China and the U.S. are the world’s two largest emitters of global warming pollution. Together, they account for more than 40 percent of global carbon dioxide emissions from fossil fuel use, more than 35 percent of the world’s energy consumption, and more than 30 percent of the world’s economic output, making their involvement to address the global warming crisis critical. The Alliance is working directly with China to use energy efficiency as a key strategy to curb these emissions while allowing for sustainable development. A new comprehensive report by the McKinsey Global Institute identified Chinese energy efficiency as the top global opportunity to curb energy growth in economically attractive ways and, in the process, cut carbon dioxide emissions.
China is the world’s largest producer and consumer of coal, using over 2 billion tons in 2008. Much of this coal is used to generate electricity for China’s power sector, which is the fastest growing energy sector in the world.
At current rates of growth, China’s power sector alone will account for an estimated 16 percent of growth in global energy demand to 2020. Furthermore, if development in China continues unchanged, China will contribute an estimated 38 percent of total global carbon dioxide emissions growth over the next fifteen years.
Within this context, the implementation of widespread energy efficiency represents an immense opportunity. Through the effective support and implementation of energy efficiency, much of China’s growing demand for electricity can be offset, resulting in the construction of fewer coal-fired power plants.
Energy efficiency allows factories to increase their output, and residential consumers to improve their standard of living, while reducing electricity use and greenhouse gas emissions. For over 30 years, regions like California have successfully developed and implemented comprehensive energy efficiency plans that have cut electricity demand while improving the economy. These programs have enabled California to keep its per capita energy use flat since 1975 while U.S. per capita energy consumption has grown by 50 percent.
China has already set an ambitious national target of improving its energy intensity (energy use per unit of GDP) by 20 percent by 2010, but major barriers exist to achieving this goal. The McKinsey report explained these market barriers in detail.
For example, the Report notes that:
Market forces alone will not capture the substantial potential for higher energy productivity and lower energy demand growth. Global energy markets are rife with market inefficiencies and distortions. Consumers lack the information and capital needed to improve energy productivity…
The Report goes on to say that:
If policy makers want to raise energy productivity and be successful in shifting global energy demand from its rapid current trajectory, they have the option of implementing a range of targeted policies to remove these market barriers.
The role of the China-U.S. Energy Efficiency Alliance (the Alliance) is to help China develop and implement targeted policies to overcome market barriers to energy efficiency. By leveraging the tremendous American knowledge base in energy efficiency planning, design, engineering, monitoring and verification, the Alliance is forging partnerships between the U.S. and China that are laying the foundation for China’s energy efficient and carbon conscious future.