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Taming the Concrete Dragon?

By: Stephen Hammer & Elizabeth Balkan

December 01, 2008

According to the recently published World Energy Outlook, 80% of China's energy use occurs in cities, reflecting the dramatic population and economic shifts that have occurred in that country in recent decades.

China's growing urban energy use has global price impacts. The country's heavy reliance on coal to fuel urban power demand also has major environmental consequences both directly in these cities and in rural communities where the coal is mined or turned into electricity. Recently, emissions from China's coal power plants have been blamed for degraded air quality in American and Canadian cities, as the plume of emissions blows across the Pacific Ocean.

There are many ways to explain growing urban energy demand in China. Automobile ownership rates in Chinese cities have increased dramatically, reflecting rising personal income levels. The country where bicycle usage was until recently ubiquitous now faces significant motor vehicle traffic jams, forcing some local authorities to grapple with the question of whether to continue to assign separate traffic lanes to bicycles. Should car ownership rates begin to approach levels common in American cities, China's cities could literally become huge parking lots.

Rising household income also manifests itself in growing ownership rates of consumer appliances. Between 2000 and 2007, air conditioner ownership around Shanghai nearly doubled, with the average household now owning two air conditioning units, making that city's steamy summers more bearable. Similar stories can be told in other municipalities.

Air conditioning use and the increased ownership of other consumer appliances like computers and mobile phones, have helped drive per capita electricity use in the urbanized core of Shanghai from 113 kWh in 1990 to 803 kWh in 2005. Just to put this in perspective, New York City's per capita residential electricity demand was 1662 kWh in 2005.

Local Energy Policy Trends
Will urban energy demand growth continue unabated, or are local authorities on the case? While most cities in China lack formal energy policies or comprehensive sustainability plans along the lines of New York's PlaNYC, that's not to say they're not thinking about these issues. Much of the energy policy focus in China's cities has emphasized reducing the energy intensity of local activities, as a response to a national mandate outlined in central government's 11th Five-Year Plan. Under the plan, provinces and cities must reduce by 20% the amount of energy required to produce one unit of gross domestic product.

Energy security challenges — in the form of periodic blackouts or brownouts — were one of the driving forces behind this mandate, as demand growth has outstripped the national power system's ability to deliver electricity to cities on peak summer demand days several times over the past few years. As recently as 2004, local authorities forced the Volkswagen and General Motors vehicle production facilities in Shanghai to shutter operations for several days because of the dire local electricity situation.

Cities have responded to the energy intensity mandate in different ways. Some have established limits on the coldest allowable air conditioner settings. The city of Rizhao in south China has aggressively touted the benefits of solar hot water systems, promoting them so thoroughly that 99% of residential households reportedly have one or more units on their rooftops, balconies, or exterior walls. Other cities in China are focusing heavily on transport-related energy use, developing new bus rapid transit schemes and subways to keep people out of their cars and reduce local pollution levels. A few have taken more dramatic steps, forcing large privately owned energy-consuming businesses to shut down altogether or encouraging them to relocate outside of the city.

Shanghai has pursued an aggressive energy strategy, reducing local energy intensity by 84% since 1985. Rapid growth in the less energy-intensive service and financial sectors is one explanation for this dramatic drop, as is a concerted effort to shut down the most inefficient factories located around the city. Given that Shanghai's economy has slowly been transitioning away from heavy manufacturing, the amount of energy consumed in commercial businesses and residential buildings is becoming a much more prominent part of Shanghai's energy picture. One recent study estimates that these buildings consumed approximately 32% of electricity used in the city in 2004, but given the phenomenal level of construction occurring in Shanghai each year, this number must be rising rapidly.

Building Energy Policymaking a Challenge at the Local Level
For a variety of reasons, reducing building-related energy consumption is a challenging proposition. From an institutional perspective, central government's energy policies have been written in a deliberately vague manner, allowing for implementation flexibility across provinces and cities in dramatically different socio-economic or geographic circumstances. This can impede local authority action to promote green buildings, however, out of fear that local policies may leapfrog central government's actual intent. For municipal officials seeking to advance within provincial or central government, overstepping one's bounds can be a real career killer.

