ARTICLE IN PRESS

Energy Policy 36 (2008) 561–570

www.elsevier.com/locate/enpol

China’s energy efficiency target 2010$

Ming Yang
International Energy Agency, 9 rue de la Fédération, Paris 75015, France
Received 20 August 2007; accepted 26 September 2007

Abstract

The Chinese government has set an ambitious target: reducing China’s energy intensity by 20%, or 4.36% each year between 2006 and
2010 on the 2005 level. Real data showed that China missed its target in 2006, having reduced its energy intensity only by 1.3%. The
objective of this study is to evaluate the feasibility and potential of the Chinese to achieve the target. This paper presents issues of macro-
economy, population migration, energy savings, and energy efficiency policy measures to achieve the target. A top-down approach was
used to analyse the relationship between the Chinese economic development and energy demand cycles and to identify the potentials of
energy savings in sub-sectors of the Chinese economy. A number of factors that contribute to China’s energy intensity are identified in a
number of energy-intensive sectors. This paper concludes that China needs to develop its economy at its potential GDP growth rate;
strengthen energy efficiency auditing, monitoring and verification; change its national economy from a heavy-industry-dominated mode
to a light industry or a commerce-dominated mode; phase out inefficient equipment in industrial sectors; develop mass and fast railway
transportation; and promote energy-efficient technologies at the end use. This paper transfers key messages to policy makers for
designing their policy to achieve China’s energy efficiency target.

Keywords: Demand management; Value-added; Sector’s efficiency

1. Introduction China’s energy consumption to GDP1 was greater than 1

The Chinese government expected to improve energy
efficiency as one of the major measures to meet its energy
demand. China’s long-term social and economic develop-
ment goal is to reach a gross domestic product (GDP) of
USD 4 trillion (constant 2000 price) by 2020, which would
quadruple per capita GDP of 2000. To achieve this goal,
the GDP would increase at a rate of 7.2% per annum
between 2000 and 2020. At the same time, the Chinese
government planned to lessen the nation’s rate of energy
consumption with a goal of only doubling energy
consumption between 2000 and 2020, yielding an increase
at a rate of about 3.6% per year.
Statistical data, however, show that energy use has been
growing much faster than expected. The elasticity of
$
The views expressed in this article are solely those of the author. They
do not represent those of any organisation or other people.
Tel.: +33 40 57 67 33.
E-mail address: ming.yang@iea.org
between 2002 and 2006 (see Fig. 1). According to the
definition of the indicator (elasticity), if energy consump-
tion (or electricity consumption) elasticity is greater than 1,
the growth rates of energy/electricity consumption will be
faster than the growth rate of economic development. In
2005, both the energy and electricity intensities with respect
to GDP increased, reaching 140 tons of coal equivalent
(tce) per million Yuan of GDP (or 784 tons of oil
equivalent (toe) per million USD), and 159 MWh/million
Yuan (or 1.27 GWh per million USD). During the first half
of 2006, the energy intensity further increased by 0.8% on
the basis of the 2005 level (NDRC, 2006a). During the
second half of 2006, the Chinese government implemented
a special policy to force the shutdown of several energy-
inefficient industrial facilities. As a result, the energy
intensity in 2006 decreased by 1.3%; however, this rate
1
The annual growth rate of energy consumption divided by the annual
growth rate of GDP.

