| Counter to experience in other developing countries, China's energy intensity (energy used per unit of output) has fallen remarkably during rapid economic growth. Observers have suggested that economic system reforms reduced energy intensity by encouraging structural change in the economy, improvements in product quality, and adoption of more energy-efficient technologies. I approach the issue from two directions, examining changes in industry and in the cement manufacturing subsector at the national level, and the response to reforms through case studies of cement manufacturing enterprises.; Through analysis of national-level data, I demonstrate that changes in sectoral structure have had little impact on energy intensity. Changes in product structure and in technical efficiency contributed equally to intensity declines in the cement industry, a key subsector. Using case studies, I show that reforms have in general lowered fuel intensity, and confirm that enterprises are increasingly stimulated to maximize profits and face growing competition. Enterprises are most strongly motivated to increase output and to improve product quality. New equipment and retrofits that plants adopt to increase output and raise quality typically reduce fuel intensities. Often, available technologies are fuel-efficient because of the government's efforts to promote efficient technologies.; On the other hand, changing prices of energy, especially coal, have had surprisingly little direct impact on technology adoption in the cement industry. Some of the case studies even demonstrate that reforms can contribute to a worsening of fuel efficiency. Reforms have removed some incentives to adopt efficient technologies, mainly as unintentional byproducts of larger efforts to dismantle the planned economy. More importantly, plants increasingly favor expanding capacity through building the least fuel-efficient type of kiln available. The technology is financially attractive, it produces higher-quality product that customers increasingly demand because of market reforms, and it allows partial independence from unreliable power supplies.; The reformed economy in its current state, while providing important incentives for efficiency improvements, may not be adequate to achieve an environmentally desirable level of energy efficiency. A broad framework, that accounts for behavior driven by economic and noneconomic mechanisms, is needed to understand how patterns of energy use change, and to design policy. |
