5. Application of AIM/Enduse Model to China
Xiulian Hu1, Kejun Jiang1, and Hongwei Yang1
Summary. Along with rapid economic growth, as a nation, China has become thesecond highest consumer of energy in the world and the greatest emitter of CO2.
The amount of future CO2 emissions in China and the means of reducing theseemissions are currently important issues to resolve. Base on sectoral andtechnological information, this study analyzed future CO2 emissions scenarioswith respect to several cases and assessed the effects of different policy options
using the AIM/Country model. It also analyzed CO2 reduction costs for various
sectors. From the results, it was found that CO2 emissions will increase along withthe rapid economic development in China, but it is possible to gradually minimize
the growth rate of CO2 emissions through technological progress directed towards
efficient markets and the adoption of policies for CO2 reduction. Technologicalprogress plays a key role in CO2 emissions mitigation and local air pollution
abatement.

5.1 Introduction
In China, the annual average GDP growth rate was 8.9% in the 1980s following
the country’s economic reforms and the opening up of its economy. From 1991 to
2001 the average growth rate increased to 9.86%, giving China one of the highest
economic growth rates in the world. Rapid economic development has stimulated
major social changes in China. The reform of economic mechanisms, changes togovernment functions, nurturing of the market economy, raising the quality of life,
etc., comprise the major social changes in China. The industrial structure is alsochanging. For example, secondary industries have increased their share of overall
economic activity, expressed as a common characteristic of countries in the earlyphase of industrial development. During the same period, personal income rapidly
increased and residential consumption patterns also changed greatly. The period
over which these changes will take place will be much shorter in China than was
the experience of the developed countries.
Along with rapid economic development, energy production and consumption
has increased very quickly. In 2000 the figures were 901 Mtoe (million ton oil
equivalent) and 903 Mtoe respectively, with annual growth rates of 5.2% and4.8% from 1980 to 2000. China is now one of the world's major countries withrespect to energy production and consumption. One significant characteristic ofenergy production and consumption in China is that coal plays a larger role than inmost other countries. In 1994, coal accounted for 78% of total energy production
1

Energy Research Institute, State Development Planning Commission, Guohong Building,
A-11 Muxidi Beili, Xicheng District, Beijing 100038, China

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Hu, X. et al.

and 48% of final energy consumption. This level of energy production andconsumption creates serious environment problems and is indicative of low energy
efficiency. Since there are limitations on energy resources and little capacity toimport energy into China from the international market, it is difficult to change
this situation in the near future. Following the increase in energy consumption
together with the invariable energy structure, CO2 emissions in China increased
from 0.41 billion tons of carbon in 1980 to 0.65 billion tons of carbon in 1990.
The share of CO2 emissions in China in relation to total world CO2 emissions has
been growing, and this trend can be expected continue in future. Rapid economic
growth, with fossil fuels meeting a large part of energy consumption, and thedemand for a better life style will drive China into becoming a conspicuous
consumer of energy and emitter of CO2 compared to the rest of the world.
Considering this development trend, a better understanding of future trends inrelation to energy demand and CO2 emissions is critical, and it is also important toassess the effects of various means of reducing CO2 emissions in China. Many
research activities on CO2 emissions scenarios in China have already been
conducted. Some significant scenarios were provided by the IPCC (IS92 and
SRES scenarios) (Nakicenovic 2001), IEW, WEC, GREEN, SGM and several
other groups (Houghton et al. 1995). It is noticeable that the range of variability inthe results of these scenarios is very large (Zhou et al. 1997). Up to now, most ofthese research activities have been based on a macroeconomic approach and did
not consider the far-reaching technological progress and structural social changes
that have been observed in recent years in China. The study described in thisreport tries to assess the effects of such technological progress and structuralsocial changes as well as possible policies on future energy consumption and CO2
emissions based on more detailed data, including energy services and processes,
energy technologies, and various social changes.
Since 1994, the Energy Research Institute has worked together with the AIMteam at NIES to develop an AIM/Country model for China. After several years
work, the AIM-China model was developed with the inclusion of 26 sectors
involving more than 500 technologies. Energy demand and CO2 emissions by
2030 were simulated, while some policies that focus on technological progress andcollaboration were assessed as to their contribution to controlling CO2 emissions.

5.2 Input Assumptions and Simulations
Growth in economic development is a key assumption for this research. It is
commonly viewed that China can continue to develop very quickly as long as no
major social upheaval occurs. Many studies had been conducted to forecast future
economic development in China. By synthesizing several forecasts on economic
development in China, annual average GDP growth rates of 9% from 1990 to
2000, and 7.5%, 6.5%, and 5.5% from 2000 to 2010, 2010 to 2020, and 2020 to2030, respectively, were used for the economic development scenario in thisresearch.

