Business Case for Energy Efficiency in Support of Climate Change Mitigation, Economic and Societal Benefits in China
This study seeks to provide policymakers and other stakeholders with actionable information towards a road map for reducing energy consumption cost-effectively. We focus on individual end use equipment types (hereafter referred to as appliance groups) that might be the subject of policies - such as labels, energy performance standards, and incentives - to affect market transformation in the short term, and on high-efficiency technology options that are available today. As the study title suggests, the high efficiency or Business Case scenario is constructed around a model of cost-effective efficiency improvement. Our analysis demonstrates that a significant reduction in energy consumption and emissions is achievable at net negative cost, that is, as a profitable investment for consumers. Net savings are calculated assuming no additional costs to energy consumption such as carbon taxes. Savings relative to the base case as calculated in this way is often referred to as 'economic savings potential'. Chinese energy demand has grown dramatically over the last few decades. While heavy industry still plays a dominant role in greenhouse gas emissions, demand from residential and commercial buildings has also seen rapid growth in percentage terms. In the residential sector this growth is driven by internal migration from the countryside to cities. Meanwhile, income in both urban and rural subsectors allows ownership of major appliances. While residences are still relatively small by U.S. or European standards, nearly all households own a refrigerator, a television and an air conditioner. In the future, ownership rates are not expected to grow as much as in other developing countries, because they are already close to saturation. However, the gradual turnover of equipment in the world's largest consumer market provides a huge opportunity for greenhouse gas mitigation. In addition to residences, commercial floor space has expanded rapidly in recent years, and construction continues at a rapid pace. Growth in this sector means that commercial lighting and HVAC will play an increasingly important role in energy demand in China. The outlook for efficiency improvement in China is encouraging, since the Chinese national and local governments have implemented significant policies to contain energy intensity and announced their intention to continue and accelerate these. In particular, the Chinese appliance standards program, first established in 1989, was significantly strengthened and modernized after the passage of the Energy Conservation Law of 1997. Since then, the program has expanded to encompass over 30 equipment types (including motor vehicles). The current study suggests that, in spite of these efforts, there is significant savings to be captured through wide adoption of technologies already available on the Chinese market. The approach of the study is to assess the impact of short-term actions on long-term impacts. 'Short-term' market transformation is assumed to occur by 2015, while 'long-term' energy demand reduction impacts are assessed in 2030. In the intervening years, most but not all of the equipment studied will turn over completely. Early in 2011, the Chinese government announced a plan to reduce carbon dioxide emissions intensity (per unit GDP) by 16% by 2015 as part of the 12th five year plan. These targets are consistent with longer term goals to reduce emissions intensity 40-45% relative to 2005 levels by 2020. The efforts of the 12th FYP focus on short-term gains to meet the four-year targets, and concentrate mainly in industry. Implementation of cost-effective technologies for all new equipment in the buildings sector thus is largely complementary to the 12th FYP goals, and would provide a mechanism to sustain intensity reductions in the medium and long term. The 15-year time frame is significant for many products, in the sense that delay of implementation postpones economic benefits and mitigation of emissions of carbon dioxide. Such delays would result in putting in place energy-wasting technologies, postponing improvement until the end of their service life, or potentially resulting in expensive investment either in additional energy supplies or in early replacement to achieve future energy or emissions reduction targets.