Why building energy efficiency matters

By 2020, China will have built more than 15 billion square metres of urban housing, equal to the European Union’s entire current building stock. Li Jun reports on how the building sector can wake up to the challenges posed by a warming planet.

The scientific consensus is clear on the reality of anthropogenic global warming; the combustion of fossil fuels for energy is the most important source of the greenhouse-gas emissions that cause climate change.

The buildings sector is responsible for around one-third of global energy use and associated carbon dioxide emissions. In 2004, China was responsible for 15% of world energy consumption and associated emissions. Residential and commercial buildings account for one-quarter of China’s total energy consumption and around 27% of the country’s electricity consumption. Overall, buildings are responsible for around 18% of energy-related carbon dioxide emissions in China.

Buildings’ energy consumption is relatively unchanging due to their long lifetime; a house will last for at least 30 to 50 years once it is built. Inefficient buildings constructed today will keep on wasting energy into the future – and generate negative environmental impacts for the next several decades. 

Rising demand

It is estimated that more than 55% of China’s population will live in cities by 2020, 60% by 2030. Some 300 million to 400 million new inhabitants will leave the countryside to settle in cities in the next 20 years. More than 15 billion square metres of housing will be constructed to accommodate these new urban dwellers, equal to the European Union’s entire current building stock built in just 15 years.

China constructs more than 2 billion square metres of floor area annually – higher than any other country in the world. Every year, housing construction consumes 20% of China’s steel output and 17.6% of cement production. At the same time, demand for energy in the buildings sector will rise sharply as standards of living increase. China’s gross domestic product per capita is expected to reach US$3,000 by 2020 (US$10,000 in terms of purchasing power parity). The buildings sector accounts for 40% of energy consumption in OECD countries, which suggests a considerable increase in energy demand from China in coming decades. 

Energy security

China’s economic growth is restrained by a scarcity of energy resources. Per capita oil and gas reserves represent only 11% and 4.5% of the world average respectively. China became a net petroleum oil importer in 1994. At present 40% of China’s oil consumption relies on imports, most of which come from the Middle East. These pass through the Strait of Malacca, a shipping lane tightly controlled by the US navy, which suggests a tremendous challenge to energy supply security from geopolitical point of view.  

Coal accounts for around 60% of national energy demand and around 75% of electricity generation in China. Coal combustion in for power and heating generates tremendous environmental pollution and poses serious threats to pubic health. As previously stated, buildings consume about one-quarter of China’s energy, of which space heating and water heating are responsible for approximately two-thirds. But due to their inefficient design and construction, residential buildings in China consume one to three times the energy for space heating of buildings in Sweden, Denmark and Finland. The mediocre thermal qualities of China’s buildings and their inefficient heating systems cause huge energy losses and serious atmospheric pollution. Each year, space heating in northern China’s cities consumes the energy equivalent of more than 130 million tonnes of coal.

At the same time, electricity demand from buildings has soared in southern and eastern China. Electricity consumption for air conditioning in buildings contributes to one-third of peak demand during the hottest period of the year. The temporary sharp increase in electricity demand and the significant variance in demand from peak hours to slack hours render the electricity supply extremely vulnerable, and raise considerable environmental concerns.

China could switch to natural gas and nuclear power to replace its coal-fired plants, which are much cleaner than coal in terms of both sulphur dioxide and greenhouse-gas emissions. But this supply-side solution will be far from sufficient to address China’s energy and environmental dilemma. The cost of natural gas is around three to four times that of coal in China, and long-distance gas supply involves considerable geopolitical uncertainty. Disputes over gas pipeline construction in northeast Asia mirror the subtle geopolitical complexities of relations between Russia, China, and Japan. On the technical level, burning gas to generate heat or electricity without utilising combined heat and power technology leads to great energy losses in terms of thermodynamic efficiency. Nuclear power, despite its low carbon emissions, requires huge capital investments in construction, which is also very time-consuming – it takes five to seven years to build one plant. Moreover, the environmental concerns regarding nuclear waste disposal should not be neglected.

Why does it matter?