5. Application of AIM/Enduse Model to China

77

Population is another key factor for making forecasts in this research. Major
aspects of population growth that needed to be considered include: planned
population policy; the decline in fertility accompanying the expected increase inincome; the shift in the age of marriage to later in life; the prospect of fewer
children due to family working patterns involving both the husband and wife
typically having jobs; the desire for fewer children among well-educated people;
the increase in the average life span; the decline in the death rate, and so on. It isbelieved that the growth in the population will follow the pattern of developed
countries in the Asian region. Based on these factors, and with reference to theresults of some other forecasts on population, the population scenario used in thisresearch was that the population will be 1.28 billion in 2000 and 1.39 billion, 1.47
billion and 1.54 billion in 2010, 2020 and 2030, respectively, with an averagenatural growth rate of 1.14% from 1990 to 2000 and 0.88%, 0.55% and 0.45%
from 2000 to 2010, 2010 to 2020, and 2020 to 2030. The rate of urbanization was
taken as 32%, 38%, 43%, and 49% in 2000, 2010, 2020 and 2030, respectively.
According to the current statistics on China's national economy as well as theavailable data, energy end users in this study are divided into five sectors; theindustrial, agricultural, services, residential and transport sectors. Table 1 gives theclassification of these sectors and their sub-divisions. Every sector is split into
several sub-sectors, or a products or services mode. The industry sector isclassified into sub-sectors, and then every sub-sector includes one or moreproducts. For example, the non-ferrous metals sub-sector includes a number of
products such as copper, aluminum, zinc and lead. For the transport sector, under
every sub-sector, transport modes for passenger transport and freight transport are
given. The residential sector is split into urban and rural to match the different
development patterns in each. Different technologies related to the demand forservices are collected for every sub-sector and product. Energy services andtechnology selection for each sector or product is determined so that energy
Table 1. Classification of energy end user sectors
Industrial
sectorSub-sectors
Iron and steel
or products Non-ferrous
metalsBuilding
materials
Chemicalindustry
Petrochemicalindustry
Paper-making
TextileMachineryPower
generation
Oil refinery
Sectors

Agricultural
sectorIrrigation
Farmingwork
Agricultural
products
processing
Fishery
Animalhusbandry

Residential
sectorUrban energy
use
Rural energy
use
Space
heating
CoolingLighting
Cooking andhot water
Householdelectric
appliancesServices
sectorSpace
heating
CoolingLighting
Cooking andhot water
Electric
appliances

Transport
Railwaytransport
Road
transport
Waterways
transport
Airtransport

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Hu, X. et al.

consumption and CO2 emissions can be estimated.
Energy services scenarios for major sectors and products are listed in Table 2.
These scenarios reflect the situation of economic development and structuralsocial change in China. The scenarios determine the increase in the level ofdemand for energy services that will be met by the selected technologies.
Table 3 lists the major technologies used in this model. In AIM-China, theseenergy use technologies are mainly broken down into three categories:
1. Technologies for services production: they are technologies to satisfy services

Table 2. Energy services forecast by industrial sector (index, 1990=1)
Energy Services
Steel
CementGlass
Paper
BricksSoda ash
Caustic soda
Fertilizer
Services area
Traffic volume for private cars
Car traffic volume in cities
Car traffic volume in rural areas
Railway passenger transport
Steam locomotives
Diesel locomotives
Electric locomotives
Railway freight transport volume
Road transport
Waterways transport
Air transport
Rural population
Rural households
Rural household land area
Urban population
Urban households
Urban household area
Cooking in urban households
Electric cooking in urban areas
Hot water in urban areas
Space heating in urban areas
Air conditioners in urban areas
Fans in urban areas
Lighting: C in urban areas
Lighting: F in urban areas
Refrigerators in urban areas
Color TVs in urban
Black/white TVs in urban areas
Washing machines in urban areas

1990
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1

2000
1.8
3.3
2.0
2.1
1.3
2.4
1.9
1.5
1.3
21.0
19.8
55.6
1.3
0.0
2.0
2.5
1.5
2.2
1.3
4.9
1.0
1.2
1.0
1.4
1.5
1.3
0.0
0.0
17.5
1.9
46.7
1.9
1.3
10.0
2.3
2.3
1.3
2.5

2010
2.1
5.2
3.5
2.6
1.8
0.5
3.0
1.8
2.0
118.7
120.5
68.3
1.8
0.0
2.8
3.6
2.0
4.0
1.6
12.9
1.0
1.2
0.9
1.8
2.0
1.6
2.0
4.7
54.7
2.9
141.7
2.8
1.3
25.1
4.6
4.4
1.7
4.6

