On Oct 1, 2008, one of the most far-reaching environmental regulations in the country's history came into effect - a directive requiring every government above the county level to make energy efficiency a part of its long-term plans.

The State Council's national decree outlines a series of energy-saving regulations at State-funded departments and organizations. It says that State-funded units at or above the county level must have offices to supervise energy use and audit energy consumption. Departments must make annual energy-saving plans and take specific action, such as using energy-friendly products.

The decree is a breath of fresh air in a hazy regulatory environment. Beijing clearly understands that reducing pollution can only happen when China stops wasting money on the inefficient use of energy.

However, although the chemical industry has been offering many of these solutions for years, structural barriers to the adoption of energy efficient solutions means that China needs more of the same if it wants to promote the adoption of these solutions and make a visible difference in the long term.

One such barrier can be seen in the construction industry, and the new decree rightly tackles this area first. An improvement in building insulation standards both reduces emissions and saves money. However, because the savings are quite low for the individual, it can only be implemented and enforced top-down by the government.

In large Chinese cities, the top consuming households use around 5,000 kWh each for cooling and heating - hence, 1 million households would consume 5 billion kWh of power. With technologies that are available today, many from the chemical industry, these households or buildings can realistically lower their consumption by 65 percent.

Such a reduction in 1 million households could theoretically heat or cool an additional 1.8 million middle class apartments, or save the cost and emissions of a medium sized power plant. However, annual savings of 2,000 to 3,000 yuan per family, at today's energy prices in China, will not lead to a change in behavior, nor act as a financial incentive to save or invest.

The best way out of this dilemma is therefore a rapid reduction in energy subsidies to make energy-efficient homes financially attractive. If China can let energy prices rise to international levels, then people will follow, and start implementing energy saving measures. Moreover, energy efficiency standards and the use of modern construction materials must be systematically and rigorously enforced at the construction site. In this particular case, by scanning buildings with an infrared sensor one can instantly see the difference between a properly insulated house and one that is not.

Automotive sector

Next, China needs to look at one of the other big energy-wasters, the automotive industry. Here, the structure of the market also inevitably points to regulation as a solution. Automotive catalysts have been around for 35 years and are one of the greatest success stories of automotive chemistry because they dramatically reduce pollutants. When combined with lightweight plastic engine components and performance-enhancing fuel additives, they can help cars be significantly cleaner while going much further on a tank of gas.

It takes political will to roll out these solutions rapidly to an entire industry. Beijing's transport authorities have implemented Euro IV emission standards for city buses and government trucks, an important first step.

Because it is the consumer and not the manufacturer who will enjoy the savings in the short term, it is up to China's national and local governments to define, implement, and enforce standards for energy consumption and discharge. The city planning authority and the local administration should be the architects and drivers of such a long-term process and its practical implementation.

(China Daily October 30, 2008)