CPI Study Finds China Made Solid Progress Towards 11th FYP Energy Intensity Targets but May Face Challenges in Meeting 12th FYP Targets

By Climate Policy Initiative, PRNE
Thursday, February 24, 2011

Carbon-Specific and More Cost-effective Policies Provide Opportunities for Future Low-Carbon Development

BEIJING, February 25, 2011 - A study by Climate Policy Initiative (CPI) found that through 2009, China
was on track to meet the 20% energy intensity reduction target in the 11th
Five Year Plan, reversing the trend of increasing energy intensity from 2002
to 2005. Carbon intensity fell as a result of decreasing energy intensity,
demonstrating the importance of energy efficiency in the transition to a
low-carbon economy; with additional carbon-specific policies, China could
expect carbon intensity to fall faster than energy intensity in the future.

CPI's initial analysis also found that many of the measures implemented
in the 11th Five Year Plan were top-down administrative measures that used
significant resources, and that some policies such as plant closures will be
more expensive to implement moving forward.

The study reviewed low-carbon performance and policies implemented in
China's power, industry, building, transport, and agriculture and forestry
sectors. Of these, the power and industry sectors provide the greatest
potential for carbon savings.

In the power sector, electricity production grew 39% from 2005 to 2008,
but the increase was offset by a 5% decline in fuel use per kWh at coal-fired
power plants and a 6.5% decline in CO(2) per total kWh produced. The per-unit
declines were due to:

    -- improvement in average efficiency of coal-fired generation as new
       generating capacity added has generally been larger and more efficient.
    -- China's closure of 70GW capacity of older, smaller, less efficient
       plants, saving over 100 million tones of CO(2) emissions.
    -- the addition of low-carbon generation, including 90GW of additional
       hydro, almost 25GW of wind, and 2GW of nuclear power.

Since average efficiencies have increased and a large portion of the
least-efficient plants have been closed, future efficiency improvements will
be more difficult and carbon intensity improvement may need to rely more
heavily on low-carbon generation.

In the industry sector, CO(2) intensity decreased by 14.8% and energy use
per unit of industrial value added decreased by 13.3% from 2005 to 2008.
Structural changes contributed, as heavy industry's growth slowed relative to
other industries, and as industry shifted towards higher value-added
products. In addition, per unit production efficiencies improved
significantly, by close to 5% in the steel industry, 17% in the cement
industry, and almost 35% in copper smelting during the period 2005 to 2009.
Many of the instruments used in the industry sector were top-down regulatory
measures which required significant administrative resources, which may not
be the most cost-effective way to achieve future targets.

In the forestry sector, afforestation contributed significantly to
building the carbon sink.

"Looking ahead to the 12th Five Year Plan, policymakers will be looking
to extend measures that have worked, as well as maximize cost-effectiveness,"
said QI Ye, director of CPI at Tsinghua. "We hope that CPI's further research
on the effectiveness of the plant closure policy and the Top 1000 Enterprises
Program will be of value."

The report is available at www.climatepolicyinitiative.org.

About CPI

Climate Policy Initiative is a policy effectiveness research and advisory
service whose mission is to assess, diagnose, and support nations' efforts to
achieve low-carbon growth. An independent, not-for-profit research
organization with long-term support from George Soros, CPI has headquarters
offices in San Francisco and regional offices in Berlin, Beijing, Rio de
, and Venice.

Ruby Barcklay of Climate Policy Initiative, +1-510-612-5180, ruby at climatepolicyinitiative.org

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