2020
2.3
6.0
4.3
3.2
2.1
6.1
3.6
2.1
2.5
523.3
534.0
209.7
3.5
0.0
4.5
7.9
2.4
5.7
1.6
80.0
1.0
1.2
0.9
2.1
2.5
1.8
2.5
6.5
111.3
4.1
296.7
3.7
1.6
34.3
7.8
7.0
0.5
8.4

2030
2.6
6.6
4.9
3.7
2.4
7.0
4.1
2.3
3.1
916.6
924.7
682.5
6.1
0.0
6.2
16.4
2.6
7.4
1.6
182.0
0.9
1.2
0.9
2.5
3.1
2.1
3.1
8.6
175.2
5.4
689.3
4.7
1.9
46.9
10.9
10.6
0.0
14.2

5. Application of AIM/Enduse Model to China

79

supply. These technologies include the renewal of various old technologies andnewly installed technologies.
2. Technologies for energy recovery utilization: including various technologies forresidual heat, combustible gases and black liquor recovery and their utilization.
3. Technologies for energy conversion: in-plant electric power generators,
technologies for thermal energy conversion (e.g. industrial boilers) as well as
electric power generation using residual heat and combustible gases, etc.
More than 500 technologies have been collected for the analysis, which covers
the major technologies used in every sector defined in Table 1. Some advanced
technologies have been taken into account even though they are not currently usedin China. Basic data for the technologies include the purchase price, annual rate ofTable 3. Energy services technologies used in this simulation
Classification
Iron and steel

Technologies (equipment)
Coke oven; Sintering machine; Blast furnace; Open hearth furnace (OH); Basic
oxygen furnace (BOF); AC-electric arc furnace; DC-electric arc furnace; Ingot
casting machine; Continuous casting machine; Continuous casting machine withrolling machine; steel rolling machine; Continuous steel rolling machine;
Equipment for coke dry quenching; Equipment for coke wet quenching; Electric
power generated with residue pressure on top of the blast furnace (TRT);
Equipment for coke oven gas; OH gas and BOF gas recovery; Equipment for cogeneration
Non-ferrous metals Aluminum production using the sintering process; Aluminum production using
the combination process; Aluminum production using the Bayer process;Electrolytic aluminum using the upper-insert cell; Electrolytic aluminum using
the side-insert cell; Crude copper production with flash furnace; Crude copper
production using an electric furnace; Blast furnace; Reverberator furnace; Leadsmelting-sintering in a blast furnace; Lead smelting using a closed blast furnace;
Zinc smelting using the wet method; Zinc smelting using the vertical pot method
Building materials Cement: Mechanized shaft kiln; Ordinary shaft kiln; Wet process kiln; Lepol
kiln; Ling dry kiln; Rotary kiln with pro-heater; Dry process rotary kiln with precalciner; Self-owned electric power generator; Electric power generator withresidue heat
Bricks and tiles: Hoffman kiln; Tunnel kiln
Lime: Ordinary shaft kiln; Mechanized shaft kiln
Glass: Floating process; Vertical process; Colburn process; Smelter
Chemical industry Equipment for synthetic ammonia production: Converter; Gasification furnace;Gas-making furnace; Synthetic column; Shifting equipment for sulphur removal
Equipment for caustic soda production: Electronic cells using the graphite
process; Two-stage effects evaporator; Multi-stage effects evaporator;
Equipment for rectification; Ion membrane method
Calcium Carbine production: Limestone calciner; Closed carbine furnace; Opencarbine furnace; Equipment for residual heat recovery
Soda ash production: Ammonia and salt water preparation; Limestone calcining;
Distillation column; Filter
Fertilizer production: Equipment for organic products production; Equipment forresidual heat utilization
Petrochemical
Facilities for atmospheric and vacuum distillation; Facilities for rectification;industry
Facilities for catalyzing and cracking; Facilities for cracking with hydrogen
adding; Facilities for delayed coking; Facilities for light carbon cracking;Sequential separator; Naphtha cracker; De-ethane separator; Diesel cracker; Depropane cracker; Facilities for residual heat utilization from ethylene
Paper-making
Cooker; Facilities for distillation; Facilities for washing; Facilities for bleaching;
Evaporator; Crusher; Facilities for de-water; Facilities for finishing; Facilities
for residue heat utilization; Facilities for black liquor recovery; Co-generator;
Back pressure electric power generator; Condensing electric power generator

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Hu, X. et al.

diffusion rate, unit energy consumption, life span, year of entering the market andyear of obsolescence, production capacity, etc. Table 4 gives a sample list oftechnological data for the coke making process in the steel industry.
Prices and emissions factors for energy and other materials inputs are listed inTable 5.
In the analysis of the AIM-China model, particular attention was paid to natural
gas supply and traditional biomass supply. According to the possible future fornatural gas production and imports, no limitation was placed on natural gas use
except in the residential sector. Natural gas use in the residential sector is strongly
limited by government policy and investment in infrastructure. Traditional
biomass use was limited to maintaining it at the most at the 1994 level among
Table 3. Energy services technologies used in this simulation (continued)
Classification
TextilesMachinery

