The Green Leap Forward takes a closer look at the Top-1000 program, one of the pillar policies behind China’s drive to achieve a 20% reduction in energy intensity over the 2006-10 period.
Energy Efficiency remains the King of clean energy strategies. It continues to remain the top energy policy priority with the Chinese government. Consider this post at China Green Buildings that speaks to the immense scale of opportunity that lay before property developers. It was recently reported that energy intensity decreased by 4.2% in 2008, an improvement over 3.7% in 2007 and marking the first time it has attained its annualized 4% decrease per year goal for the period of 2006 through 2010. Charlie highlights a policy thrust, guided by the goal of reducing energy intensity, of consolidating heavy industry in favor of service sectors. This approach is not precluding it from cleaning up and optimizing energy efficiency in its existing heavy industries.
The Top 1000 Energy-Consuming Enterprises Program, which set energy-saving targets for China’s 1000 highest energy-consuming enterprises, which together are responsible for a staggering one third of China’s energy consumption, is a key effort. According to the authoritative report on the program authored by Lawrence Berkeley Labs (LBL), the chief foreign advisers to the program, these enterprises are large-scale enterprises that fall within nine industrial categories: iron and steel, petroleum and petrochemicals, chemicals, electric power generation, non-ferrous metals, coal mining, construction materials, textiles, and pulp and paper. (This list seems right to me, although I would have thought the cement industry would also make the list.) [duh! cement, a big carbon culprit, is part of construction materials.]
The program employs the use of voluntary environmental agreements modeled afterthe Dutch Long-Term Agreements (LTAs), which are essentially negotiated contracts in which the company agrees with the government to bind itself to certain environmental performance targets. The Dutch model has informed the design of many variations of voluntary agreements that have been applied in many countries across many environmental areas over the years, as this list shows.
Recently, Lisa Margonelli, the author of Oil on the Brain: Adventures from the Pump to the Pipeline, wrote an excellent piece (hat tip to Sustainable John) covering the progress of the program. She accounts the program’s humble beginnings, which really begins with LBL’s collaboration with the Chinese government beginning 20 years ago, with LBL serving as a provider of objective energy information rather than an advocate of any specific policies. Eventually, this relationship matured to the point where they decided to initiate two pilot projects to reduce energy intensity in two steel plants in Shangdong province using a Dutch-style voluntary agreement mechanism. The pilots were successful, resulting in a 9% reduction in energy intensity. Lisa writes:
Beijing was pleased, and started casting about for ways to scale up. In late 2005, Peking University professor Wang Xuejun, got a call asking him to look at his databases and see what would happen if the voluntary agreements were applied to more companies. He sat down with Zhang Ruiying, a briskly efficient government engineer. They combed the database to see whether the country’s top 1,000 energy users—including steel, chemicals, electrical generators, coal mines, and cement—could cut the equivalent of 100 million tons of coal (mtce) by 2010. The answer was yes.
So in April 2006, the Top-1000 program was formalized and announced, with the goal of energy savings amounting to a cumulative total of 100 mtce (2.9 EJ) by 2010. Each of the participating companies signed conservation agreements with local governments, which in turned signed agreements with the central government (the NDRC, specifically) to administer the program. In return for the companies binding themsleves to energy targets, the government provides capacity building. For instance, NDRC has provided training workshops on energy benchmarking and audits. The results pieced together by LBL in their report suggests that in the first year of the program, some 20 mtce of energy has been saved, meaning that the program is exactly on track to meet its 100 mtce target by 2010.
Lisa sums up the potential impact of the Top-1000 program:
The program started in 2006, and if current trends continue, by 2010 it could keep 450 million tons of carbon dioxide out of the atmosphere. Even though China’s emissions continue to rise, 450 million tons is a lot. Since 1997, the entire European Union has been laboring mightily to reach its 2012 Kyoto target of reducing its 1990 baseline emissions by 300 million tons…In 2006, the program alone accounted for two-thirds of China’s efficiency improvements and by 2007, when the country was making improvements, the Top-1000 still represented half the total. Almost overnight, the program has become a model that has been replicated far beyond the initial 1,000 companies.
The LBL report provides a robust list of recommendations to improve the program that GLF advises the reader to look at more closely, but also weighs in on the importance of the program in helping China achieve its energy efficiency goals:
Even though the Top-1000 program was designed and implemented rapidly and did not fully implement best practices regarding establishment of targets, development of supporting policies and programs, information dissemination, and monitoring and evaluation, it appears that – depending upon the GDP growth rate — it could contribute to somewhere between approximately 10% and 25% of the savings required to support China’s efforts to meet a 20% reduction in energy use per unit of GDP by 2010.
The lessons of China’s Top-1000 program for the United State’s own energy efficiency drive are poignant, observes Lisa:
The United States is a stunning case in point. LBNL’s own analysis has shown that American industry could profitably recycle its own waste byproducts, including heat, gases, and pressure, to reduce the national carbon footprint by 20 percent. What’s more alarming is that these missed opportunities to capture efficiency add up to a stunning $50 billion in lost potential profits to American companies, according to figures from the McKinsey Global Institute….Decades of policies favoring cheap energy have allowed U.S. industry to compete with only incremental gains in energy efficiency. If China’s Top-1000 succeeds on the scale that China is hoping for, U.S. industry will have to change its strategy to compete. Traditional American barriers between government and industry, regulators and the regulated may need to be torn down, to create something more cooperative and flexible. Something oddly, more like China.
Eventually, though, both China and the U.S. need to put their heads together to move beyond efficiency, which is a useless concept by itself if we continue to be guided by the guiding star of neo-classical economics which speaks little to the limits of economic growth. Our fixation on GDP, year in and year out, means that any gains made by economic efficiency will be wiped out as economic growth catches up. Do we need to seriously consider adopting an alternative economic-social welfare models, such as Bhutan’s Gross National Happiness, perhaps?