Rapid industrialization and urbanization pose challenges for the 12^th Five-Year Plan

BEIJING, CHINA — Climate Policy Initiative has published its second “Annual Review of Low-Carbon Development in China,” which tracks China’s performance and strategies to transition to a low-carbon economy. Under the 11^th Five-Year Plan (2006-2010), China achieved a 19.1 percent reduction in the energy intensity of its economy relative to 2005 levels, although overall emissions grew by 33.6 percent.

Technology upgrades delivered two-thirds of the total energy intensity improvement; economic restructuring accounted for around one-quarter:

• Energy efficiency improvements in power plants, industries, and buildings reduced China’s energy intensity, while renewable energy reduced carbon intensity. Continued penetration of these technologies provides an additional opportunity for the future.
• While the industrial sector expanded as a share of the economy, changes to the mix of industries and a shift to higher value-added products delivered a net reduction in energy use of 143 Mtce relative to the 2005 baseline.

Rapid industrial growth in middle, western, and northeastern China drove up national energy consumption and carbon emissions despite an overall decrease in energy and carbon intensity in these regions.

To facilitate low-carbon growth, China employed a diverse set of policies, new implementation mechanisms, and significant financial support:

• Public funding and incentive instruments (e.g. rewards) had the greatest impact, reducing emissions by 777 MtCO₂ relative to the baseline; administrative instruments (e.g. industry targets, building codes, and vehicle efficiency standards) reduced emissions by 473 Mt, and market instruments (e.g. energy performance contracting) by 15 Mt.
• New implementation mechanisms include an accountability system for energy efficiency targets and market instruments such as energy performance contracting.
• China’s cumulative investment in clean energy and energy efficiency was 2.59 trillion yuan (USD 399 billion).

Local governments, large enterprises, and consumers played important roles in China’s performance:

• Local governments explored low-carbon development strategies under the 11^th FYP, but struggled to reconcile these strategies with their economic growth priorities.
• Government policies focused on large, energy-intensive enterprises during the 11^thFYP and supported the achievement of the Top 1000 Enterprises energy efficiency target a year ahead of schedule; some of these policies have now been expanded to cover smaller enterprises.
• Carbon emissions not associated with industrial production (e.g., emissions from building and transport construction and operation, and consumer goods production) grew faster than total emissions (41% compared with 34%); these trends are likely to continue as incomes grow.

“Understanding how China reduced its energy intensity during the 11^th Five-Year Plan will help policymakers achieve further reductions under the 12^th Five-Year Plan,” said Qi Ye, director of CPI Beijing. “Our review indicates that China should encourage further technology penetration, explore additional market-based policy instruments, and extend support to small and medium-sized enterprises. Key challenges include containing the growth of energy-intensive industries, particularly in the West and Northeast, accelerating growth through low-carbon development, and redirecting increasingly energy-intensive consumer behavior.”