Irrigation
Farming work
Agricultural
products
processing
Fishery
Animal husbandry
Space heating fordwellings

Technologies (equipment)
Cotton weaving process; Chemical fiber process; Wool weaving and textile
process; Silk production process; Printing and dyeing process; Garment making;Air conditioners; Lighting; Facilities for space heating
Ingot process: Cupola; Electric arc furnace; Fan
Forging process: Coal-fired pre-heater; Gas-fired pre-heater; Oil-fired preheater; Steam hammer; Electric-hydraulic hammer; Pressing machine
Facilities of heat processing: Coal-fired heat processing furnace; Oil-fired heatprocessing furnace; Gas-fired heat processing furnace; Electric processing
furnaceCutting process: Ordinary cutting; High speed cutting
Diesel engine; Electric induct motor
Tractor; Other agricultural machines
Diesel engine; Electric induction motor; Processing machines; Coal-fired
facilities
Diesel engine; Electric induction motor
Diesel engine; Electric induction motor; Other machines
Heat supplying boiler in a thermal power plant; Boiler for district heating;
Dispersed boiler; Small coal-fired stove; Electric heater; Brick bed linked to astove (Chinese KANG)
Air conditioner; Electric fan

Cooling indwellings
Lighting in
Incandescent lamp; Fluorescent lamp; Kerosene lamp
dwellings
Cooking and hot
Gas burner; Bulk coal-fired stove; Briquette-fired stove; Kerosene stove; Electricwater in dwellings cooker; Cow dung-fired stove; Firewood-fired stove; Methane-fired stove
Electric
Television; Cloth washing machine; Refrigerator; Others
AppliancesSpace heating in
Heat supplying boiler in the thermal power plant; Boiler of district heating;the services sector Dispersed boiler; Electric heater
Cooling
System of central air conditioner; Air conditioner; Electric fan
Lighting
Incandescent lamp; Fluorescent lamp
Cooking and hot
Gas burner; Electric cooker; Hot water pipeline; Coal-fired stove
water
Electric appliances Copying machine; Computer; Elevator; Others
Passenger and
Railways (passenger and freight): Steam locomotive; Internal combustion engine
freight transport
locomotive; Electric locomotive
Highway (passenger & freight): Public diesel vehicle; Public gasoline vehicle;
Private vehicle; Large diesel freight truck; Large gasoline vehicle; Small freighttruck
Waterways (passenger & freight): Ocean-going ship; Coastal ship; Inland ship
Aviation (passenger & freight): Freight airplane; passenger airplane5. Application of AIM/Enduse Model to China

81

rural residents.
To assess the effect of technological progress and the alternative policy options
for energy consumption and CO2 emissions in China, several cases were defined
to run the model. The cases defined in Table 6 include the “frozen technology
case,” the “market case” and the “policy case.” They are described in thefollowing.
The frozen technology case, only used for comparison with other cases, canalso be called the no technological progress case. It is presumed that the present
services production technologies and energy efficiency will remain at the samelevel as in 1990 without any technological progress. However, this does not meanthat energy consumption for this case will increase at the same rate of growth asthat for economic development.
In the market case, in a properly functioning market it is assumed thattechnologies can be selected based on market mechanisms. It will consider
technological options after rational assessment of the economic benefits provided by
the energy services technologies. This case is designed to emphasize thecontribution of market mechanisms to energy use conservation and CO2 emissions
reduction. China is at the stage of economic reform shifting from a planned
economy to a market economy and this is expected to be completed in the next 10
years (Zheng et al. 1995). The results of the analysis for this case could be used to
explain the benefits of market mechanisms, and it is also used as a base line
emissions scenario for the medium term.
Table 4. Technological parameters in the coke making process of the steel industry
Name oftechnologies
Smallcokingoven

Outputmass

Fixed Life Year of Year of Output Input
price span introduc obsolesc(100Mcal/t*)(yuan/t*) (yr.) tion
ence
Coal
185
20
1930
2030
36.46 76.00
Utility*
185
20
1930
2030
36.46
4.80
Electricity
185
20
1930
2030
36.46
0.40
Coal
185
20
1930
2030
5.20 76.00
Input
materials

Coke
Coke
Coke
Coke
oven gas
Coke
Coal
210
20
1970
2050
Large
cokingCoke
Utility**
210
20
1970
2050
oven
Coke
Electricity
210
20
1970
2050
Coke
Coal
210
20
1970
2050
oven gasInternational Coke
Coal
330
30
1985
2100
Advanced
Coke
Utility*
330
30
1985
2100
cokingCoke
Electricity
330
30
1985
2100
oven
Coke
Coal
330
30
1985
2100
oven gas
New
Coke
Coal
380
30
1995
2100
advanced
Coke
Utility*
380
30
1995
2100
cokingCoke
Electricity
380
30
1995
2100
oven
Coke
Coal
380
30
1995
2100
oven gas*
ton steel output**"Utility" used in this table is defined in Appendix A of Part IV.

