Developing an Energy Efficiency Service Industry in Shanghai

Publication Type


Date Published




The rapid development of the Chinese economy over the past two decades has led to significant growth in China's energy consumption and greenhouse gas (GHG) emissions. Between 1980 and 2000, China's energy consumption more than doubled from 602 million to 1.3 billion tons of coal-equivalent (NBS, 2003). In 2000, China's GHG emissions were about 12% of the global total, ranked second behind only the US. According to the latest national development plan issued by the Chinese government, China's energy demand is likely to double again by 2020 (DRC, 2004), based on a quadrupling of its gross domestic product (GDP).

The objectives of the national development plan imply that China needs to significantly raise the energy efficiency of its economy, i.e., cutting the energy intensity of its economy by half. Such goals are extremely ambitious, but not infeasible. China has achieved such reductions in the past, and its current overall level of energy efficiency remains far behind those observed in other developed economies. However, challenges remain whether China can put together an appropriate policy framework and the institutions needed to improve the energy efficiency of its economy under a more marketbased economy today.

Shanghai, located at the heart of the Yangtze River Delta, is the most dynamic economic and financial center in the booming Chinese economy. With 1% of Chinese population (13 million inhabitants), its GDP in 2000 stood at 455 billion RMB yuan (5% of the national total), with an annual growth rate of 12% — much higher than the national average. It is a major destination for foreign as well as Chinese domestic investment. In 2003, Shanghai absorbed 10% of actual foreign investment in all China (Economist, January 17-23, 2004).

Construction in Shanghai continues at a breakneck pace, with an annual addition of approximately 200 million square foot of residential property and 100 million square foot of commercial and industrial space over the last 5 years. It is one reason that China consumed over 60% of the world's cement production in 2003 (NBS 2004)!

Energy consumption in Shanghai has been growing at 6-8% annually, with the growth of electricity demand at over 10% per year. Shanghai, with very limited local energy resources, relies heavily on imported coal, oil, natural gas, and electricity. While coal still constitutes over half of Shanghai's energy consumption, oil and natural gas use have been growing in importance. Shanghai is the major market for China's West to East (natural gas) Pipeline (WEP). With the input from WEP and off-shore pipelines, it is expected that natural gas consumption will grow from 250 million cubic meters in 2000 to 3000-3500 million cubic meters in 2005.

In order to secure energy supply to power Shanghai's fast-growing economy, the Shanghai government has set three priorities in its energy strategy: (1) diversification of its energy structure, (2) improving its energy efficiency, and (3) developing renewable and other cleaner forms of energy. Efficiency improvements are likely to be most critical, particularly in the near future, in addressing Shanghai's energy security, especially the recent electricity shortage in Shanghai.

Commercial buildings and industries consume the majority of Shanghai's, as well as China's, commercial energy. In the building sector, Shanghai has been very active implementing energy efficiency codes for commercial and residential buildings. Following a workshop on building codes implementation held at LBNL for senior Shanghai policy makers in 2001, the Shanghai government recently introduced an implementation guideline on residential building energy code compliance for the downtown area of Shanghai to commence in April, 2004, with other areas of the city to follow in 2005. A draft code for commercial buildings has been developed as well.

In the industrial sector, the Shanghai government started an ambitious initiative in 2002 to induce private capital to invest in energy efficiency improvements via energy management/services companies (EMC/ESCOs). In particular, the government is developing a policy framework to encourage the use of energy performance contracting as the catalyst to stimulate the market for energy efficiency services. In September 2003, the Shanghai Economic Commission, the Shanghai Construction and Management Commission, the Shanghai Foreign Expert Bureau, and the Lawrence Berkeley National Laboratory sponsored the International Workshop on Energy Efficiency Services Industries to share experiences of energy services industry development in the US, Japan, and China. The major findings of the workshop are summarized in this report.

Year of Publication



Research Areas

Related Files