Reuters is reporting that government data released last Thursday shows that
The amount of energy used to generate each dollar of national income fell 4.2 percent last year, accelerating from a 3.7 percent fall the previous year as factories closed or cut back production across the country’s manufacturing heartland.
If these preliminary numbers hold up after further refining, then 2008 will be the first year that China has met the annualized (soft) goal of a 4% improvement in energy efficiency. The 11th Five Year Plan goal calls for the amount of energy used to generate a yuan of national income in 2010 to be 20% less than the amount needed in 2005. The numbers reported for the first three quarters of 2008 had shown an efficiency improvement of 3.46%, with the third quarter improvement given as 0.58%; energy use per unit of GDP for the fourth quarter must have fallen 0.74% to achieve the number reported on Thursday.
Thus, although it is tempting to attribute this respectable efficiency gain on the economic downturn, the greatest gains in 2008 were achieved during the first half of the year when the downturn had not yet significantly impacted China. Moreover, a downturn alone will not necessarily improve efficiency. Without additional information, it is impossible to conclude that a factory shut down will increase total energy efficiency. Only if the shuttered factory is using energy at an efficiency rate worse than the average rate will the shut down move the needle in a positive direction.
The Reuters article suggests that
Heavy industrial and manufacturing sectors have been worst hit by the crisis, nudging the country’s pattern of growth toward the service and retail sectors in a way that, at least temporarily, dovetails with Beijing’s plans for cleaner growth.
I assume the “service and retail sectors” use less energy than the “industrial and manufacturing sectors,” but can anyone point to statistics that show they use it more efficiently in China to produce a unit of GDP?
In any event, I think the article correctly notes the tough road ahead for China
[T]he real challenge may come in the second half of this year and 2010, when the economy is expected to start picking up but cuts to energy intensity will need to fall far more steeply if Beijing is to meet its goal.
Assuming 4.2% is the correct number for 2008, the combined energy efficiency improvement from 2006 to 2008 would be 9.65% (see), leaving a 10.35% improvement to be achieved in 2009 and 2010-a tall order.
9 responses so far ↓
1 Elizabeth Balkan // Jan 27, 2009 at 6:24 am
Charlie,
I cannot point to data that overtly demonstrates a lower energy intensity in the retail vs industrial sector, as I don’t believe these numbers exist in the public domain.
However, comparing energy intensity figures against percentage of GDP generated by the different economic activities (primary, secondary, and tertiary) confirms this hunch. I’ve not done it at the national, aggregate level; but I’ve found it true using regional level data (specifically, Shanghai). China’s NBS classification of industry (wherein transport gets lumped together with tertiary and electricity production with secondary) can make the exercise an imperfect and clumsy one; but does seem to confirm at a rudimentary level the logic you put forth.
Hope that helps some.
-Elizabeth
2 cmcelwee // Jan 27, 2009 at 8:33 am
Elizabeth: Your information is extremely helpful! Thank you for all the work you have done in the energy and sustainable development field in China. You have been doing the real work, while the rest of us only blab about it.
3 Greg // Jan 27, 2009 at 1:03 pm
Well, all of the construction of green energy sources could be set back by local officials trying to milk Beijing for their share, bad/no maintenance of new facilities, substandard installation practices, etc.
Also, unlike the US, Canada, Japan, Australia and Europe, the wide open, sunny areas that are great for solar are not easily reached by any vehicle for regular maintenance, and you need educated technicians to do those things, another quality hard to find in the wide open, remote areas.
4 All Roads // Jan 27, 2009 at 11:54 pm
Charlie.
Call me crazy, but I am actually a optimistic about Beijing’s ability to remove some of the fat during the downtime.
One area of particular is in transportation. China’s plans to increase rail transport will keep a lot of trucks off the road, which will have a measurable returns in a number of areas related to energy management, manufacturing, and economic efficiency.
Another area is in the fact that through this downturn we are going to see a number of industries see a significant amount of low end manufacturers drop off the map, and that will have benefits as well - scale will allow for better enforcement on the regulatory side while increasing the service level power producers will need to give manufacturers.
Keeping in mind that a large number of issues were created by the speed of China’s growth, here area few rays of optimism to consider as the downturn takes hold.
R
5 Greg // Jan 28, 2009 at 12:21 pm
@ Allroads,
It takes a long time to build that much rail, and it will take at least a year of round the clock surveying, material pre-positioning, securing all of the financing, etc before the first shovel of dirt is lifted. And all of that has to be done by experienced people. You don’t want village laborers acting like surveyors and heavy equipment operators, the results won’t be pretty.
And many of those experienced people are already on the North South diversion project. Beijing will either have to pull many people off to do this or pull some off as supervisors. And it will take quite a bit of time to train the people that those supervisors will manage.
6 Elizabeth Balkan // Jan 29, 2009 at 1:35 am
Thank you, Charlie. It’s an honor to “hear” those sentiments from you.
Best,
Elizabeth
7 All Roads // Jan 30, 2009 at 1:40 pm
@ Greg.
I agree that it takes time, and that is why I am optimistic about the improved conditions over the long term. They are making investments.
As for the talent needed, there were certainly be regional difference here, but keep in mind that China only “finished” the national highway system last year, and that several thousand building projects on the east coast have idled.
R
8 Elizabeth Balkan // Feb 1, 2009 at 12:31 am
Charlie,
I was just re-reading a paper on China’s Energy Use, which includes national level analysis of the point you made. I thought I’d include these hard numbers here.
According to Dan Rosen and Trevor Houser’s “China Energy: A Guide for the Perplexed,” in 2005, industry accounted for 71% of energy demand and 48% of GDP. Commercial activity represented 19% of GDP and 40% of GDP. By this calculation, industrial activity is over 3 times as energy-intensive per unit of GDP as commercial activity in China.
To be fair, energy consumed for transportation should be (at least partially) factored into the commercial energy use, on account of the classification. But, even if you consider all energy consumed for transportation in China to be for commercial purposes (10%), that still only gets you 29% of China’s energy use for 40% of GDP; which leaves the commercial sector twice as energy efficient per unit of GDP compared to the industrial sector.
It comes as no surprise, then, that the government is pushing to consolidate its heavy industry and promote service sector growth in the cities!
Best,
Elizabeth
9 cmcelwee // Feb 1, 2009 at 9:41 am
Elizabeth: Thanks for the follow up! Those numbers seem to settle the issue. Ironically, I had the Rosen & Houser Guide among the stack of papers I was going to read over the Spring Festival Break, but (alas) never got around to.
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