0301-4215/$ - see front matter

doi:10.1016/j.enpol.2007.09.032

562
3.0
2.5
Electricity growth to GEP growth
2.0
Elasticity index
1.5
1.0
0.5
0.0
1990
1992
1994
1996
1998
2000
-0.5
-1.0
Fig. 1. Elasticity of energy and electricity to GDP.
was far less than China’s average reduction rate of energy
intensity in the last two decades of the 20th century.2
Reducing energy intensity has recently become a top
priority in the Chinese government’s policy agenda. In
November 2004, the government approved ‘‘The Medium
and Long-Term Special Plan for Energy Conservation’’
(Energy Conservation Plan) (Zhang, 2005). In that plan,
the government set specific targets to reduce energy
intensity in various sectors by 2020. In its 11th Five-year
Plan (2006–2010), the government has made another
ambitious and challenging energy efficiency target: redu-
cing the energy intensity of the country by 20% between
2006 and 2010. This means that China plans to reduce its
energy intensity by 4.36% each year between 2006 and
2010.
While implementing the energy efficiency programs, the
government is upgrading production processes and tech-
nologies and changing the country’s economic structure.
Tables 1 and 2 show the government targets of energy
efficiency improvement for key industrial sectors and
technologies. According to the calculations in the tables,
China’s expected energy intensity reduction will contribute
about 45% to the total energy efficiency improvement.3
This implies that the government expects to achieve the
remaining 55% efficiency improvement by other means.
These may include: (1) restructuring the country’s economy
from the current energy-intensive mode to a non-energy-
intensive mode; (2) using more high-quality energy (natural
gas and oil); (3) improving technologies; (4) using better
raw materials in production; and (5) improving energy
system management.4
2
China had successfully cut energy intensity by 5.4% annually from
1981 to 2000.
3
The average of 1.0% and 2.9% divided by 4.36%.
4
Energy intensity in terms of energy consumption per unit of GDP is
traditionally linked to energy consumption per value added in sub-sectors
of an economy. Thus, energy consumption per unit of value added has
directly linkage to GDP energy intensity. However, this energy consump-
tion per unit of value added may give wrong information due to incorrect
and inconsistent exchange rates in the long run. This study uses another
indicator: energy consumption per unit of physical output, and a set of
new indicators: structure effect, energy-efficient technology effect, primary
ARTICLE IN PRESS
M. Yang / Energy Policy 36 (2008) 561–570
This is an impressive and ambitious target. There are,
however, many barriers to achieving it. Appropriate
policies, legislation and monitoring are needed if China is
to reach its energy efficiency goals. This paper addresses
>1
some of the issues faced by China if it is to succeed;
specifically, energy use by the economic sector, energy
efficiency measures and demographic issues that affect
energy consumption levels.
Energy to GEP
Several approaches are used to gain a better perspective
2002
2004
2006
of the goals and needs versus the reality. This paper first
assessed China’s macro-economic development to examine
the possibility of a recommended potential GDP growth
rate. Then, the national economy was deconstructed into
value-added sectors such as the agricultural, industrial and
commercial sectors to ascertain the most energy-intensive
sector and its contributive share to GDP. Afterwards, the
industrial sector was examined at energy-intensive sub-
levels to measure the actual energy intensity and potential
for energy efficiency improvement. The results strongly
justify the feasibility and economics of China’s energy
efficiency target, since the country expects 48% of energy
efficiency improvement to come from energy consumption
reduction in energy-intensive industrial products. Follow-
ing the analysis in the industrial sector, this paper
examined energy efficiency issues in power generation,
power demand side, transport, urbanisation, the impact of
poor-quality primary energy resources on energy efficiency,
the benefit of using advanced technology for energy
efficiency, and the impact of energy efficiency policy on
the target. Fourthly, the paper briefly estimated the impact
of energy efficiency policy, measures and technology on
CO2 reduction in China. While analysing power demand
side management, this paper looked at energy efficiency at
the end use with two case studies: energy-efficient electric
motors and efficient standby power technologies for
household appliances. Finally, this paper makes policy
recommendations on the basis of the data collected and
results derived from this study.
2. Economic development cycles and growth rate of potential
GDP
China has sustained high economic development over
the past 26 years. The country’s GDP growth rates were
between 5% and 14%, with an average rate of about 10%
between 1979 and 2006 (see Fig. 2; NBS, 2006; CERC,
2006).
Historical data also show that China’s GDP growth
rates changed in a cyclical curve with 9–10 years in each
period. The last valley point was in 1998 while the peak
point appeared in 2003. This study projected the area of
GDP growth rates (Fig. 3). The shaded area simulates the
potential (or sustainable) GDP growth rate, while the cure
(footnote continued)
energy quality effect, and energy system management effect. These are all
the components linked to the GDP energy intensity in 2005 and 2010.
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M. Yang / Energy Policy 36 (2008) 561–570 563

Table 1
Targets of energy efficiency for key industrial processes

Unit 2005 2010 Annual improvement (%)

Thermal power gce/kWh 370.0 355.0 0.8

Steel kgce/ton 760.0 730.0 0.8
Aluminium tce/ton 9.6 9.5 0.3
Copper tce/ton 4.4 4.3 0.6
Oil refining kgce/ton output 13.0 12.0 1.5
Ethylene kg oil equivalent/ton 700.0 650.0 1.4
Synthetic ammonia kgce/ton 1210.0 1140.0 1.2
Soda kgce/ton 1503.0 1400.0 1.4
Cement kgce/ton 159.0 148.0 1.4
Construction ceramics kgce/m2 9.9 9.2 1.4
Railway transportation tec/million-ton-km 9.7 9.4 0.5
Average 1.0

Source: Calculated from NDRC (2006b).

Table 2
Targets of energy efficiency for key technologies

Unit 2000 2010 Annual improvement (%)

Coal-fired industrial boilers % 65 70–80 2.3

Small and medium power generators % 87 90–92 0.6
Pumps % 75–80 83–87 1.4
Air compressor % 75 80–84 1.2
Room air conditioner EER 2.4 3.2–4 6.7
Refrigerator energy efficiencya % 80 62–50 6.0
Household cooking stoves % 55 60–65 1.8
Household gas hot water % 80 90–95 1.9
Cars L/100 km 9.5 8.2–6.7 4.2
Average 2.9

Source: Calculated from NDRC (2006b).

a
According to China’s standards, a benchmark of 100 is for the average efficiency of refrigerators in 1992.

