China’s latest energy consumption data reveals new opportunities and challenges

The Chinese Government recently announced the long-awaited provincial energy consumption data for 2011. The data shows that China’s energy intensity in 2011 was 0.793 tons coal equivalent (tce) per unit gross domestic product (GDP), 2.01% less than 2010. The data also reveals new opportunities and challenges for achieving China’s energy intensity target under the Twelfth Five-Year Plan (12FYP) (2011-2015).

Energy intensity is a measurement of energy consumption per unit GDP that is normally measured in tons of coal equivalent used to produce 10,000 Chinese Yuan of GDP. Whether the energy intensity of the economy increases or decreases depends in part on how the growth rate of energy consumption compares to the growth rate of GDP. When the energy consumption growth rate is higher than the GDP growth rate, energy intensity increases, and vice versa.

In the Eleventh Five-Year Plan (11FYP) period (2006-2010), China made a significant achievement, with a 19.06% reduction in energy intensity. Last year, the government announced another significant target of 16% for the 12FYP period. The new 2011 energy intensity data reflects the initial outcomes of the 12FYP, and provides some indications on energy consumption trends in China:

1. Notable progress towards achieving the 12FYP target
In the last five-year plan period, the government closed down many inefficient industries, and many industries retrofitted their factories to improve energy efficiency (See “ChinaFAQs: China’s Energy Conservation Achievements of the 11th Five Year Plan” and “ChinaFAQs: Efficiency, a Thousand Companies at a Time”). Many people feel that it is becoming more and more difficult to further reduce energy consumption beyond these early achievements. Despite these challenges, the new data shows a 2.01% intensity reduction in the first year of 12FYP. This is considered significant progress when compared with the reduction made in the first year of 11FYP, which was only 1.79%.

2. Impacts of economic slowdown
Besides improvements in energy efficiency, another possible reason for the energy intensity reduction in 2011 is the economic slowdown in China. Since last year, there has been an obvious slowing down of the economy in China. China’s 2011 GDP growth rate was 9.3%, a one percentage point drop from 10.3% in 2010. The most recent GDP data reveals that the annualized GDP growth rate further dropped to 7.8% in the first half of 2012. Out of 31 provinces, 30 provinces showed reduction in GDP growth rates. The latest statistics also show that in the first nine months of 2012, the total profit of large industries and enterprises (annual turnover of above 20 million Chinese Yuan) has dropped 1.8% from the corresponding period in 2011. The economic slowdown is deemed to indirectly impact energy consumption patterns. Reduced production of high energy intensity industries and closing of some less efficient industries have resulted in improved energy intensity.

3. Shifting of development to the central and western regions
One of China’s key strategies to reduce energy consumption is to restructure the economy by shifting from industrial sectors to service sectors. Many cities in the eastern region have moved their energy-intensive industries to the traditionally less-developed central and western regions in order to improve their energy efficiency and to promote low-carbon development. For example, Beijing’s energy intensity is the lowest among all the provinces. This is mainly due to its focus on service industries that contribute about 75% of its overall GDP. This is also part of the Chinese government’s strategy to promote more balanced development between eastern and central/western regions. The 2012 GDP data shows that provinces in the eastern region generally have lower GDP growth rates compared to the central and western regions. Energy intensities of most of the provinces in the eastern region range between 0.4 and 0.7 tce/10,000 Chinese Yuan GDP, while most provinces in the central and western regions are within the ranges of 0.6-0.9 and 0.9-2.2 tce/10,000 Chinese Yuan GDP, respectively. One of the implications of this development trend is that energy intensities in the eastern region are significantly improved. For example, Beijing and Shanghai’s energy intensities were reduced by 6.94% and 5.32% respectively. Conversely, some provinces in the western regions recorded higher energy intensities. For instance Qinghai, Ningxia, and Xinjiang’s energy intensities were increased by 9.44%, 4.60%, and 6.96% respectively.

From the above observations, it can be seen that economic slowdown and rapid development of central and western China create both opportunities and challenges for China in promoting low-carbon development.

In terms of opportunities, although relocating energy-intensive industries to the central and western regions may increase energy consumption in these regions, it also creates new opportunities for these industries to transition to more energy-efficient and low-carbon technologies. This would eventually improve the nationwide energy and greenhouse gas performances of China. The data shows that although overall energy consumption per 10,000 Chinese Yuan GDP in the central and western regions reduced only about 3% compared to 5-7% in Beijing and Shanghai, the figures for reductions in energy consumption per 10,000 Chinese Yuan of industrial added value in these regions are much more than 3%. For instance, energy consumption per 10,000 Chinese Yuan GDP in Henan and Hunan was reduced by only 3.57% and 3.68%, but the energy consumption per 10,000 Chinese Yuan of industrial added value was reduced by as much as 8.60% and 8.61% respectively. This shows that the energy intensities of industrial sectors in these regions have been significantly improved.

On the other hand, the recent economic slowdown and rapid development of central and western regions also pose some challenges. Although so far the economic slowdown has resulted in reduced growth in energy consumption, there are risks of adverse impacts due to investments in energy-intensive industries in order to stimulate economic growth. For example, unofficial sources revealed that in 2012 the government approved over 17 trillion Chinese Yuan ($270 billion USD) worth of projects such as railway, airport, power generation, and others. If such projects are implemented without proper consideration of energy consumption, they may increase energy intensities, particularly in the central and western regions. The good news is that since June there have been an increasing number of clean development mechanism (CDM) projects, including wind power, hydro-electric, biogas, LED lighting, etc.

In summary, the recent economic slowdown and economic restructuring in China create both opportunities and challenges. It will be interesting to see if China is able to take advantage of this opportunity to promote low-carbon development while developing the central and western regions.

China provincial energy consumption intensities, 2011
tce: tons coal equivalent; GDP: gross domestic product; CNY: Chinese Yuan; n.a.: no data available Source: National Bureau of Statistics of China

Dr. Wee Kean Fong is a Senior Associate with the Greenhouse Gas Protocol, Climate and Energy Program. Based in WRI’s Beijing office, he leads the Greenhouse Gas Protocol City Accounting Project to develop an international standard for accounting and reporting greenhouse gas emissions from cities and communities.

Image courtesy of Fornax Wang and licensed for reuse under this Creative Commons License.