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Newsletter:  September 2002/ Issue 3
Working to Improve Energy Efficiency in China

The Beijing Energy Efficiency Center (BECon) is an important partner in efforts to promote improved management of energy use in China. Since its inception in 1993, the Center has been involved in a variety of projects working with the Chinese and United States government, domestic and foreign industry, and international organizations such as the United Nations and World Bank. These activities have revolved around efforts to promote energy efficiency technologies and awareness of the environmental impacts of energy use, and to improve market practices concerning the consumption of energy.

BECon, described by Pacific Northwest National Laboratory (PNNL) Project Manger, Jeffrey Logan as, “an innovative institution staffed entirely by Chinese whose goal it is to promote efficient use of energy in China,” is one of six independent, nonprofit energy efficiency centers launched by the Advanced International Studies Unit (AISU) of PNNL. The other centers are located in Russia, Bulgaria, Poland, the Czech Republic and Ukraine. All are staffed by local experts and were provided with core funding from the US Environmental Protection Agency, the US Department of Energy, and the World Wildlife Fund. AISU employees serve as planning and logistics advisors for the centers and play an oversight role.

The issue of energy efficiency is important for many reasons. Energy security—and thus, the availability and accessibility of sufficient and affordable energy —is recognized to be a key factor of national stability. In addition, the use and production of energy has profound environmental impacts, as well as consequences for public health and states’ economies.

The United States government has several incentives to support energy efficiency efforts in China. The country is an enormous market for US businesses selling energy saving technologies, and according to Logan, the US government has already more than recouped in taxes what it has invested in energy saving projects in China. In addition, reducing pollution in China has a global impact because China is the second largest emitter of greenhouse gases in the world (the United States is the largest). And, as Chinese companies gain a competitive edge and greater share of the global market, they are increasingly embracing transparency measures and other international standards, in turn, pressuring their government to do the same.

From the perspective of the Chinese government, higher efficiency is necessary for economic success. In the 1980s, when China began its transition from a closed to a more open market, requiring consistent economic growth of around eight percent, officials feared that a lack of energy would impede the nation’s long-term economic ambitions. The country is heavily dependent on its enormous coal reserves, which supply 67 percent of its energy. Coal is heavy and expensive to transport, and coal found in China often contains a lot of sulfur and ash, making it highly polluting. The government has experimented with other energy production options, including nuclear energy (three or four nuclear reactors are now operating and more will come on line soon). However, the greater shift in policy has been toward improved efficiency and cleaner production methods.

Also, environmental problems such as water shortages, exacerbated by contamination and inefficiency in use; dust storms; water and air pollution—the World Bank estimates that, in China, nearly 400,000 premature deaths result each year from air pollution—have taken a toll on public health budgets and local economies, making a clear connection between environment and the economy. So, in the early 1990s, when the creation of BECon was proposed to the Chinese government, the Center was a welcome addition to existing efforts in the drive toward greater efficiency and improved environmental management.

BECon is engaged in several activities to promote greater efficiency: it advises the government on energy policy; educates the public and industry on energy and environmental issues; helps to arrange financing for energy saving projects; and organizes information exchanges and public outreach on the benefits of energy saving practices and technologies.

One of the Center’s efforts is a $150 million project with the World Bank, Global Environment Facility, and European Union to introduce commercial Energy Service Companies (ESCOs) in China by creating pilot firms. It is estimated that the vast majority of energy saving potential in China lies within the industrial sector, and ESCOs have both the technical expertise needed to improve energy efficiency and the financial savvy to determine which measures would be most profitable to companies. ESCOs perform energy audits for client companies by evaluating the way in which the company uses energy and devising a plan for improved efficiency. After the client approves the plan, the new methods or technologies are implemented. According to Logan, in China, the majority of companies operate at a low level of efficiency making it possible for ESCOs to routinely provide savings of 30 percent or more to clients. As payment, the audited company and ESCO then split the savings over a specified time frame—usually two or three years. Afterwards, profits/savings are entirely enjoyed by the client company.

BECon is also working on the China Green Lights Project, which has strong support from the Chinese government including the Vice President of the State Economic and Trade Commission, who is the project lead. The objective of the multimillion-dollar campaign is to promote the benefits of “green lighting.” The campaign will include a permanent Beijing exhibit of the products of 60 “green lighting” manufacturers. It will also entail efforts to help companies obtain the technology and funds they need to manufacture efficient lighting products, such as fluorescent bulbs, in an attempt to create both a market pull and push for the products.

Other BECon activities include efforts to identify financing sources for energy efficiency projects (which is somewhat of a challenge because in China only banks can lend money) and aiding local governments to implement the Energy Conservation Law. Local implementation of the new law, which entered into force in January 1998, is crucial, as it will determine the law’s real effectiveness.

While BECon provided guidance to the Chinese government in its initial shift toward greater energy efficiency, more prosperous provinces, and cities like Beijing, Shanghai and Guangzhou now lead the way. As the economy grows, public interest and awareness of environmental issues is rising, resulting in a stronger demand for a healthy environment. And, planning for the 2008 Beijing Olympics has made the Chinese government eager to “clean up” Beijing and surrounding areas in time for the games in hopes of making a positive impression on the world.

“BECon has succeeded beyond most people’s wildest expectations,” says Logan, who has great praise for BECon’s Director, Zhou Dadi, and his effective steering of BECon, as well as for the contributions of Zhou’s team. “A lot of BECon researchers are dedicated in ways that go beyond financial reward because they believe energy efficiency is key to China’s future—they’re doing something great for the country.”