16% 16.0% Real GDP growth rate and projected rate

GDP growth rate
14% 14.0%

12% 12.0%
10.0%
10%
8.0%
8%
6.0%
6% 4.0%
4% 2.0% Zoon of potential GDP growth rate
2% 0.0%
79
82
85
88
91
94
97
00
03
06
09
12
15
18

0%
19
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79

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01

03

05
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19

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19

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19

19

19

19

19

19

20

20

20

Fig. 3. Projection of China’s GDP growth rate.

Fig. 2. China’s GDP growth (%).

represents the actual growth rate. According to this
projection, the next valley point of economic growth will
be in 2009–2010, the next peak point in 2013–2014, and so
on. The study also notices that the ranges between the
valley points and peak points are diminishing with time.
The reason is that the total amount of GDP increases, and
the overall growth rates and their variations gradually
decrease. It is worth noticing that this curve only represents
the nature of a potential GDP. The potential GDP growth
rate, which is defined in economics theory as the natural
real gross domestic product with highest sustainable rate
over the long term, should be about 7.2% per year on
average between 2006 and 2020 if China wants to achieve
its energy efficiency target and sustainable development.
However, China’s real GDP growth rates, as indicated in
Fig. 3, were much higher than its potential GDP growth
 ARTICLE IN PRESS
564 M. Yang / Energy Policy 36 (2008) 561–570

rates. According to economic theory, if actual GDP rises 100%

and stays above the potential output, in the absence of Commercial
wage and price controls, inflation tends to increase as 80%
demand exceeds supply. Looking at the price changes in
China over the past few years, one can see an inflation 60%
history. On 31 March 2005, Mr. Yao Jingyuan, the chief
economist of the State Statistical Bureau, stated that 40%
China’s consumer price index (CPI) in 2004 rose by 3.9% Industrial
compared to 2003, reaching its highest level since 1997. He
20%
also indicated that the rise of food prices contributed to Agricultural
over 60% of the total CPI rise. One may argue that 3.9% is
0%
not high when compared with 10% of the GDP growth

1978
1980
1982
1984

1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
rate. However, this rise occurred under Chinese govern-
ment conditions of strict price controls on many goods and
services such as water, gas and electricity. Price control Fig. 4. Shares of sector value added (%).
cannot last long. The government had to allow the rise of
electricity and coal prices more than three times during 25%
2005–2007. It was confirmed during the annual coal- Industrial Sector
trading conference of 2006 that the price of coal for power 20%
generation would rise by 5–8% in 2007. This means that
the prices of electricity and other goods will also rise. In 15%
particular, prices of some goods and services that are
related to people’s daily life are rising much faster than 10%
GDP. For example, the price of pork in China increased Commercial Sector
more than 100% during the spring of 2007. The average 5%

sale price of an apartment in Beijing has been increasing Agricultural Sector

much faster than the average income in Beijing. 0%
79

81

83

85

87

89

91

93

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01

03

05
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20
3. Major economic development sectors -5%

Fig. 5. Sector value-added growth rates (%).

In order to look at the major energy-consuming sectors
in China, this study deconstructed the GDP into three
value-added sectors: agriculture, industry and commerce.
Fig. 4 shows the changes in the share of each sector’s
contribution to the national GDP, and Fig. 5 shows the
growth rates of the value added by these sectors.
The share of the agricultural sector’s contribution to
GDP has been decreasing over time and its growth rate of
value added has been lower than 5% since 1985 (Fig. 4).
The pattern of its growth rate has little correlation with
that of the national GDP (see Fig. 2 and the curve in black
in Fig. 5). Conversely, the share of the industrial sector has
been growing quickly. Thus, this sector plays an important
role in China’s economic development. Its values of annual
growth rates have also been very close to those of the
national GDP. For example, the average annual growth
rate of the value added by the industrial sector was about
10% during 1997–2005, which was about the same as
China’s GDP growth rate between 1979 and 2005. It is
interesting to note that the pattern of the growth rate of
value added by the industrial sector is similar to that of the
national GDP (see Fig. 2 and curve in red in Fig. 5). Using
the historical data and a correlation function model, this
study found that the correlation factor between these two
growth rates was about 0.89. This confirms that China’s
industrial sector was dominant in contributing to China’s
GDP over the past few years. This trend may continue for
many years to come if China maintains a high GDP growth
rate and continues to favour investments in the industrial
sector. The commercial sector, in contrast, has kept its share
of value added almost unchanged since 1988. The continued
expansion of China’s energy-intensive industry is verified by
the following statistic economic data. Between January and
June 2007, the growth rate of China’s value added in industry
increased by 18.5%, to which light industry contributed
16.4%, and heavy industry 19.5% (CPEA, 2007).
4. Energy efficiency issues
4.1. Industry
This section focuses on China’s energy-intensive indus-
trial sector. Table 3 shows the calculated results of the
average annual growth rate of China’s energy-intensive
products versus the average annual growth rate of non-
energy-intensive products during 1995–1999 (the first
period) and 2000–2004 (the second period).5 In the first
period, China’s energy-intensive products increased only
about 8% per annum while the non-energy-intensive
5
Due to the shortage of data for year 2005, the data periods were
constructed as 1996–1999 and 2000–2004.
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M. Yang / Energy Policy 36 (2008) 561–570 565

