Developing Efficiency: Why energy efficiency gains in China may not be fully realized

Throughout its recent economic emergence, China has grown substantially as an energy consumer. Even as China decreased its energy intensity (energy consumption per unit of GDP) by over 19 percent from 2005 to 2010, energy consumption rose annually with 5.9 percent growth from 2009 to 2010. As the country seeks to reduce its environmental footprint and energy use, all regions and government departments are directed to find ways to improve energy efficiency. Energy efficiency gains, however, may not be as successful at reducing energy consumption as previously thought, due to the rebound effect.

The rebound effect is the increased usage of energy once it becomes more efficient and cheaper to use. Many studies have found this effect to be real and significant. In the United States, improvements in fuel economy in automobiles have been found to increase driving by 5 to 20 percent of the energy saving, while efficiency savings from household goods and services have about 10 percent of their energy savings taken back due to a direct rebound effect.

Less research, however, has been conducted on developing nations, and China in particular experiences much larger energy growth than a developed nation. In “Direct rebound effect on urban residential electricity use: An empirical study in China,” Zhaohua Wang, Milin Lu, and Jian-Cai Wang investigate the rebound effect in Chinese urban residential housing to determine the effect in this developing urban environment. They find that these settings have a much larger rebound effect, with 74 percent of the long-term energy savings taken back and 72 percent of the short-term energy savings taken back due to the rebound effect. This means that 74 percent of energy efficiency gains made in the long-term are offset by increased demand, while 72 percent of gains in the short-term are offset. These are both partial rebound effects; there are gains to energy efficiency, but these gains are not nearly as large as their efficiency would suggest.

Wang et. al conduct their analysis by using data from China’s 30 provincial governments in the years 1996-2010. They build two statistical models, which analyze the effects of multiple variables, like per capita disposable income, residential energy prices, and population, on overall urban electricity consumption in the long term and short term. By determining the effect of changes in urban residential energy prices on electricity consumption, the authors can determine the effects of price changes due to energy efficiency gains.

The authors analyze urban residential housing in China because mass urbanization and development has driven growth, and moving forward, it is expected that China’s urbanization rate will hit 60 percent by 2018. As living conditions improve, more people will have access to and use additional electrical services, and these urban communities will need an energy supply to match this demand.

The estimates from the models, both the long-term rebound effect of 74 percent and the short-term rebound effect of 72 percent, are considerably larger than rebound effects estimated in other studies. Many things could cause these differences, but they do suggest variation in how different groups of people respond to lower prices in the energy market. It is possible that the rapid industrialization and urbanization in China contributes to this distinction. Because rebound effects are higher in China, programs looking to decrease energy consumption and greenhouse gas emissions through increased efficiency may not have nearly the success in China that they might have elsewhere. This has significant consequences for efforts to reduce global greenhouse gasses, where China stands to be a major player in international discussions to combat global climate change.

Efficiency is just one tool in energy and emission reduction. But in a developing country, other tools, like decreasing overall energy usage, may be much harder to achieve as more people are beginning to experience higher standards of living. If efficiency as a means of emission reduction is less effective than previously thought, it becomes even harder to significantly reduce energy consumption.

Article Source: Zhaohua Wang, Milin Lu, and Jian-Cai Wang, “Direct rebound effect on urban residential electricity use: An empirical study in China,” Renewable and Sustainable Energy Reviews 30 (Feb 2014): 124-32.

Feature Photo: cc/(mariusz kluzniak)