# **<mark>Box 5. An important demand-side lock-in for the future arising from the major expansion of the building stock: The case of China</mark>**

<mark>46. Rapid urbanization and economic growth in China is generating a boom in construction— comparable to post-War reconstruction efforts in Western Europe. Yet space heating in buildings in China is inefficient: it consumes 50-100% more energy than in Western Europe or in North America. The Chinese Government has promulgated new energy efficiency standards for buildings, but the standards are often</mark> _<mark>not</mark>_ <mark>enforced. Almost all of the new buildings being</mark> constructed are still based on old, highly energy-inefficient designs (World Bank, 2001).

<mark>47. Emission-wise, China’s space heating alone consumes on the order of 130 million tons of standard coal equivalent per year, more coal than the unified Germany consumes for all purposes (in energy terms). Total direct (on-site) and indirect (off-site) emissions from residential buildings in China are on the order of 500 MtCO</mark> 2 <mark>per year in 2003, the equivalent of total annual GHG emissions from France.</mark><sup>37</sup> <mark>48. Enforcing standards in China for new buildings now can still have a significant impact on the rate at which total emissions grow in the near future. Half of China’s urban residential and commercial building stock in 2015 will be constructed after the year 2000 (this contrasts with the fact noted above that 60% of the expected building stock in France in 2050 will be buildings already built before 2000). In other words, in China, unlike Europe and Japan where postwar reconstruction is over and costly retrofitting maybe necessary, there is still an opportunity to “grow out” of the enormous energy waste problem at relatively low cost.</mark> <mark>49. Data remains scarce, but a rule of thumb estimate is that with existing technologies, Chinese buildings can be made more energy-efficient, saving over 50% on energy costs with increases in construction costs of some 10% (World Bank, 2001). Applied broadly, such a program would have national implications for energy dependency, and could reduce a large amount of GHG emissions—with global implications for climate change. However, energy expenditures savings alone may not be sufficient to compensate for increased upfront building cost.</mark><sup>38</sup> <mark>Putting a price on carbon (via e.g., a market or a tax) would help, but it is unclear whether it would be sufficient to tilt the result of the financial cost-benefit analysis towards energy efficient buildings. In addition, it is recognized that the development of energy efficient buildings in China face many other barriers, related inter alia to information asymmetry or institutional design (Richerzhagen et al., 2008). Yet if, on the other hand, actions are</mark> **_<mark>not</mark>_** <mark>taken now, every year lost in developing more efficient buildings will</mark> **_<mark>lock-in</mark>_** <mark>some 700-800 million square meters of urban residential and commercial building floor area with inefficient energy use for future decades. This could generate more than two billion tCO</mark> 2 <mark>e of additional carbon by 2030 relative to an efficient energy use scenario for residential and commercial buildings.</mark><sup>39</sup>

> 37 Direct emissions from the residential sector in 2003 are based on IEA (2003). Share of residential sector in electricity & heat generation are estimated using China 2003 energy balances (IEA, 2006a). _In addition_ , the residential sector in China consumes 217 Mtep of biomass. We did not find data on the associated emissions, but if emissions/consumption ratios observed in the OECD are of any guide in the China context, the emissions from biomass use might be larger than the emissions from all other energy uses in residential buildings combined. 38 In fact, indicative data provided in World Bank (2001) suggest that it may not be the case.

> 39 This figure is estimated by assuming that an average of 750 Mm2 of new building is built from 2004 to 2030, either at 2003 emissions per square meter (of about 0.016 tCO2e/m<sup>2</sup> ), or at half that rate (if new buildings are more energy efficient).

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