Table 3
Growth rate of major industrial products in China (%/yr)

Non-energy- Energy-intensive products

intensive
products Total Energy Iron Building Chemicals Plastic Transports Paper
and materials
steel

Annual average 1995–1999 28.1 8.1 3.2 6.3 7.4 10.3 17.2 10.6 1.7
Annual average 2000–2004 25.7 15.4 9.9 17.4 11.4 9.7 15.6 25.1 19.0

Source: Calculated from NBS (2006).

Note: Non-energy-intensive products include: chemical fibre, yarn, cloth, salt, sugar, beer, cigarettes, refrigerators, washing machines, colour TV, machine
tools, computers and integrated circuits. Energy products include coal, gas, oil and electricity. The building materials include cement and glass. Chemicals
include ethylene, sulphuric acid, sold ash, caustic soda, chemical fertilisers and chemical pesticides. Transport products include motor vehicles and
tractors.

products increased about 28% per annum. The elasticity of Table 4

energy-intensive products with respect to non-energy- Comparison of energy indicators of selected products (2004)
intensive products was 0.29. In the second period, China’s Efficiency indicators (kgoe/ton) Average World Efficiency
energy-intensive products increased at the rate of 15.4% in China advanced
per annum, jumping by 7.3%, but the growth rate of non- (year) level
energy-intensive products dropped from 28.1% to 25.7% (year)
per annum, decreasing by 2.4%. The elasticity of energy- improvement potential (%)
intensive products with respect to non-energy-intensive Coal-fired power generation 376 320 15
products was 0.6 in the second period. This means that (gce/kWh)
China consumed more energy-intensive goods to generate Steel (kgoe/ton) 493 449 9
the same amount of non-energy-intensive goods during the Aluminium (kWh/ton) 14,795 12,900 13
Cement (kgoe/ton) 109 71 35
period of 2000–2004 than during 1995–1999. Table 3 also Glass (kgoe/box) 25 16 36
shows that energy, iron and steel, building materials, and Building ceramics (kgoe/ton) 216 196 9
transport and paper sub-industries were the major con- Sanitary ceramics (kgoe/ton) 788 237 70
tributors to growth between the two periods. Oil refinery (kgoe/ton) 77 59 23
This study compared the average energy consumption Ethylene (kgoe/ton) 703 550 22
Synthetic ammonia (kgoe/ton) 1235 990 18
per unit of output between China and the world’s lowest
Calcium carbide (kWh/ton) 3520 3000 15
rates. Table 4 shows the results. China’s energy intensity in Phosphorus (kgoe/ton) 5200 4900 6
terms of kilograms of oil-equivalent consumption per ton Paper and pulp (kgoe/ton) 382 117 69
of material output was between 6% and 60% higher than
Source: Calculated from various primary sources such as statistic
the world’s lowest rates. Sanitary ceramics, paper and pulp
yearbooks of industrial associations.
and glass have the largest potential for energy efficiency
improvements among the selected products.
In order to cut energy consumption and control practice for China to cut down energy intensity. The next
pollution effectively, the State Council recently issued a step is to implement stricter standards for different kinds of
new policy called ‘‘The Limit of Project Approves’’, and plants and facilities that will force the plant owners to
authorised the Environmental Protection Bureau (EPB) of invest in energy-efficient and low-emissions technologies.
China to implement this policy. With this policy, the EPB
re-audited energy and pollutant-intensive projects, facilities 4.2. Power generation
or plants. If a plant’s emissions and energy consumption
are higher than the standards, an operational permit will To evaluate how China’s electricity use affects its energy
not be issued and the plant must be shut down. Under this consumption, this study quantified the correlation factor
policy, in January 2007, the EPB announced that they had between energy intensity and electricity intensity using
limited or withdrawn operation permits for 82 large, historical data. The growth rate of energy intensity versus
energy-inefficient, high polluting projects/plants in iron the growth rate of electricity intensity was calculated on
and steel, power and metallurgical industries. The invest- the basis of 22 sets of data. All 22 sets of results were put
ment in these projects totalled 112.3 billion Yuan (or USD together and a linear regression was made to generalise the
14 billion). Unless energy efficiency is improved and relationship of energy intensity to electricity intensity. The
emissions are reduced to meet the standards, these plants results show that if China’s electricity intensity increases by
are not allowed to operate.6 This is a good policy and 18%, its energy intensity will increase by about 16%, and
vice versa (Fig. 6). If this relationship holds true for
6
Source: CCTV.com news, 10 January 2007. China’s future, China needs to decrease its electricity
 ARTICLE IN PRESS
566 M. Yang / Energy Policy 36 (2008) 561–570

