CAN CHINA GO CALIFORNIA EFFICIENT?

China needs to grow. 2/3 of its 1.33 billion people are just beginning to reach out to modernity.

In 1978, Deng Xiaoping set out to quadruple China’s GDP. He was told the nation would need to increase its energy capacity 4-to-6 times. He knew the nation didn’t have the economy and infrastructure to do that. So he demanded efficiency.

He declared an annual National Efficiency Week. He capped energy to companies, cut them off if they exceeded their caps and demanded better performance from those that met the caps.

Lisa Margonelli, author, Beyond the haze; China's ambitious plan to get companies to voluntarily increase energy efficiency…: “Quotas, standards, regulations, incentives, contests, money for investments, and a countrywide network of training centers with 7,000 employees—they tried everything. And by 1988, they'd made history, by severing the relationship between development and energy. Energy demand had grown at half the speed of GDP.”

China’s growth accelerated in 2002 and it could no longer hold back energy consumption and greenhouse gas emissions. By 2005, the leadership realized it needed controls and demanded another 20% improvement in energy intensity (energy required per dollar of GDP). As part of the program, they asked the U.S. Department of Energy’s Lawrence Berkeley National Laboratory (LBNL) to help.

Lynn Price, research scientist, LBNL Environmental Energy Technologies Division: "It was the Chinese partners' job to figure out what to do, and it was our job to show them what's done around the world…"

The collaboration evolved into a 2003 pilot program to improve two Shandong steel plants’ energy intensity. They modeled a Dutch program that developed voluntary agreements between factories and government. It worked. By 2005, there was a 9% increase in energy intensity.

Peking University professor Wang Xuejun and government engineer Zhang Ruiying did a government-ordered study that concluded a similar program in China’s 1,000 biggest energy consumers (steel, chemical, cement companies, electrical generators, coal mines, etc.) could eliminate energy consumption equal to 100 million tons of coal.

By April 2006, 998 companies “volunteered” and the Top-1000 Energy-Consuming Enterprises Program, a collaboration between LBNL and the Chinese government, was off and running.

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Example: LBNL developed BEST, a process-based computer tool, for Shandong cement engineers. 15% of China's cement (more than ALL U.S. cement production) is in Shandong province. BEST compares energy use in Chinese plants to the most efficient methods in the world and suggests equipment upgrades.

Pressured by the Chinese government, Shandong Iron and Steel Group applied Top-1000 Program methods like BEST at one of its plants and quickly cut energy consumption significantly. The company immediately realized efficiency is a win-win proposition: Reduced pollution, more profits.

Liang Kaili, lead efficiency engineer, Shandong Iron and Steel: "I didn't have to convince them…Productivity increased while energy use was reduced and pollutants were reduced…The investment was very profitable."

Transformations like the ones at Shandong Iron and Steel are powerful.

Price, LBNL: "In industry, you can improve energy efficiency by 10 or 20 percent in a few years…Wouldn't that be easier than talking everyone into changing their light bulbs?"

China still has a long way to go before it moves from “developing” to “developed” nation status. Its energy intensity is now “down” to twice the world average and is expected to lead the world in greenhouse gas emissions for decades.

Despite the great benefits and profits of efficiencies, there is a lag between potential and performance. Even U.S. companies are, according to LBNL, failing to implement methods that could cut emissions 20% and add $50 billion in profits.

China may be different. As a centrally organized society, it can rapidly scale up major undertakings. Shandong Province already has 1,000 companies and 100 large schools and hospitals in a 6th phase of efficiencies implementation.

Margonelli, author, Beyond the haze: “China's ability to commit administrative resources to scale projects rapidly is, in a sense, a natural resource.”

That natural resource could even be a resource to the U.S.

Jiang Lin, China office of the U.S.-based Energy Foundation: "The [Top-1000] project has been copied and it's had a multiplier effect…There's a huge opportunity for the United States and China to work together on the knotty problems of energy and carbon. If the United States can help as a solution provider, China has enormous human capital. Look at automobile fuel economy standards. They were developed in the United States and met with resistance, but China adopted them with great enthusiasm."

An enthusiasm that, to Margonelli, seemed a little TOO enthusiastic. Last year, the Top-1000 companies beat their targets by 190%. Nevertheless, China’s energy consumption is still on track to double by 2020, its greenhouse gas emissions keep rising and its air quality remains notorious.

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China is a command economy. What people at the top say, goes. Ideas are put to work and, if needed, fixes follow. That might or might not be better than the slow unfolding of the democratic process but it serves China for now because it creates a strong impression of action that distracts a roiling, hungry population. Results are well-groomed enough to suggest success.