Within local government, planning and development responsibilities tend to be split among several different agencies, each of which reports to different Vice Mayors and gauges success in different ways (e.g., Plan, Plan, Plan! vs. Build, Build, Build!). The planning permit approval process can be convoluted, involving much back and forth negotiations between the developer and the local authority. Several developers we interviewed in Shanghai last summer suggest it is possible to negotiate alternative zoning rules for an individual parcel of land. Unfortunately, this can lead to a patchwork of development across the city, making energy system master planning more difficult at the city level.

Market impediments also slow the push for green buildings. China has a long history of artificially depressing energy prices to facilitate economic development. Local authorities do have the ability to modestly raise rates above national levels — a step Shanghai Municipal Government took just a few months ago — but these prices are still a bargain compared to what market prices would otherwise dictate, making it difficult to promote voluntary action by real estate developers.

Building energy efficiency advances can also be contingent upon local building practices. Although it is commonplace to install large HVAC systems capable of serving all building tenants in commercial properties, residential properties in Chinese cities south of the Yangtze River are generally built as a shell, without any centralized heating or cooling system. The owners of each unit are instead expected to outfit their unit according to their own needs, desires, and budget. Large residential buildings are easily identifiable because of the number of small, less efficient heating and cooling units affixed to the exterior of the building.

Cultural factors may also explain local government's hesitancy to be more proactive on green building efforts. After decades of forced limits on consumer product availability, households are now exercising their buying power from fully-stocked shelves. Some commentators argue that it has become culturally unacceptable for local authorities to reinstate command-and-control policies telling the public which energy-using technologies they can and cannot buy when outfitting their homes.

Cause for Optimism?
The green building news is not all bad, however. Shanghai Municipal Government has been instrumental in pushing for the design and development of the Dongtan Eco-City on nearby Chongming Island in the middle of the Yangtze. The plans are impressive, with buildings in the new development anticipated to use but a fraction of the energy consumed by other buildings around the city. While there are concerns that shovels have yet to break ground despite three years of planning, China has clearly proven its ability to move amazingly quickly on large construction projects when it so chooses. Ask any recent visitor to a downtown Shanghai hotel, and they'll tell you stories about waking up in the middle of the night from noise associated with the 24-hour work schedule on a new skyscraper under construction next door. Tianjin Eco-City outside of Beijing actually did break ground in October; it too calls for highly efficient residential housing and commercial properties and a green power supply for these buildings.

More good news appeared in early November, when China's Ministry of Housing and Urban-Rural Development signed a commitment with a Shanghai-based NGO known as JUCCCE (the Joint US-China Cooperation on Clean Energy) to develop a new energy policy training program for the mayors and vice-mayors of Chinese cities. Columbia University's Urban Energy Program is playing a central role in that program, aiding with the development of the curriculum and developing case studies profiling China-relevant energy efficiency initiatives implemented in cities around the world. Building-related topics will be an important focus of the training, which over the next three years will introduce more than 300 mayors and vice-mayors (representing hundreds of millions of people) to proven urban energy policy and program strategies. Vendors and policy experts involved in these programs will travel to China to participate in the training, so they can directly answer the questions of local officials concerned about how to implement these ideas within China's unique regulatory, cultural, technology, and market context.

Given China's voracious energy appetite, getting urban energy planning "right" is of critical importance to all of us. The new mayoral training program will help bring some of the best ideas from around the world to the table, and we're excited to help support this important initiative. However success will also require profound change in how decisions are made at different levels of government, , and the current economic downturn will provide us with important new insights about where energy ranks on the country's priority list during hard-times. The news so far indicates that energy efficiency projects will be a priority of central government's giant economic stimulus package. If true, this bodes well for those who want to see China's "concrete" dragon cut its energy appetite to a more manageable and environmentally sustainable level.

We'll report back next year with some observations from the first round of the mayoral training program, and with other energy news that we're seeing on the ground in other Chinese cities.



Dr. Stephen Hammer is Director of the Urban Energy Program at Columbia University's Center for Energy, Marine Transportation and Public Policy (CEMTPP).

Elizabeth Balkan was formerly a researcher at CEMTPP; she currently consults on a range of China energy sector-related initiatives.

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