Government Support Needed to Boost Development of Energy-Saving Technologies

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A new study released on June 29 by the International Energy Agency estimates that world energy demand for lighting will be 80 percent higher in 2030 than today if no immediate action is taken. Yet at the same time, the potential for energy savings in the lighting sector is enormous given technologies already available in the market, notes the report, “Light’s Labour’s Lost: Policies for Energy-efficient Lighting.”

As the international community begins to embrace new energy-saving alternatives, China is getting in on the action as well. The country’s national “Green Lighting Project,” launched in 1996, is estimated to have saved 59 billion kilowatt-hours of electricity by the end of 2005, reducing 17 million tons of carbon dioxide emissions and 530,000 tons of sulfur dioxide emissions over the decade. Meanwhile, Chinese exports of energy-saving lighting products have averaged 20 percent annual growth in recent years, with a total export value of more than US $8 billion, reports the state-run newspaper China Economic Times.

Eyeing the rosy prospects for China’s energy-saving market, a variety of domestic players are jostling to get new technologies into consumer households. In December 2005, Chinese electronics manufacturer Guangdong LONON signed a licensing agreement with American Honeywell, a world leader in the building automation and control industry, to design and distribute medium- to high-end lighting fixtures and other energy-saving products in China. And Shanghai Hongyuan has stepped up investments in the development of energy-saving technologies including “electrode-less discharged lamps,” in which the discharge is induced by a high-frequency energy flux. At the Beijing Energy Efficiency Exhibition in June, more than 180 participants showcased numerous environmentally sound innovations, reflecting an upward trend in the energy-saving market.

This Chinese industry remains at an embryonic stage, however. While name-brand companies are getting proprietary technologies out in the market, more holistic solutions are needed to make the technologies commercially viable. Few companies have attempted this wider push, due in large part to the higher manufacturing and operating costs associated with energy-saving technologies and materials. Energy-efficient light bulbs, for example, are more than ten times as expensive to buy in the Chinese market than conventional ten-cent bulbs.

Greater government support could effectively reduce costs in this burgeoning industry. Japan, for example, has implemented an energy-saving law since 1979, stipulating stringent standards on products such as automobiles, air conditioners, televisions, copy machines, and computers. In addition, the government created tax incentives to encourage the consumption of energy-saving products: tax reductions and exemptions have been applied to 111 types of equipment, reducing operating costs by as much as 7 percent.

China is a different story. Though the government has issued several regulations favoring energy-saving industries in the past decade, these have not cut operational expenses to the degree anticipated. Domestic experts criticize the codes and standards for lagging far behind the new technologies, which are changing rapidly. The outdated regulations have become the primary hurdle for energy-saving manufacturers seeking to adopt advanced technologies, as they fear potential penalties for “breaking the rules.”

Governmental incentives, such as funding for R&D, tax incentives, and government procurement, play a key role in driving the market for new technologies, but are lacking in China. However, the Ministry of Finance is drafting a new income tax law that is expected to bolster the energy-saving industry by providing strong revenue support. Under the new law, industries highlighted in the country’s 11th five-year plan, such as those involved in energy efficiency, water, high technology, and coalmine safety, will enjoy a reduced income tax.

The international community is increasing capital investments in China’s energy-efficiency sector as well. The International Finance Corporation recently guaranteed RMB 200 million (US $25 million) out of the RMB 460 million set aside by China’s Industry Bank to provide loans for small- and medium-sized energy users to upgrade energy efficiency. It is expected that more than 150 million RMB will go to support energy efficiency and equipment investment, resulting in some 5–10 million tons of greenhouse gas reductions. The program, which covers the activities of three main groups—utility companies, suppliers of energy-efficiency equipment, and commercial banks—could become the basis for a new financing model for China’s energy-efficiency sector.