36.46
36.46
36.46
5.80

68.00
4.80
0.44
68.00

36.46
36.46
36.46
7.20

59.89
4.05
0.23
59.89

36.46
36.46
36.46
7.60

54.20
4.26
0.23
54.20

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Hu, X. et al.

The policy case is defined in order to analyze the effects of climate policies in
reducing CO2 emissions. As a commonly used method, the policy case wasdefined here as the levying of a carbon tax of 100 yuan per ton of carbon andreturning all the revenues from this carbon tax as subsidies for the diffusion ofadvanced technologies. The introduction of a carbon tax is assumed to begin from2000. The introduction of advanced technologies would be promoted by policies
that contribute to CO2 emissions reductions. Analysis of the carbon tax does notmean a pure tax; it can be considered here to be a mixture of comprehensive
policies such as an energy tax, government regulations, etc. It is only used here asa means of introducing the carbon tax as a modeling parameter.
The four other cases are selected in order to estimate CO2 reduction costs. As
discussed above, subsidies can be invested in advanced technologies to reduce
fixed costs (the price of the technology), thus expanding the introduction of
Table 5. Price and CO2 emission factors
Emissionfactor
Coal
10062
Coke
12300
Crude oil
7811
Gasoline
7658
Kerosene
7748
Diesel
7839
LPG
6833
NGS
5639
Town gas5835
Black liquid
10751
Electricity
26449
Biomass0
Utility*
14374
Steam
14374
Water
0
Recycled steel
0

1990
2.86
8.82
8.00
25.00
25.00
25.00
4.29
4.29
4.00
0.00
34.90
0.03
4.00
4.00
0.30
1100.00

1994
2.90
8.89
9.00
26.00
26.00
26.00
10.00
10.00
6.00
0.00
35.00
0.03
4.16
4.16
0.42
1120.00

Price
2000
3.00
9.00
10.00
26.50
26.50
26.50
14.00
12.00
8.00
0.00
37.00
0.04
4.40
4.40
0.60
1150.00

2010
3.20
9.40
11.00
29.00
29.00
29.00
16.00
13.00
8.60
0.00
40.00
0.05
4.50
4.50
0.80
1200.00

2030
3.50
9.80
12.00
31.00
31.00
31.00
18.00
16.00
9.60
0.00
43.00
0.08
4.80
4.80
1.00
1300.00

Unit: emission factor: g-C/100Mcal
price: 1990 yuan/100Mcal for energy and 1990 yuan/ton for materials (water andrecycled steel)* "Utility" used in this table is defined in Appendix A of Part IV.

Table 6. Definition of the cases

Frozen technology
MarketPolicyTechnology
selection

Tax rate(Yuan/t carbon)

Subsidy√√100

All tax revenues

5. Application of AIM/Enduse Model to China

83

efficient technologies to save energy and reduce CO2 emissions. By using thelinear program sub-module for optimal subsidy assignment, an estimate can bemade of the lowest additional cost that would be required at the national level toreduce CO2 emissions. In the model calculation, four subsidy cases were defined
to analyze the reduction of costs. The four cost estimation cases are: a subsidy
used as equivalent to the revenue from a 50 yuan per ton carbon tax, a 100 yuan
per ton carbon tax, a 500 yuan per ton carbon tax and a 1000 yuan per ton carbon
tax.

5.3 Simulation Results
Based on the technologies and services assumption, by using AIM-China, theforecast results for energy demand and CO2 emissions according to the different
cases for China are presented in Fig. 1.
It can be clearly seen from Fig. 1 that CO2 emissions will increase quickly witheconomic development in China. Compared with the base year of 1990, CO2
emissions will be 1.7, 2.5 and 3.8 times the 1990 level in 2000, 2010 and 2030 for
the market case, which can be regarded as a possible development case, 1.6, 2.1
and 3.3 times for the policy case, which represents the lowest growth rate of CO2
emissions. There is little possibility for China to adopt some intervention policies
within the near future, so the CO2 emissions for the market case are very
important. All the results show that China will play an important role in world’s
energy production and consumption, as well as in its CO2 emissions.
From the CO2 emissions in the market case, it is noticeable that it is possible
for China to maintain a low CO2 emissions growth rate compared with its rate of
economic growth. The basic assumption for the analysis is that the annual
economic growth rates are 9% from 1990 to 2000, 7.5% from 2000 to 2010, and
6% from 2010 to 2030, so the elasticity values for CO2 emissions are 0.58, 0.53
and 0.37 for the market case. This represents a relatively low elasticity relative tothe experience of developed countries.
A properly functioning market could contribute to the diffusion of technologies
3000

