Maximizing the economic welfare extracted from the energy system is a key priority for all governments. This can be measured by a country’s energy productivity. Perhaps nowhere else in the world is this issue more salient than in China. China is the world’s largest energy consumer and has led global economic growth in the first part of the twenty-first century. Furthermore, in the interconnected world we live in, decisions in China have global impacts. In periods of some of its fastest growth (from 2002-2005) China experienced declining energy productivity. In 2006, China put in place ambitious energy intensity targets. Combined with policies at the sector and product level, these contributed to China reversing its falling energy productivity. Building on this success, China’s 12th Five Year Plan, extended and deepened these reforms. But within China’s system of provincial and industrial energy intensity targets there is a blind spot which could reduce the potential welfare gain from these plans. Assessing the embodied energy in interprovincial trade reveals these potential gains and provides the information required to encourage regional practices to align better with national objectives. The response from Chinese policymakers to the challenges of building new infrastructure while managing resource and environmental constraints provides a valuable lesson for governments in rapidly developing countries, such as Saudi Arabia. A summary of key lessons from the Chinese experience of managing energy productivity is presented in the conclusion.
Former Research Fellow Nicholas is an applied economist specializing in economic growth, energy and natural resource and environmental economics. He was leading KAPSARC… Nicholas is an applied economist specializing in economic growth, energy and natural resource and environmental economics. He was leading KAPSARC research on energy productivity and is a subject matter expert on energy efficiency, industrial strategy and energy pricing with KAPSARC Advisory. He has received several awards for his published work, including recognition for his first book on carbon markets by the American benchmarking journal Choice as a top 25 academic publication in the category of economics in 2010. Nicholas is an experienced policy advisory, thought leader and project manager with strengths in interdisciplinary issues and applied policy gained from working as a ministerial adviser in Australia and in a variety of international roles. He is also an experienced lecturer and public speaker on energy productivity, green growth and sustainable development and has presented work at a range of technical and policy fora including meetings of the International Association of Energy Economists and in support of the G20 Energy and Sustainability Working Group and United Nations Sustainable Development Goals processes.