China’s energy intensity target: On-track or off?

Author: Stephen Howes, ANU

Recent media reporting suggests good progress by China in relation to its target of reducing the energy intensity of its economy (energy consumed over output produced) by 20 per cent by 2010 relative to 2005.

With China’s announcement in the run-up to Copenhagen of a 2020 target to reduce emissions intensity (carbon dioxide emissions over output produced) by 40-45 per cent over 2005 levels, this 2010 energy intensity target has assumed greater prominence.

A recent China Daily article reported Premier Wen Jiabao as saying that China’s energy intensity had fallen by 14.38 per cent between 2005 and 2009, which would put the country on track to come close to if not hit its 20 per cent target with a year still to go.

The published data, however, seem to tell a different story. The National Statistical Bureau’s recently released 2009 Statistical Communique puts energy consumption for 2009 at 3.10 billion tons of standard coal equivalent up from 2.25 billion in 2005 (from China’s 2008 Statistical Yearbook). That’s growth of 37.97 per cent. The same 2009 Communique gives GDP growth for 2009 and 2008 at 9.6 per cent and 8.7 per cent respectively, and the previous year’s 2008 Communique gives 2007 and 2006 GDP growth at 13 per cent and 11.6 per cent. These annual figures give cumulative GDP growth  of 50.24 per cent from 2005 to 2009.

So GDP grew 12.27 percentage points faster than energy between 2005 and 2009. The reduction in energy intensity is equal to this difference divided by 1 plus GDP growth, which, after rounding, is 8.2 per cent. This implies that China is less than half way towards its 2010 target with only one year out of five to go.

2009 was always going to be a difficult year because of the fiscal stimulus and all-out effort for growth. The 2009 Statistical Communique reports that energy intensity fell in 2009 by only 2.2 per cent. But the record for 2005-2008 doesn’t look too good either, with a cumulative reduction in energy intensity over these three years of only 6 per cent, much lower than earlier estimates.

Note that while I’m using the latest numbers in the public domain, they have been released at various times. Pehaps there have been some subsequent revisions of the earlier numbers. Still, its hard to imagine that any revisions would be of a magnitude to close this puzzling gap.

To conclude, while there is some uncertainty, the published data suggest that China is well off-track from meeting its 2010 target. Of course, China deserves credit for at least having a serious emissions reduction target, unlike either the United States or Australia, for example. But the world will be closely watching China’s performance against its announced targets. At a minimum, the derivation of the 14.38 per cent claim needs to be explained, and the apparent discrepancy with the published data resolved.

Stephen Howes is Professor of Economics in the Crawford School of Economics and Government at Australian National University and worked on the international dimensions of the Garnaut Climate Change Review.