Carbon-Specific and More Cost-Effective Policies Provide Opportunities for Future Low-Carbon Development

BEIJING, CHINA — A study by Climate Policy Initiative (CPI) found that through 2009, China was on track to meet the 20% energy intensity reduction target in the 11th Five Year Plan, reversing the trend of increasing energy intensity from 2002 to 2005.  Carbon intensity fell as a result of decreasing energy intensity, demonstrating the importance of energy efficiency in the transition to a low-carbon economy; with additional carbon-specific policies, China could expect carbon intensity to fall faster than energy intensity in the future.

CPI’s initial analysis also found that many of the measures implemented in the 11th Five Year Plan were top-down administrative measures that used significant resources, and that some policies, such as plan closures, will be more expensive to implement moving forward.

The study reviewed low-carbon performance and policies implemented in China’s power, industry, building, transport, and agriculture and forestry sectors.  Of these, the power and industry sectors provide the greatest potential for carbon savings.

In the power sector, electricity production grew 39% from 2005 to 2008, but the increase was offset by a 5% decline in fuel use per kWh at coal-fired power plants and a 6.5% decline in CO₂ per total kWh produced.  The per-unit declines were due to:

• Improvement in average efficiency of coal-fired generation as new generating capacity added has generally been larger and more efficient,
• China’s closure of 70GW capacity of older, smaller, less efficient plants, saving over 100 million tones of CO₂ emissions, and
• The addition of low-carbon generation, including 90 GW of additional hydro, almost 25GW of wind, and 2GW of nuclear power.

Since average efficiencies have increased and a large portion of the least-efficient plants have been closed, future efficiency improvements will be more difficult and carbon intensity improvement may need to rely more heavily on low-carbon generation.

In the industry sector, CO₂ intensity decreased by 14.8% and energy use per unit of industrial value added decreased by 13.3% from 2005 to 2008.  Structural changes contributed, as heavy industry’s growth slowed relative to other industries and as industry shifted towards higher value-added products.  In addition, per unit production efficiencies improved significantly, by close to 5% in the steel industry, 17% in the cement industry, and almost 35% in copper smelting during the period 2005 to 2009.  Many of the instruments used in the industry sector were top-down regulatory measures, which required significant administrative resources, which may not be the most cost-effective way to achieve future targets.

In the forestry sector, afforestation contributed significantly to building the carbon sink.

“Looking ahead to the 12th Five Year Plan, policymakers will be looking to extend measures that have worked, as well as maximize cost-effectiveness,” said QI Ye, director of CPI at Tsinghua.  “We hope that CPI’s further research on the effectiveness of the plant closure policy and the Top 1000 Enterprises Program will be of value.”

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Climate Policy Initiative is a policy effectiveness analysis and advisory service whose mission is to assess, diagnose, and support nations’ efforts to achieve low-carbon growth.  An independent, not-for-profit research organization with long-term support from George Soros, CPI is headquartered in San Francisco and has regional officies in Beijing, Berlin, Rio de Janeiro, and Venice.