieve targets or implement energy conservation measures; this covers more than 15,000 enterprises.

The Law also authorises the implementation of a system of differential electricity pricing whereby enterprises in some energy-intensive industries can be charged higher prices if their operations fail to meet energy intensity targets.  Differential electricity pricing is applied to energy-intensive enterprises in eight industries; enterprises are divided into three categories according to resource consumption and technology level and inefficient enterprises pay surcharges on the standard electricity price.

In Part 3 of this series I’ll go into detail surrounding a number of the specific programs China has implemented to improve its energy efficiency and reduce the economy’s energy intensity.

David Crossley is a Senior Advisor with the Regulatory Assistance Project. The Regulatory Assistance Project is a global, non-profit team of experts focused on the long-term economic and environmental sustainability of the power and natural gas sectors, providing assistance to government officials on a broad range of energy and environmental issues.