substantial declines in energy intensity gave way to annual increases of almost 4% per year between 2002 and 2005 (Zhou et al, 2010: 1).<sup>44</sup> In response to this turnaround, the central government developed a new set of policies and institutions to put the economy back on an intensity reduction track.<sup>45</sup> The government did so by setting an energy intensity improvement goal of 20% between 2005 and 2010 (Price et al 2011). To achieve this goal, the government redoubled efforts to eliminate and/or reduce production from inefficient industrial processes, technologies and facilities. It created a program for improving energy efficiency in the country’s Top 1000 industrial enterprises (Price et al, 2010). It identified Ten Key Projects to improve energy efficiency in such areas as industrial boilers and industrial motor systems. It revitalized the country’s energy conservation centers and rebuilt the statistical system for tracking performance from enterprises, counties, and provinces relative to energy intensity improvement targets.

In addition, the government linked this new energy intensity standards system to the cadre personnel evaluation system. And it adopted a number of incentives to encourage enterprises to reduce their energy intensity, including use of higher prices for energy for high energy consuming industries alongside generally rising prices for energy. The government also used tax policy (exemptions for approved energy saving projects or equipment) and fiscal policy (awards to enterprises of from $26 to $33 per ton of coal equivalent saved) (Zhou et al 2010: 7) to encourage energy conservation. During this period, the energy intensity of GDP fell by nearly 4% per year (Rock 2012: 27).

# **III. Technological Learning within Enterprises and Impacts on CO2 Intensities**

How has the evolution of China’s industrial and technology policies affected energy use and CO2 emissions in China’s energy intensive industries? We answer this question by focusing on the impact of specific enterprise investments in technological learning on energy and CO2 intensities.<sup>46</sup> Our aim is to demonstrate that enterprise investments in technological learning went hand in hand with significant declines in energy and CO2 intensities. We focus on four enterprises—two in cement (the Luzhong Cement Company and Sinoma International), one in pulp and paper (Yueyang Paper Company) and one in iron and steel (Baosteel).

# **A. Technological Learning in Cement**<sup>**47**</sup>

# **1. Luzhong Cement Factory**

> 44 These increases reflected increases in the rate of growth of output in China’s energy intensive industries. Cement production grew at 10% per year between 1985 and 2001 and rose to 12.7% per year between 2002 and 2005. Increases in growth were even more dramatic in iron and steel (growth increased from 7.7% per year between 1985 and 2002 to 23.8% per year between 2002 and 2005), aluminum (growth increased from 12.3% to 23.4%) and pulp and paper (where growth rates rose from 8.9% per year to 15% per year).

> 45 Unless otherwise noted, what follows draws on Zhou et al (2010).

> 46 Of course we recognize that other factors affect energy intensity, but as argued in section 2, all of those other variables require enterprises to invest in learning if they are to reap environmental technique effects.

> 47 What follows draws on Rock and Cui (2011).

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