Reduced carbon emissions, more growth
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At the same time, savings from greater energy efficiency could lead to increased energy consumption that in turn could mean a smaller emission reduction rather than otherwise.
To mitigate such a risk, structural changes must be introduced in order to increase the share of renewable energy and natural gas in total energy use. In this sense efforts for greater efficiency involving existing sources need to be part of a game plan to tap less polluting sources.
Finally, several things need to be done to achieve a greater impact from energy efficiency programs.
First, there needs to be a sharper focus on certain sectors, such as small and medium enterprises, that suffer from a lack of viable financing solutions for energy efficiency.
Second, resources ought to be channeled directly toward activities, including housing and commercial buildings that offer the highest potential for reducing GHG emissions and are currently under-served by the market.
Third, subsidies could be targeted toward areas of evident market failure, where social benefits would be highest but where existing private returns are not high enough to change people's behavior.
All three avenues offer prospects for greater effectiveness in achieving energy efficiency.
Programs such as CHUEE seek a much-needed balance between growth and environmental sustainability. The lessons learned from this experience of China should help replicate as well as improve the design of programs in energy efficiency.
Vinod Thomas is the director-general, Evaluation of the World Bank Group. Marvin Taylor-Dormond is the director of the Independent Evaluation Group of IFC.