M t-C

2500
2000

Frozen technology

1500

M arket1000

Policy

500
0
1990

2000

Fig. 1. CO2 emissions in China

2010
Year

2020

2030

84

Hu, X. et al.

to reduce CO2 emissions. Compared with the frozen technology case, there would
be a 10.37% CO2 emissions reduction for the market case in 2010 and 9.32% in
2030. This shows that establishing a better market mechanism is an efficient way
to achieve advanced technology diffusion in China.
Industry is the major sector that emits CO2 (Fig. 2). In 1990, the results showthat CO2 emissions from industry account for 75% of the total in the market case,and will generally decline to 70% in 2030, giving it the dominant role in future.
There is no significant reduction in CO2 emissions in the transport sector (Fig.
3). Vehicle prices are very high compared to other countries, and the prices ofgasoline and diesel for vehicle use are comparatively low. So the benefit of lower
energy consumption from the use of efficient vehicles cannot compensate for the
expenditure for the vehicles. Thus, efficient vehicles cannot be expected to be
widely adopted. CO2 emissions will increase in the rural residential sector for themarket case compared to the no technological progress case. The major reason isthat a substantial amount of biomass energy will be replaced by commercial
energy based on the market along with the rise in income. However, there is
100%
80%

Rural

60%

Urban

40%

Commerce
Transport

20%

Industry

0%
1990

2000

2010
Year

2020

2030

Fig. 2. Share of CO2 emissions in China by sector for the market case

2500

M t-C

2000
Frozentechnology

1500
1000

M arket500

Policy0Industry Transport Commercial Urban
Rural
residential residential
SectorFig. 3. CO2 emissions in 2030 by sector

5. Application of AIM/Enduse Model to China85

considerable potential for CO2 emissions reductions in the residential sector,
including both urban and rural areas, if policy options are adopted.
CO2 reduction policies are effective in reducing the rate of growth of CO2
emissions. From Fig. 3, it can be demonstrated that adoption of intervention
policies for CO2 reductions using taxes and subsidies can provide greater
reductions in CO2 emissions compared with the market case. However, thereduction results differ according to the policy options. A combination of policies
for taxes and subsidies are comparatively better than a taxes only policy.
The introduction of energy conservation technologies in the industrial, residential
and services sectors will benefit from a carbon tax, but it is not such a substantial
benefit for the transport and agriculture sectors. Due to the low energy prices andhigh vehicle prices, carbon taxes and subsidies have a very minimal effect in thetransport sector. The reason for the lower impact of a tax in the agriculture sector isthat some advanced technologies are already being selected in the market case.
Figure 4 gives an example of CO2 emissions in the steel making sector in China.
Significant emissions reduction was observed in this sector. Technological progress
really plays a very important role in reducing unit energy use and, therefore, in CO2emissions reduction.
In the study, SO2 emissions were simulated for these three scenarios. Since
desulphurization technologies are not considered here, a reduction in SO2 emissions
is calculated from technological change among the scenarios. In order to provide
better information on future CO2 emissions and SO2 emissions, a detailed inventory
based on more than 2,300 counties in China was established. Figure 5 and Fig. 6
present the CO2 emission intensity in 2010 and SO2 emission intensity in 2010,
respectively. The emission intensity is given in a rather simple way based on the
future whole emissions in China and the extrapolation of the present intensity ineach county.
Figure 7 presents the costs of emissions reductions by sector. In this figure, thevertical axis is the average cost for CO2 emission reduction. Subsidies in four costcases are described here. The horizontal axis is the rate of cumulative CO2
reductions due to the subsidies beginning in the year 2000 to 2010 compared with
200
FrozenTechnology
frozentechnology

M t-C

150

M arket100

Policy

50
0
1990

2000

2010
Year

2020

2030

Fig. 4. CO2 emissions in the steel making sector in China

86

Hu, X. et al.

the market case.
From Fig. 7 it can be seen that the average CO2 emissions reduction costs forthe transport sector are very high. This is for the same reason that the amount of
CO2 emissions reduction according to the policy option is small. A rational way
for the transport sector to reduce its CO2 emissions is to encourage vehicle
producers to introduce new technologies and decrease new vehicle prices to a0.00
0100.00 100
200.00 200
300.00 300
400.00 400
500.00 500
600.00 600
700.00 700
800.00 800
900.00 900
1000.00
1,000
1100.00
1,100
1200.00
1,200
1300.00
1,300
1400.00
1,400
1500.00
1,500>=1600.00† 1,600<t-C/km2>

