Boosting carbon productivity through energy efficiency
Because environmental externalities have not been factored into the costs of production, most economic development has progressively intensified its consumption of energy by resorting to the cheapest fuels available, inevitably coal and abundant oil. A price on carbon and the end of cheap oil changes that scenario dramatically and just as developed economies transitioned into the energy efficiency curve in the 1980s and 1990s, fast industrialising countries like Japan, Korea and India are seeing the best dividends to be had initially by jumping on the eco-efficiency bandwagon.
At Copenhagen the IEA’s Tanaka promoted the carbon productivity bonus to be achieved by energy efficient economies, telling delegates that “the bulk of the emissions reduction could be delivered by energy efficiency, accounting for over half of total abatement by 2030 in the IEA 450 Scenario”. The energy agency estimated that an additional US$8.3 trillion of investment in energy efficiency would deliver US$8.6 trillion in savings up to 2030 (IEA 2009). Tanaka commended the energy efficiency initiatives of China, India, Brazil and South Africa. He could also have mentioned his own country, resource scarce Japan, which has long understood the advantages of clean manufacturing and energy efficiency.
When Prime Minister Yukio Hatoyama pledged in 2009 to a 25 per cent cut in greenhouse gas emissions from 1990 levels by 2020, he delivered on climate policy but also resounded on a core Japanese aim of achieving resource security in part through efficiency. Japan’s climate governance is indelibly linked to its national energy strategy which involves improving energy efficiency by 30%, significantly reducing dependence on imported oil and increasing nuclear in the national energy mix (Hughes 2009). And at back of mind for the Japanese is the enormous commercial and trade opportunity beckoning in China as that country launches on its own low carbon strategy and environmental clean-up.
The challenge for China will be to achieve its efficiency targets. Over the past decade energy efficiency has grown significantly but off a very low base. The future holds higher benchmarks, and there is no certainty China will rise to task – if for no other reason than the scale of its growth in energy consumption keeps expanding. It is not for a want of investment in innovation that has caused China to struggle to meet its 2010 target of a 20 per cent reduction in energy intensity. The rate of growth and change has simply over-run efficiency dividends and, if the IEA is to be believed, until 2007 the carbon intensity of China’s energy system was still increasing (Jotzo, 2010). This was possibly because China’s energy efficiency drive was driven politically without much of a detailed implementation plan in place, including the governance and measurement and reporting mechanisms to manage such a major transformation.