0.5 1.10
y = 0.8226x - 0.0018
R2 = 0.803
Electricity intensity index

1.05
0.4
1.00
0.3
0.95

0.2 0.90

0.85
0.1
0.80
0

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0 0.1 0.2 0.3 0.4 0.5 0.6
Energy intensity index
Fig. 7. Power supply and demand index.
Fig. 6. China’s energy intensity versus electricity intensity.

intensity by about 17% (or 3.4% per annum) to achieve its
target of 20% energy intensity reduction. The following
section looks at the potential of energy efficiency in power
generation and electricity savings in China.
China is currently the second-largest electricity-generat-
ing country after the United States. It installed 622 GW of
power production capacity by the end of 2006, and
generated 2834 TWh of electricity, over 10% of the world
total in 2006. During the first half of 2007, China’s power
generation increased by 16% over the same period of 2006
(CPEA, 2007). This study analysed energy efficiency in
China’s power sector to demonstrate how China could
improve energy efficiency in industrial sub-sectors. This
case study consists of two parts: energy efficiency in power
generation, and energy efficiency at the end use or power
demand side management. This study looks at the potential
of energy savings, assesses the barriers to achieving the
potential, and recommends necessary policy measures to
overcome these barriers.
China may have a power supply surplus in the next few
years. An index of power supply and power demand (S/D
index) was used to show the surplus. An S/D index in this
study is defined as the total available power supply capacity
(GW) divided by the total power demand, including
transmission and distribution losses (GW). If the S/D
index is equal to 1, the power supply and demand are
balanced. If it is less than 1, power supply cannot meet
demand. The lower the value, the more power shortages
the country will face. In contrast, if this value is higher than
1, power supply capacity is greater than demand and there
is a power supply surplus. Fig. 7 shows that China suffered
from power shortages during the periods 1982–1990,
1993–1997, and 2002–2006. However, the nationwide
power supply and demand was balanced at the end of
2006, although there were still some power shortages in a
few provinces during the summer peak period in 2006.7
With the development of a few additional large power
plants and with moderate growth in demand, China will
likely have a power surplus in 2007 and onwards. Thus,
there will be a great opportunity for China to shut down
inefficient power units and improve energy efficiency in the
power industry, which would contribute to the overall
energy efficiency target.
China will be able to phase out inefficient and small
thermal power units in the near future. China’s total
generation capacity in 2006 was 622 GW, with 476 GW of
thermal power capacity. As a sample, 440 units of coal-
fired power plants with a total capacity of 84.5 GW were
randomly selected and their capacity distributions were
analysed. Fig. 8 shows the results. Of the 440 units, over
27% have a unit capacity of less than 100 MW, and 47%
are in the range of 100–200 MW/unit. In 2006, the coal
consumption rate of a power generation unit of 50 MW
was 450 g coal/kWh, while the rate of a unit of 600 MW
was 270 g coal/kWh. The smaller the capacity per unit, the
less efficient the unit. It is estimated that inefficient power
generation facility with unit capacity of no more than
100 MW currently totals 60 GW or accounted for about
13% of China’s total power generation capacity. The
Chinese government and power producers have acknowl-
edged this issue and made efforts to use fewer inefficient
power units to meet the power demand. By doing so, in
2006, China generated electricity at the average coal
consumption rate of 366 g/kWh, a drop of 4 g/kWh, and
saved over 9.3 million tons of standard coal (7000 kcal/kg)
in the power industry.8 If all these small thermal units are
replaced with large and efficient power generation units
(X600 MW/unit), China will be able to save 82.2 million tce
(or 57.5 million toe) each year in power generation. Such a
move will help reduce the national energy intensity by
3.15%, or 15.8% of the contribution to the total target
(reducing energy intensity by 20%).
Further analysing the total installed capacities, electricity
generations, and coal consumptions between 2005 and
2006, this study uncovered a couple of additional interest-
ing facts: (1) the average operation time of the power

7 8
China’s peak time happens in summer due to the increasing load of air- 2834 TWh multiplied by 82% (share of coal power in total) and by 4 g/
conditioning. kWh.