Unnamed Chinese energy expert: "Some companies have no ability to meet the requirements or do the audits to reach the goal so they try to supply some documents to keep a good relationship with their local government…Now the government is using the phrase 'Great Leap Development'…We can't really do anything with a Great Leap."

Margonelli got the impression that many Chinese want to believe in “Great Leapism” but fewer remember China’s original Great Leap was a disastrous 1958 industrialization plan that produced more environmental degradation and starvation than industrialization.

Margonelli: “…[T]he Top-1000 Program, with its risky data, precarious achievements, and its blow-on-the-dice Great-Leapism seemed nothing less than an epic bet on whether China can continue to grow or whether it will be forced to slow down, risking social and political turmoil.”

Given China’s role in the world’s economy and global climate change, there is an urgency to making its Top-1000 program succeed. Perhaps that urgency has something to do with its statistical success. One official hinted to Margonelli that the government set targets low and companies reported numbers to please the government and avoid penalties.

Yet the way China operates offers – or offered before the world financial crisis – the opportunity to adapt.

Unnamed official: "China is the world's factory. We can't reach our growth targets because of limits in the environment and energy supply. We need to change our ideas, our economic structure, and the mix of industries."

Before the emergence of the present financial crisis, China certainly gave the impression of at least a “Modest Leap” via the Top-1000 program. That could make a huge difference. China has shown it is possible for current efficiency technologies to produce 22% of needed energy intensity improvements in the world’s developing AND developed countries – IF governments believe in the possibility of the Leap and get behind the programs.

Margonelli: “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…”

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Beyond the haze; China's ambitious plan to get companies to voluntarily increase energy efficiency is the result of a 20-year relationship with Lawrence Berkeley National Lab.
Lisa Margonelli, January/February 2009 (California)

WHO
Lawrence Berkeley National Laboratory (LBNL) of the U.S. Department of Energy; Chinese government, academia and private sector (college professors, energy experts, local and national officials, Chinese scientists at LBNL, Communist party leadership efficiency experts, cement plant operators, industry trade groups, Chinese representatives of the U.S.-based Energy Foundation); Lynn Price, research scientist, LBNL Environmental Energy Technologies Division; Zeng Xuemin, Standing Vice President, Chinese Cement Association

WHAT
The Top-1000 Energy-Consuming Enterprises Program, a multifaceted plan to create energy efficiencies and improve energy intensity, could turn the U.S.-China relationship into a competitive collaboration.

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WHEN
- 1978: China’s first efficiency implementations.
- 2002: China’s economic growth began to show the need to control energy consumption and greenhouse gas (GhG) generation.
- 2005-06: China's first energy intensity Five Year Plan aims for a 20% improvement.
- If China’s GDP grows by an average of 7% per year, 85% of China will be new in 2030.
- If China’s current goals for efficiency continue, it will cut 450 million tons of GhGs by 2010 while the entire EU is working to cut 300 million tons by 2012.

WHERE
- Jinan is the capital of Shandong province.
- 20% of China’s energy is used to produce goods for the West.
- U.S. energy intensity 1/3 of China's. Japan’s is 1/6.
- China makes ~50% of world cement, 15% in Shandong.

WHY
- China has been working on efficiency, with varying results, for 3 decades.
- The Top-1000 uses voluntary agreements between government and industry.
- Top-1000 results: In 2006, the program accounted for 2/3 of China's efficiency improvements. In 2007, with the rest of the nation growing more efficient, the Top-1000 program still represented ~50%.
- Industry uses 70% of the energy China consumes, making it possible for effective efficiency initiatives to produce 10-to20% reductions in a short time.
- Government pressure unquestionably drove the Top-1000 reforms by linking efficiency to advancement within companies. Once the new methods and equipment began saving the companies money, the government pressure became almost irrelevant.

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QUOTES
- Head, Economic Development Commission, Shandong: "My heart is filled with so much passion for energy efficiency that I need to drink more just to lower my blood pressure!"
- Zeng Xuemin, Standing Vice President, Chinese Cement Association to Lynn Price, research scientist, LBNL Environmental Energy Technologies Division: "A toast…from the Chinese Cement Industry." (Price’s response: "The Chinese cement industry—that's big!")
- Price, on energy consumption/greenhouse gas emissions in China cement industry: "The problems are enormous but the potential is enormous too…In the United States there's often pushback [from industry that does not invite efficiency standards or limits on greenhouse gas emissions] but in China the doors are wide open. It feels like we can make an impact here because we're welcome."
- Lisa Margonelli, author, Beyond the haze; China's ambitious plan to get companies to voluntarily increase energy efficiency…: “China had become a curious hybrid of market, command, and coercion. The government couldn't pull the plug or even whip the fast ox. Instead, it turned into a Hello Kitty-esque omniscient cheerleader, trying to influence energy use through incentives, endless news reports, and even a comic book.”