Fig. 5. CO2 emission intensity in China for 2010 (see color plates)

00.00
1000.00 1,000
2,000
2000.00
3000.00 3,000
4000.00 4,000
5000.00 5,000
6000.00 6,000
7000.00 7,000
8000.00 8,000
9000.00 9,000
10000.00 10,000
11000.00 11,000
12000.00 12,000
13000.00 13,000
14000.00
14,00015000.00
15,000>=16000.00† 16,000<kg-SO2/km2>

Fig. 6. SO2 emission intensity in China for 2010 (see color plates)5. Application of AIM/Enduse Model to China

87

suitable level. In contrast, in the residential sector, CO2 reduction costs are
relatively low since the major energy utilization technologies such as refrigerators,
washing machines, TVs and lighting devices, etc., are already in a competitivemarket. The prices for these are rational and they can provide a better service andconserve more energy, so it is easier to introduce energy saving technologies in
the residential sector. Another factor is an increase in the standard of living that
requires clean energy in the residential sector. The consumption of electricity,
natural gas and other types of gas will increase while coal consumption declines.
The costs for the industry sector stand at the mid point. Since there are manytechnologies in this sector, it is reasonable for the combined average costs for CO2
reductions to maintain this level.
This analysis of average costs for CO2 reductions presents a brief ranking in theCO2 emissions reduction costs for each sector. The residential sector has thelowest costs, followed by the commercial sector, industry sector, etc.
Table 7 gives an example of technology selection for typical cases. These
technologies are listed in Table 4. From this result, the technological process andthe contribution of technological progress to CO2 emissions reduction can bereadily understood. It shows the effects of different cases (policies) on technology
selection or progress. For these technologies, the effects of a policy of taxes andsubsidies is better than that of a tax only policy, but this may not be true fortechnologies in other sectors or processes.
Table 8 shows the cost-effective technologies identified through this study.

600

Urban

700

Com
merc
e
Rural

800

Indu

Agriculture

Transport

Average cost for CO2 reduction, yuan/t-C

900

stry

1000

500
400
300
200
100
0
0%

5%

10%

15%

20%

25%

30%

Rate of cumulative CO2 reductions
Fig. 7. Average cost for CO2 reductions by sector

35%

40%

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Hu, X. et al.

5.4 Findings and Conclusion
Based on this analysis, the conclusions were as followings:
1. China will continue a path of rapid economic development, and energy
consumption and CO2 emissions also will increase quickly to satisfy thedemand for economic development. CO2 emissions will rise 1.7, 2.5 and 3.8
times 1990 levels in 2000, 2010 and 2030 for the market case if no intervention
Table 7. Technology selection for several cases in the coke making process in the steel
industry
Technology 1990
Small size coke 59.9
ovenLarge size
40.1
coking furnace
Large size
coking furnace 0.0
from Japan
New coking
oven + coke
0.0
wetting
Unit: %

2000
2010
2020
2030
Market Policy Market Policy Market Policy Market Policy
18.0

-

1.1

-

0.0

-

0.0

-

70.6

62.9

85.5

-

87.5

-

100.0

-

11.5

37.1

13.4

35.3

12.5

30.0

0.0

-

0.0

-

0.0

64.7

0.0

70.0

0.0

100.0

Table 8. Cost-effective technologies
SectorSteelTechnologies
Large-scale equipment (Coke oven, blast furnace, basic oxygen furnaceetc.); Equipment for coke dry quenching; Continuous casting machine;
TRT; Continuous rolling machine; Equipment for coke oven gas, OH gas
and BOF gas recovery; DC electric arc furnace
Chemicals Large-size equipment for chemical production; Waste heat recovery
system; Ion membrane technology; Existing technology improvements
Papermaking Co-generation system; Facilities for residual heat utilization; Black liquor
recovery system; Continuous distillation system
Textiles Co-generation system; Shuttleless loom; High-speed printing and dyeing
Nonferrous Reverberator furnace; Waste heat recovery system; QSL for lead and zincmetalsproduction
Building Dry process rotary kiln with pre-calciner; Electric power generator usingmaterials residual heat; Colburn process; Hoffman kiln; Tunnel kiln
Machinery High-speed cutting; Electric-hydraulic hammer; Heat preservation furnace
Residential Cooking using gas; Centralized space heating system; Energy-saving
electric appliances; High-efficiency lighting
Services Centralized space heating system; Centralized cooling and heating system;
Co-generation system; Energy-saving electric appliances; High-efficiency
lighting
Transportatio Diesel trucks; Low energy consumption cars; Electric cars; Natural gasncars; Electric railway locomotives
Technology High-efficiency boiler; FCB technology; High-efficiency electric motor;
used in Variable-speed motors; Centrifugal electric fan; Energy-saving lighting
common5. Application of AIM/Enduse Model to China