M. Yang / Energy Policy 36 (2008) 561–570
250
200
Number of units
150
100 15%
12%
50
0 0%
50 100
Fig. 8. Distributions of unit capacity of China’s coal-fired power plants.
capacities in China dropped by 203 h or 3.74%; and (2) if
China’s load factor is raised by 1%, China will save more
than 7 million tce (or 4.9 million toe) annually in power
generation.
4.3. Power demand
Besides power generation, there is also a great potential
to improve energy efficiency in energy end use or demand
side. This study found that in some special areas, for
example, in energy-efficient standby power technologies in
household appliances, energy savings can offset the
marginal energy demand during the next 20 years.
4.3.1. Case study of the energy-efficient standby power
technologies
The energy and power consumption by appliances were
calculated when they were at standby power modes in two
scenarios: the business as usual (BAU) scenario and the
energy efficiency (EE) scenario (Bradley and Yang, 2007).
Under the BAU scenario, the total energy consumption by
standby power in China between 2007 and 2020 will
amount to about 800 TWh and demand for generating
capacity will rise from 8.6 GW in 2006 to 15.6 GW in 2020.
Under the EE scenario, the total energy consumption by
standby power between 2007 and 2020 will be about
500 TWh; a reduction of nearly 40% when compared to the
BAU scenario. The capacity demand will decrease from
8 GW in 2006 to 5 GW instead of increasing to 15.6 GW as
in the BAU scenario by 2020. The use of standby power-
efficient technologies would decrease power needs substan-
tially and could lead to the postponement of building eight
or nine large power plants by 2020.
4.3.2. Case study of energy-efficient electric motors
Similar to the analysis of energy-efficient standby power,
BAU and EE scenarios for analysis of China’s electric
motor efficiency were designed (Yang, 2007). From 2006 to
2020, using a special technology called ‘‘intelligent motor
ARTICLE IN PRESS
567
50%
47%
45%
40%
Share of units (%)
35%
30%
25%
17% 20%
15%
7% 10%
0.5% 2% 1% 5%
200 300 400 500 600 700
MW/Unit
controllers (IMC)’’ under the assumption of a 20%
penetration rate of large induction motors, the electricity
saving will be about 795 TWh. The accumulated cut of
power capacity demand will be about 8.2 GW, 20% of the
total power consumption by motors.
The information in this section indicates that energy
savings potential at the end use is between 20% (as in
motors) and 40% (as in standby power). Converting
electricity savings potential at the end use into energy
potential at the national level as described in Fig. 6,
and developing energy-efficient end-use equipment and
appliances at industrial and household sectors will
contribute 17–35% to the national energy intensity
reduction.
4.4. Transport
The transportation sector is energy intensive and has
great potential for energy efficiency improvement. Fuel
cost is a major part of the total operation cost in the
transportation sector, reaching 40% in highway and airway
transport. According to NBS (2006), the shares of energy
consumption in China’s transport sector in 2004 were
51.6% in highways, 17.2% in railways, 17.3% in water-
ways, 9.7% in airways, and 4.2% in other ways such as
pipes. In 2004, the transportation sector consumed
107.5 million tons of oil products (or 150 million tons of
crude oil), increasing 1.67-fold over 1990, or with a growth
rate of 7.28% per annum. From 1990 to 2004, China’s
annual growth rate of oil consumption was 6.5%. Gasoline
and diesel consumption in highways increased 2.27-fold
from 24.8 million tons in 1990 to 81 million tons in 2004.
Kerosene consumption in airways increased 5.56-fold from
1.18 million tons in 1990 to 7.9 million tons in 2004. The
consumption of oil products in the transportation sector
was growing much faster than in the nation as a whole and
accounts for over 40% of the country’s total. If the
transportation sector can save 4% energy consumption,
China will cut 6 million tons of oil per year.

