China Energy Conservation by Shifting from Manufacturing to IT

(February 13, 2008) – My last post about China’s growing energy demand may have given you the impression that there is no energy conservation going on. Quite the contrary. The focus of China’s economic policies today is to reduce dependence on energy-intensive sectors, reduce pollution and increase employment by investing heavily in the high-speed communications, information technology and education sectors. The impact of this strategy on reduced energy per unit of output is outlined in an interesting article titled
Taking out 1 billion tons of CO2. This is not likely to reduce the estimates from the previous post, however. China’s energy demand is driven by its tremendous economic growth. At 10% per year, GDP will double in just over 7 years and quadruple in 15 years.

Implications:
1. Oil and coal prices are not going down over time.
2. The stability of the Gulf region will remain top priority.
3. We need lots of R&D on new energy technology.
4. There are tremendous investment opportunities in clean energy and IT.
5. Educate the heck out of your children, especially in math and science.

JR

Abstract

China’s 11th Five-Year Plan (FYP) sets an ambitious target for energy-efficiency improvement: energy intensity of the country’s gross domestic product (GDP) should be reduced by 20% from 2005 to 2010 [National Development and Reform Commission (NDRC), 2006. Overview of the 11th Five Year Plan for National Economic and Social Development. NDRC, Beijing]. This is the first time that a quantitative and binding target has been set for energy efficiency, and signals a major shift in China’s strategic thinking about its long-term economic and energy development. The 20% energy-intensity target also translates into an annual reduction of over 1.5 billion tons of CO2 by 2010, making the Chinese effort one of the most significant carbon mitigation efforts in the world today. While it is still too early to tell whether China will achieve this target, this paper attempts to understand the trend in energy intensity in China and to explore a variety of options toward meeting the 20% target using a detailed end-use energy model.