“China’s progress in implementing mandatory energy efficiency policies over the past decade has made it the world’s energy efficiency heavyweight.” — IEA, Energy Efficiency in China (February 2021) 1
China’s economy is energy-intensive. In 2021, only seven countries in the world used more energy per unit of GDP than China. The energy intensity of China’s economy is due to several factors, including the high share of heavy manufacturing in China’s economy and lack of market signals to motivate energy efficiency in some sectors. 2
The energy intensity of the Chinese economy has improved dramatically in the past several decades. Between 1990 and 2020, energy use per unit of GDP in China fell by roughly 75%. 3
The steady improvement in China’s energy intensity has been caused by structural changes in the economy as services and light industry grow, as well as regulation-induced energy efficiency improvements. The industrial sector has had the greatest energy savings, mainly in response to government mandates. Energy appliance standards and labeling have played an important role, as have energy service companies (ESCOs). The deployment of smart meters to drive demand response is only recent but growing rapidly. The central government has continued to introduce measures to improve the energy efficiency of buildings. 4
China’s energy efficiency gains have had an enormous impact on energy use and emissions of heat-trapping gases. The International Energy Agency estimates that (i) energy efficiency improvements since 2010 have cut energy consumption by 20%; (ii) energy efficiency improvements between 2000 and 2017 reduced China’s 2017 emissions by nearly 1.2 Gt CO2e (roughly equal to Japan’s 2017 emissions). 5
In 2018, more than 60% of China’s energy use was covered by mandatory energy efficiency policies—more than any other nation in the world. 6
Improving energy efficiency is a long-standing goal of the Chinese government. Most Five-Year Plans since the 1980s have included energy intensity goals for the Chinese economy. The 11th Five-Year Plan (2006–2010) contained especially strong provisions, with a mandatory national target to reduce energy intensity 20% below 2005 levels by 2010. The 12th Five-Year Plan (2011–2015) contained a mandatory national target to reduce energy intensity 16% below 2010 levels by 2015. Both these targets were met or almost met. 7
The 13th Five-Year Plan (2016–2020) contained a mandatory national target to reduce energy intensity 15% below 2015 levels by 2020. This target was missed when energy intensity improved only 13.2%, due in part to the focus on energy-intensive industries in post-COVID economic recovery programs. 8
The 13th Five-Year Plan also introduced the Dual Control policy, which set caps for total energy consumption and energy intensity for provinces, municipalities and autonomous regions. These sub-national governments would then set annual Dual Control targets and establish mechanisms to achieve those targets, focusing on energy-intensive industries. In August 2021, the National Development and Reform Commission (NDRC) identified ten provinces that were not on track to meet one or both of their annual Dual Control targets for 2021. 9
The 14th Five-Year Plan (2021–2025) contains a mandatory national target to reduce energy intensity 13.5% below 2020 levels by 2025. 10
As the energy intensity of an economy improves, easier ways of saving energy are implemented and more challenging ways remain. If energy intensity improves by 15% in one five-year period, a 15% improvement in the next five-year period would require more effort than in the first. As a result, the successive energy intensity improvement targets in recent Five-Year Plans—from 20% to 16% to 15% to 13.5%—do not represent diminished ambition on the part of Chinese energy planners. Instead, those targets represent roughly constant ambition in improving energy intensity over time.
The State Council highlighted the importance of energy efficiency in several policy documents published in late 2021 and early 2022. It drew attention to the need for energy efficiency improvements in sectors including heavy industry, building materials, coal, transport, appliances and urban design. The State Council also highlighted the need to continue with the Dual Control mechanism. 11
NDRC’s 14th Five-Year Plan for a Modern Energy System repeats the energy intensity target in the overarching 14th Five-Year Plan published in March 2021. It sets no cap on total energy consumption, but mentions the need to improve the Dual Control mechanism. 12
These energy intensity targets in Five-Year Plans are implemented through four main policy tools: (1) annual goals, (2) provincial targets, (3) government spending and (4) regulations and standards.
- Annual goals. In the past, Five-Year Plan targets for energy intensity were supplemented with specific annual goals. Such annual targets have not been set in the 14th Five-Year Plan. 13
- Provincial targets. As part of the process for implementing China’s Five-Year Plans, each province is required to meet specific energy intensity targets. Under the 13th Five-Year Plan, these targets varied from a 17% improvement (for eight provinces, including Beijing, Shanghai and Guangdong) to 10% (for Xinjiang, Tibet and Qinghai). 14 Such provincial targets for energy intensity reduction and total energy consumption are part of the Dual Control mechanism.
In September 2021, NDRC issued proposals to improve the Dual Control mechanism through the more careful setting of targets and their decomposition, greater flexibility in implementation in certain cases, improved energy consumption management systems and better early warning mechanisms. Under the new scheme, NDRC continues to set energy consumption and energy intensity targets for provinces which, in turn, delegate targets to subordinate levels of government. Lower levels of government are allowed flexibility to set their annual goals. 15
- Central government spending. The central government spent more than $35 billion on energy efficiency programs during the 12th Five-Year Plan (2011–2015). Provincial governments spent at least $7 billion. These funds were spent on projects to demonstrate energy efficient equipment, upgrade coal-fired boilers, recover waste heat, implement energy management systems and more. Financial tools used in these projects included direct funding, subsidized loans and credit guarantees. The IEA estimates that Chinese government funding leveraged over $211 billion of private spending on energy efficiency. 16<
- Regulations and standards. The Chinese central government has issued dozens of regulations standards to promote energy efficiency across a range of sectors. NDRC, the Ministry of Industry and Information Technology (MIIT), the Ministry of Housing and Urban-Rural Development (MOHURD), the Ministry of Commerce (MOFCOM), and other ministries all have roles. Among the most important are:
- Efficiency standards for coal-fired power plants. All new coal plants must use supercritical or ultra-supercritical technology. There are long-standing programs to retire small and low-efficiency coal boilers. 17
- Benchmarks for energy-intensive industries. In October 2021, NDRC identified the need to tighten energy efficiency benchmarking for energy-intensive industries such as steel, aluminum, flat glass, cement, oil refining, chemicals and data centers. The new benchmarks were published one month later. In February 2022, NDRC followed up by declaring that steel, cement, coal-to-chemicals and aluminum smelting plants must all meet minimum standards by 2025 or be phased out, and that some portions of other industries should meet new benchmark standards by 2025. 18
- Appliance standards and labels. The Chinese government’s appliance energy efficiency standards and labeling programs date back many years. NDRC and MIIT each publish catalogs of recommended energy-saving products and promote their use through public education. NDRC runs an Energy Efficiency Leaders program to recognize top products in different categories. The most recent catalog was published in April 2020. In it, NDRC stated that the 14 previous rounds of catalog published since March 2005 covered 37 types of products and more than 1.9 million product models, resulting in more than 500 billion TWh of electricity savings. Recognizing the growing importance of air conditioning and other uses of cooling, the government issued a Green and Efficient Cooling Action Plan in 2019. This plan covered a wide range of settings including buildings and data centers and addressed both energy efficiency and the coolants used. 19
- Building standards. All new urban residential and public buildings must meet energy-saving design standards established by MOHURD. MOHURD has also developed a Green Building Action Plan, with green building evaluation standards and a labeling program. These standards were updated in 2019. MOHURD issued further codes for energy efficiency and renewable energy for buildings in 2021. MOHURD issued its 14th Five-Year Plan for Building Energy Conservation and Green Building Development in March 2021, effective in April 2022. This sets targets relating to the energy consumption of new buildings, the renovation of existing buildings, the proportion of prefabricated buildings, renewable energy and construction methods, among others. 20