Improvements in energy efficiency are essential for reasons of energy supply security, economic competitiveness, improvement of citizens’ livelihoods and environmental sustainability. It is one of the quickest, cheapest and cleanest ways to address energy and environmental challenges. The Intergovernmental Panel on Climate Change (IPCC) Fourth Report estimates that by 2020, carbon dioxide emissions from building energy use can be reduced by 29% at no extra cost. In China, gaining 1 megawatt of electricity by building greater generating capacity costs at least four times as much as saving 1 megawatt through greater efficiency.  It is typically far cheaper to use better design and modern technology to achieve the same level of comfort for building occupants than building a new power plant. Heating, air conditioning, lighting and other energy services can provide the same level of comfort with much less energy in efficient buildings. 


People often raise concerns that efficient buildings will cost far more money to construct than conventional ones. However, a recent study conducted by the World Business Council for Sustainable Development (WBCSD) showed that the key players in real estate and construction generally misjudge the costs and benefits of green buildings. Most of them estimated the additional cost of green building at 17% above conventional construction – more than triple the true cost difference of about 5%. The US Green Building Council has carried out numerous studies, and concluded that the cost of reaching certification under its Leadership in Energy and Environmental Design (LEED) standards system is between zero and 3% — insignificant compared with the land premium and property transaction costs. China’s Ministry of Construction affirms that the extra cost of complying with building codes relating to construction energy conservation is no more than 10% of that in conventional design.  

Moreover, the IPCC’s 2007 report states that the cost of efficiency and carbon mitigation in buildings can be reduced to zero – or even a negative figure compared to conventional buildings – by using a lifecycle approach. A wide range of co-benefits can be offered by the implementation of energy efficiency and carbon mitigation options in buildings, including: job creation; increased economic competitiveness; energy security; social welfare benefits for low income households; increased access to energy services; improved indoor and outdoor air quality; as well as increased comfort, health and quality of life. 

Overcoming barriers

Many energy savings initiatives can be achieved with little or no cost through improved building design and good management practices. However, there are substantial market barriers that need to be overcome to achieve energy efficiency and low-cost carbon mitigation potential. These barriers include: the high cost of gathering reliable information on energy efficiency measures; a lack of proper incentives for property developers, builders and landlords who would pay for efficiency costs; limitations in access to financing; and subsidies on energy prices (for instance, space heating in China’s northern cities is billed on the basis of one’s area rather than actual consumption, and household electricity costs are heavily subsidised by local governments). Progress on energy efficiency depends on people in the building industry being aware of the importance of the issue – and being willing and able to act on it.

Many technological and other solutions exist to improve building energy efficiency, as seen in the numerous green building projects that are being developed around the world. The world’s largest zero-carbon city, Dongtan, near the city of Shanghai, is under construction. Energy-efficient buildings constructed on this island will use local energy generated from renewable resources. However, the question remains of how to scale up this kind of prototype of green building to a more general context in Chinese cities.  

In the absence of well-designed policy measures, improvements in building energy efficiency will move at a slow pace. As the IPCC report suggests, there is a range of government policies that have been successful in many countries. These include: continuously updated appliance standards and building energy codes; labelling; energy pricing measures and financial incentives; as well as utility demand-side management programs; public sector energy leadership programs including procurement policies, education and training initiatives; and the promotion of energy service companies. Appropriate policy instruments are required to help implement energy efficiency in buildings. Apart from the regulatory approach (such as mandatory minimum efficiency requirements in building codes), flexible market-oriented approaches like certificates and labelling, energy performance contracting, tax and fiscal instruments need to be developed further to achieve greater energy savings in buildings in China.  The international financing alternative presented by the Clean Development Mechanism in the framework of the Kyoto Protocol may offer a new opportunity in filling the investment gap for building energy efficiency.

In the end, another great challenge in improving efficiency lies simply in education. Changing consumer behaviour by reducing avoidable energy waste and fostering smart energy use in buildings can make a substantive contribution to climate-change mitigation. Turning off the light before you leave the office does help to reduce global greenhouse-gas emissions.


Li Jun is a Ph. D student at the Industrial Economics research centre of the Ecole des Mines de Paris and works with the Institute for Sustainable Development and International Relations (IDDRI) in Paris.

Homepage photo by Sean Coon