How Industries Fit In: Energy Efficiency Report Part II

Please click here to access part I of the Industrial sector’s overview.

In order to address these recent developments in the industrial sector, we propose the following recommendations which target industrial emissions abatement potential and specific barriers towards abatement:

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Governments must provide technological standards and incentives when equipment standardization is required or significant barriers exist. Energy efficient subsidies can produce profitable margins in energy efficient technologies, which otherwise had net positive costs and high capital costs. Additionally, equipment standardization in certain cases can facilitate the rapid retrofitting of aged industrial plants. In the case of China and India, where the average plant age is significantly lower than in the United States, prompt standardization could lock in a more significant emissions abatement.

Governments should adopt programs which help manufacturers manage their energy demand, evaluate performance, and provide resources for electricity demand forecasting.  Programs such as Energy Star in the United States have been essential for providing energy ratings in cement plants, petroleum refineries, and other facilities. Furthermore, these programs help bridge the information gap for energy efficient technologies. Energy efficient measures such as fuel switching to natural gas, combined heat and power, and clinker substitution have negative net costs, but are not typically adopted by firms due to unclear information on energy demand.

Bilateral or multilateral venues dealing with energy efficient technology transfers to developing countries should be expanded. China in particular has benefitted greatly from energy efficient technology transfers including Japan’s JICA Energy Efficiency Training program, Green Aid Plan, and the Asian Development Bank’s Shandong Energy Efficiency and Emissions Reduction Project. International cooperation on the issue of energy efficiency not only provides greenhouse gas abatement opportunities for developing countries, but frees up necessary energy resources which developed countries demand.

Supportive legislation should be developed to promote low-carbon chemical and iron and steel industries joint ventures with international firms to reduce the effects of emission outsourcing from access to shipping. Especially within the chemical industry, access to shipping has made it economical to import chemicals from less energy efficiency conscious regions which have lower fuel and feedstock prices due to energy subsidies. Thus, energy efficient actions taken by the U.S. or China could shift production to other regions. The steel industry, while dominated by Chinese exports, is also reliant on international energy prices. Thus, the development of international joint ventures among companies can help lock in production within one energy efficient joint venture and provide private, energy efficient technical assistance in combination with government venues.

If you are interested in learning more about our sectoral research or want information of our upcoming reports, please attend our presentation at 12 pm on April 22 at the LBJ School of Public Affairs here in Austin, Texas. We look forward to answering any questions you might have.

Travis Clayton is a first year Masters of Global Policy Studies and Asian Studies student with a B.A. in Economics and Chinese from the University of Texas. His interests lie in Chinese energy policy and international finance. He has foreign experience living in Taiwan and interning at a consulting firm in Shanghai, China.

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