Revisiting the myth of energy efficiency in China

Energy efficiency is considered the “first fuel” in clean energy transitions that plays an important role in reducing greenhouse gas emissions and mitigating climate change. The myth of energy efficiency in China has attracted considerable attention in recent years, and the analysis of energy efficiency measurements, driving factors, and effects has become increasingly complex. This chapter’s cross-country comparison of the facts at the micro and macro levels indicates that although some Chinese enterprises are at the international frontier in terms of micro-level energy efficiency, their overall energy efficiency levels at the industrial and national levels are seriously lagging. Accordingly, in terms of energy efficiency, China is characterized as a “local leader” at the micro level and an “overall laggard” at the macro level. This chapter then systematically analyzes the channels affecting energy efficiency in China based on the market segmentation framework. The results reveal that technical, scale, and allocation inefficiencies are three important transmission mechanisms through which market segmentation inhibits energy efficiency. This chapter provides a special perspective on the barriers and opportunities for improving energy efficiency in China, which in turn informs the sustainable development in various counties.