89

policies are adopted.
2. Massive CO2 emissions could be reduced by market mechanisms. The 182
million tons of carbon and 249 million tons of carbon will be reduced in 2010
and 2030 by comparing the market case and the frozen technology case. In
order to reduce China’s CO2 emissions, market mechanisms should be
improved to promote the distribution of efficient technology in order to have abetter effect on energy conservation and CO2 emissions reduction.
3. China can reduce CO2 emissions further if some policy options are adopted.
From the analysis it was noticed that there is a large potential for China to
reduce CO2 emissions by adopting different intervention policies. Levying acarbon tax and returning it as a subsidy is the most efficient way for CO2
emissions reductions to be achieved among the policies assessed in thisresearch.
4. The residential sector and services sector have comparatively low costs for CO2
emissions reduction. China will be benefit from making efforts to reduce CO2
emissions in the residential and services sectors, since it is not only a low cost
strategy for CO2 emissions reduction, but can also reduce SO2 emissions andTSP (Total Suspended Particles) emissions, which will improve local air
quality. The industry sector has a medium level of costs from the analysis, but
this is an aggregated result. Some products in the industrial sector benefit fromenergy conservation, which should be considered for CO2 emissions reduction
at low cost.
5. There has been a rapid growth in energy consumption in the transport sector,
and effective energy consumption measures are not significant. Thus this sector
will be the most important for reducing CO2 emissions. More countermeasures
should be introduced, such as fuel taxes and the encouragement of competition
to reduce vehicle prices and raise the efficiency of vehicles.
6. International technological collaboration is essential for energy conservation
and CO2 emissions reduction in China. Some advanced technologies fromdeveloped countries have very high efficiencies and can save substantial
amounts of energy, and they are widely used in the developed countries. But
there are still few of such technologies in China due to the cost and otherfactors. It is important for China to further collaborate in the introduction ofenergy saving technologies with the developed counties.
7. Further research activities on climate change should be promoted in China toachieve a better understanding of greenhouse gas (GHG) emissions and otheraspects of climate change. In order to support China in developing its policy
response to climate change, these types of research activities can help toestablish a common knowledge base among researchers in China and othercountries. This is an essential premise for future collaboration between
developed countries and developing countries.
Base on these findings, the conclusions from this study are summarized asfollows:

90

Hu, X. et al.

1. Technological progress plays a very important role in GHG emissions reductionand energy use in China, which will contribute significantly to global and local
environmental conservation
2. The market mechanism is an efficient way to achieve the diffusion of advanced
technologies in China
3. International collaboration on knowledge transfer is a key factor for theenhancement of technological progress in China
4. Sophisticated policies should be designed at the sectoral level, especially intransport, commerce and the chemical industry.
5. New environmental policies are required that are designed for the early stages ofdevelopment in China in order to integrate strategies for both the local
environment and global environment
6. International collaboration on technology should be promoted at the earliest
opportunity to help developing countries to enhance their ability to ensure a clean
environment.
From the analysis, it was also found that the analysis itself could be improvedin future. For example, in order to ensure that the policy assessment is moreaccessible to policy makers, some macroeconomic analysis is necessary to
feedback to the bottom-up end use model. By linking this with a top down model,
some indirect costs could be analyzed when adopting policy options, withconsideration for interrelationships among the sectors. The effect of insufficientinvestment should be analyzed to reflect the most likely energy consumption andCO2 emissions patterns in China. In addition, more policy options should beassessed, especially for the non-intervention case, for example, renewable energy
orientated policies, green lighting practices, shifting the energy supply pattern, etc.
International collaboration also should be considered as an important approach to
reducing CO2 emissions in China.

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AIM
AIM/Country ................................1, 2
carbontax .....................................................8
CO2
emission........................................1, 9emission mitigation ..........................1
reduction cost .......................8, 11, 12
cost-effective technology ....................13
economic development .........................2
emission
intensity...........................................11energy ...................................................1
conservation technology..................11
demand .............................................9

service scenario................................ 4international technological collaboration....................................................... 15
intervention policy ............................. 11
knowledge transfer ............................. 16
local air pollution ................................. 1
market mechanism ............................. 16
natural gas ............................................ 6
policy option ........................................ 7
SO2 emission ...................................... 11
subsidy ................................................. 8technologicalprogress................................ 1, 11, 15
technology ............................................ 4
traditional biomass ............................... 6