Common Tragedies

Thoughts on Environmental Economics

Can China move towards a culture of energy conservation?

Posted by Daniel Hall on December 5, 2007

We’ve noted previously (as have others) that while China has an objective of increasing the energy efficiency of its economy, it has struggled to achieve goals for energy conservation, partially because the career prospects for local party officials depend far more on delivering breakneck economic growth than on saving energy. It appears that China may be trying to shift this balance:

China stepped up its energy conservation drive with a law that makes officials’ career prospects dependent in part on their energy-saving efforts, according to Xinhua News Agency, the official press agency of the People’s Republic of China. …

Among the new provisions is one that requires the performance reviews for local government officials’ — vital for advancement in the Communist Party — to include an assessment of their energy-saving efforts.

Further, China is expanding its conservation programs from the industrial sector alone to include sectors such as transportation and buildings:

New entities have been included under the amendment ranging from the construction sector to transportation, while the old law only held industrial enterprises responsible for energy conservation.

According to the revised law, local energy saving standards in the construction industry must be stricter than those set by the central government and industrial associations as energy saving on buildings is closely related to the local geographic situation.

The revised law also requires property developers to inform buyers of energy saving measures in each building for sale. This obligation has to be stated in the property quality certificate and also in contract papers.

This sounds promising. In general by including more sectors in the conservation efforts China should be able to get more reductions at the same marginal cost (or the same reductions at lower marginal cost). The last paragraph indicates the Chinese are trying to minimize asymmetric information problems in developer-buyer transactions. I am not sure exactly why, as stated in the middle paragraph, efficiency standards in the construction industry must be stricter than those set by the central government just because savings are “closely related to the local geographic situation” — wouldn’t geographic variation imply that some regions should do more and some less? — although perhaps this based on a presumption that the building sector contains more energy-saving opportunities than industry. Regardless, the broad picture that emerges seems promising.

Not all is rosy, however. As the New York Times pointed out in the piece we discussed previously, China has for years tried to increase energy conservation (officially) while at the same time holding down electricity rates. This attempt to swim upstream against a river of its own creation looks set to continue:

The revised law also stipulates that energy producers are not allowed to provide free energy to their employees. But it did not tackle an issue which many analysts say is at the root of China’s wasteful energy use — low state-set prices for power.

The source is Xilin Zheng at the new ClimateIntel blog. The blog’s section on international law and policy looks like it might evolve into a valuable resource.

2 Responses to “Can China move towards a culture of energy conservation?”

  1. Dan Cole said

    The question in the title suggests that China does not already possess a culture of energy conservation. But China cut the energy intensity of production by more than 50% between the late 1980s and early 2000s. In the last few years, energy intensity has risen slightly. But a 50% reduction in about a 20-year period is pretty darn impressive, even for a country starting from a high rate of energy use per unit of production.

  2. Evan Herrnstadt said

    As for the regional policy, I assume the central authorities are setting a minimum conservation standard but allowing flexibility for regions that perceive room for greater mandated gains. Thus, while no region can shirk to weak standards, areas where fruit hangs a bit lower can still set strict guidelines.

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