568
Developing mass transportation is a key to cutting
energy intensity. There is a huge difference in energy
intensity among the different modes of transportation. In
terms of 100 person-km, energy consumption is 1 kgoe by
bus, 2.7–3.4 kgoe by car, 4.8 by air, and 0.7 by express
train. Train transport in China uses coal-fired power. Thus,
developing the express train to meet the increasing demand
of internal transportation is a priority in China. Historic
data show that mass and fast transport by railway will
attract more customers. Between 1990 and 2000, railway
passenger transport was growing at 3.7% per annum.
From 2000 to 2005 after the raising of the train speed, this
amount was growing at 6% per year. If China substitutes
highway or airway transport with railway transport for
passengers by 2.3%, it will save 2 million tons of oil per
year. It will contribute to about 10% of the energy
efficiency target.
4.5. Urbanisation
Good urbanisation policies could also help to achieve
China’s energy efficiency target. Using household statistical
data, this study projected that China’s rural households (or
population) will keep decreasing and urban population will
continue to grow until 2020, especially with a continuing
decline in the agricultural sector (see Fig. 9). The issue
regarding how and where to house China’s rural migrant
population affects energy efficiency and use policies.
Historically, most rural migrants entered the industrial
sector (mainly manufacturing) when they migrated to
urban areas. China’s micro-economic development and
employment policies should focus on development and
investment in the commercial or service sector more than in
the industrial sector while urbanising the rural areas. The
reason is that energy consumption is lower in the service
sector. Moreover, sustainable and energy-efficient policies
should direct China to enlarge GDP production in the
commercial sector rather than in the industrial sector,
particularly while the agricultural share of GDP is
decreasing.
500
450
Number of Households (Mn)
400
350
300
250
200
150
100
50
0
78
89
92
19
19
19
Fig. 9. Number of households in China. Source: Calculated from NBS (2006).
ARTICLE IN PRESS
M. Yang / Energy Policy 36 (2008) 561–570
4.6. Quality of primary energy resources
One of the reasons for high-energy intensity is that China
consumes a large amount of poor-quality primary energy.
Among primary energy consumption, coal ranked first, with a
share of about 70%. According to China’s long-term energy
policy, coal will keep its dominant position in the next 20 or 30
years. In addition, China’s coal resources are located mainly in
north and west China, while China’s major economy zones
are in east and south China. Over 80% of coal consumed in
the east and the south of China is transported from coalmines
over 1500 km away. This distance will increase further. There
is huge waste and consumption of energy in the way coal is
transported, which has a great negative impact on China’s
energy intensity. The Chinese government is working hard to
increase the share of high-quality primary energy such as
natural gas and nuclear power. This will have a positive
impact on national energy intensity reduction.
4.7. Technology
There is a very wide range of technologies in China: from
a few worldwide highly efficient technologies to a large
number of old and inefficient technologies. For example, in
the cement industry, China has four cement production
lines of dry technology with a capacity of 10,000 tons per
line per day. In the meantime, about 70% of China’s
cement is produced by small and inefficient wet technology
with a capacity of 300 tons per line per day. Due to
different technologies, energy consumption per unit of
output is quite different within an industrial sector. The
gap energy efficiency can be as large as 100%. As a result,
investment in advanced and large-scale production tech-
nologies in individual industrial sectors is one of the areas
for China’s overall energy efficiency improvement.
4.8. Quality of raw materials
Compared with OECD countries, China uses large
quantities of low-quality materials or poorer natural
Projected
Historical
Total growth by 18% in 2000-2020
Rural
Urban growth by 94% in 2000-2020
95
98
01
04
07
10
13
16
19
19
19
20
20
20
20
20
20
20
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M. Yang / Energy Policy 36 (2008) 561–570
resources in industry. For example, in paper production,
China uses a large amount of crop waste for pulp, while
other countries use mostly wood. In oil production, most
of the Chinese oil fields need to pump in water to pump out
oil. In steel production, China uses a lot of low-quality ore,
while OECD countries use high-quality ore and a large
portion of scrap. The use of poor-quality raw materials
also contributes to China’s high-energy intensity.
4.9. Energy efficiency policy
China lacks an energy efficiency management system.
Energy consumption in a company is not an important
standard to measure the firm’s performance. As a
result, it is not of high importance for a firm to hire
a specialist to monitor energy consumption for the firm.
In addition, the energy price in China, which is still
under government control, can hardly be set on the real
cost of energy production on time. Market failure on
energy pricing will encourage energy wastage and reduce
energy savings. China needs to develop better energy
efficiency policy to provide incentive to firms in saving
energy.
5. China’s energy efficiency target and CO2 reduction
The success or failure of China’s energy efficiency target
will have a great impact on the world energy and carbon
markets. In 2000 and 2004, China’s emissions of CO2 from
fuel combustion were 3.10 and 4.72 billion tons (IEA,
2006), with an annual growth rate of 11.1%, which was
higher than the growth rate of the country’s GDP. These
numbers in the USA were 5.7 billion tons in 2000 and
5.8 billion tons in 2004, and a 0.4% growth rate. If China
keeps its economic growth rate at about 10%, and does not
change the structure of its economy, its CO2 emission
growth rate will remain at about 11.1%. Scenario 1 of
Fig. 10 shows that China’s fuel combustion-related CO2
emissions will total 9.8 billion tons in 2010 and 25.3 bil-
lion tons in 2020.
Under Scenario 2, whereby China will achieve its energy
efficiency target in 2010 and 2020, energy consumption and
emissions will grow at about 3.6% to support a GDP
growth rate of about 7.2% during 2007–2020. As a result,
China will likely emit 6.8 billion tons of CO2 in 2010 and
8.8 billion tons in 2020. China may overtake the USA,
Canada and Mexico in fuel-combustion-related CO2
emissions in 2014 under Scenario 2.
The above analysis is made on the basis of the historical
data and simple assumptions and projections. Thus, the
projection results are very preliminary. CO2 emission and
reduction from the energy-related sector is a complicated
issue and requires a detailed analysis to give the full
picture. It is beyond the scope of this paper to do detailed
analysis on this issue.
569
Fig. 10. Projections of China’s fuel combustion-related CO2 emissions.
Source: Calculated from the IEA’s database (beyond 2020) and various
other data sources. Note: Based on assumptions that North America
(USA, Canada and Mexico) maintains an emissions growth rate of 0.8%
(calculated from data between 2000 and 2004). Scenario 1 is based on
assumptions that China maintains an emissions growth rate of 11.1%
(calculated from 2000 to 2004 real data). In Scenario 2, China maintains
emissions rate at 11.1% during 2000–2006, but these decrease to 3.6% in
2007–2020.
6. Conclusions and policy recommendations
This study identified three major factors that have
significantly contributed to China’s high elasticity of
energy to GDP over the past 5 years. First, the national
economy was growing faster than normal between 2000
and 2006. According to the Chinese long-term economic
development plan and the analysis, the sustainable GDP
growth rate for China should be about 7.2% per annum.
However, the real GDP growth rate was about 10% per
annum. High economic growth created supply shortages of
energy and other resources. The Chinese did not have the
chance or ability to phase out old and inefficient equipment
and facilities. The potential (or sustainable) GDP growth
rate should be 7.2%, under which China could have
opportunities to implement energy efficiency programs and
keep energy consumption at the rate of 3.6% per annum.
Second, China favoured fast development of energy-
intensive industrial sub-sectors. Since 1991, China’s agri-
cultural sector has been shrinking and the industrial sector
expanding, while the commercial sector’s contributory
share to GDP has remained relatively constant. Since the
agricultural sector uses the least energy supply while the
industrial sector uses the most energy supply per unit of
value added, this structural change has considerably
increased the energy intensity of China over the past few
years.
Third, China has continued using inefficient facilities or
equipment in industry. Due to rapid and intense economic
development, the country needs to maintain production
capacities in all the industrial sectors and thus has been
unable to phase out old and inefficient equipment or energy
plants. Taking the power sub-sector industry as an
example, about 60 GW or 16% of the total thermal power
 ARTICLE IN PRESS
570 M. Yang / Energy Policy 36 (2008) 561–570
generation equipment was inefficient, and consumed twice
the primary energy as efficient equipment. If the inefficient
generation capacity is replaced by an efficient one, China
will be able to save 57.5 million toe per annum. It will
reduce the national energy intensity by 3.15% per year, and
contribute to 75% of the energy efficiency improvement
target.9 Other energy-intensive industrial and transport
sectors also have great potential for energy efficiency
improvement, ranging from 6% to 70%, which will
physically provide enough room for China to achieve its
energy efficiency target.
Besides the above three major factors, other factors that
contribute to China’s high-energy intensity include (1) the
use of poor-quality raw materials and energy resources; (2)
poor energy policy and management systems; and (3) the
failure of economic pricing of energy.
China’s energy intensity reduction exists in the following
sectors or measurements:
(1) Cutting energy consumption per unit output in the
industrial sector by phasing out dated technology,
which will contribute to about 45% of the target.
(2) Using energy-efficient equipment and appliances in
industrial and residential sectors, which will contribute
to about 20% of the target.
(3) Restructuring the country’s economy from the current
energy-intensive mode to a non-energy-intensive mode,
such as substitution of car transport with train
transport, which should contribute to about 20%.
(4) Using higher-quality energy (natural gas and oil) and
better raw materials in production and implementing
better policy and energy management systems, which
will contribute to about 12% of the target.
Achievement of China’s energy efficiency target would
have a great impact on world carbon emission reductions.
When China achieves its target of energy efficiency, it will
considerably reduce its carbon emissions and delay or avoid
becoming the world’s largest carbon emission country.
To achieve the target, the following necessary policy
actions and measures are necessary:
1. Keep the GDP growth at the potential rate: 7.2% per
annum. High GDP growth rate, for example 10%,
which is certainly possible but not necessarily sustain-
able, will create shortages of resources, and prevent
China from transferring its economy from energy
intensive to non-energy intensive.
2. Revise the energy savings law of China to facilitate the
development of energy efficiency standards and codes,
and help monitor and manage energy efficiency at end
use.
3. Establish national energy efficiency statistic data collec-
tion organisation and build-up networks. This organisa-
tion will collect information from the best runners of
9
3.25% per annum divided by 4.36% per annum.
saving energy in sub-sectors, make and up-grade energy
efficiency standards, and distribute this information to
all other organisations in the relevant sectors.
4. Require an energy efficiency study for a project before
investment. For a new project, there must be a
calculation of energy intensity indicators against a
certain standard. If the project cannot meet energy
efficiency standards, the government should not approve
the project. Banks or financial institutions should not
deliver a loan to finance the project.
5. Audit energy consumption in all energy-intensive
industrial sectors, and set higher energy efficiency
standards accordingly year by year. If the energy
intensity of a production facility is higher than the
minimum standards, the facility must be closed until
energy efficiency improvements are made.
6. Keep incentives for energy-efficient technology invest-
ments, and levy heavy fuel tax on the operation of
inefficient technologies. This is to ensure the rapid
and continued replacement of small and inefficient
technologies.
7. Fully establish a government procurement system for
energy efficiency goods. Wherever there is govern-
ment procurement, energy-efficient products should be
purchased.
With a slower national economic development rate and
with effective government polices and measures, China will
be able to achieve its ambitious energy savings target, and
its ultimate economic and energy goals.
Acknowledgements
The author wishes to thank the three anonymous
referees for providing valuable comments on this article.
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