ICT LowCarbon Growth China

8/3/2019 ICT LowCarbon Growth China

http://slidepdf.com/reader/full/ict-lowcarbon-growth-china 1/58

January 2011

ICT and Low Carbon Growth

in China



ICT and Low carbon growth in China Page 1

This paper has been prepared by Dr Simon Zadek ([email protected]), Maya Forstater, Kelly Yu and Jon

Kornik for Digital Energy Solutions Campaign (DESC) . The paper was produced with the support and

inputs of DESC’

s members including Intel, HP, Lenovo and Nokia.

The paper is intended both for policy makers and business leaders in China, to help to spark thinking

and discussion on the potential role that the ICT sector can play in China’s transition to low carbon

development and the steps that can be taken to accelerate that transition. The audience for this paper

is not limited to those already concerned with ICTs, but also for those concerned with the industries

that could benefit through greater use of these technologies, including in buildings, transportation,

agriculture, logistics, manufacturing and services, as well as in public institutions that are also energy

users.

The paper draws on the insights of policy makers, business leaders, and low carbon growth experts

who took part in the China International ICT and Low Carbon Economy Development Forum, hosted

by the Ministry of Industry and Information, the Ministry of Science and Technology, and the Ministry

of Environmental Protection in Beijing on Dec 17th 2010. Those who provided inputs and comments

to the paper and the Forum included Feng Fei of Industrial Economics Research Department, DRC , Li

Junfeng of Energy Research Institute, NDRC, Zong Fang of Energy Saving Promotion Committee, Steve

Harper, CY Yeung, Terry Zhang, Ding Wei, and David Xu of Intel, Hongjun Zhang of Holland & Knight,

Professor Wang of xxxxx, Zhao Jun of HP, Dr Tao Hongzhi, Xudong Chen, Gong Xun, and Paul Huang of

Lenovo, Fu Lei, Salla Ahonen and Chen Min of Nokia, Professor Qi Ye of Tshinghua University and the

Climate Policy Institute, Dr Zou Ji of Renmin University and WRI, Professor Jin Min of Renmin

University, Director Huang Dao of the China Iron and Steel Association, Peter Johnstone and Robert

Madelin of the European Commission, Dennis Pamlin, who has been a leader on WWF’s area in this

work, Chris Tuppen who has been active in this area through BT, Smart 2020 and GeSi, Molly Webb,

and Wu Changhua of Climate Group, Mark Levine, Jonathon Toomey, Dale Sartor, and Bo Shen of

Lawrence Berkeley Labs, Jiang Jiaqi of US Information Technology Office , Wu Jichuan of Chinese

Institute of Electronics, Zhou Zixue of MIIT, Bie Tao of Department of Policies, Laws and Regulations,

Ministry of Environmental Protection, Helen Chui of HP, Cuizhong, of China Institute of Strategy and

Management, Wen Zongguo of China Circular Economy Industry Research Center, Tsinghua University,

Zhang Junhua of Zhejiang University, Peng Jun of China Mobile, Chen Qingquan of Chinese Academy of

Engineering, Fang Qing of China Energy Conservation Association, Wang Yi of China Academy of

Sciences, Shi Jianwei of Beijing Municipal Institute of City Planning and Design, Zhou Fuqui of Energy

Research Institute, National Development and Reform Commission, Li Pengcheng of China National

Institute of Standardization, Zhang Jian of ASAT Technology Corp, Wang Hongtao of Sichuan University,

Allen Yen of SIA China, and Yu Yuqing of Climate Policy Center, Tsinghua University. . Antonio Álvarez

García-Mon provided key support to the quantitative modeling.

The paper also draws on the valuable work of key institutions including the Development Research

Center of the State Council, Energy Research Institute of the National Development and ReformCommittee, the Program of Energy and Climate Economics at Renmin University, the UN Development

Program, The Climate Group, the Global e-Sustainability Initiative, WWF and McKinsey & Company.

The reports content, including and errors and omissions, remain the responsibility of the authors.

Cover photo by Huangjiahu

http://hgn03131.chinaw3.com/



http://creativecommons.org/licenses/by-nc-nd/3.0/





Contents

Summary .................................................................................................................. 4

1 ICT and China’s low carbon growth goals........................................................ 11 1.1.1 The opportunity for green transformation ........................................... 11 1.1.2 The ICT sector contribution .................................................................. 14

2 The relationship between ICT, growth & emissions ........................................ 18 2.1.1 The ICT industry drives productivity and competitiveness .................... 18 2.1.2 The ICT contributes directly to economic growth ................................. 22 2.1.3 The ICT sector’s own footprint ............................................................. 24 2.1.4 ICT enabled carbon savings in other parts of the economy ................... 28

3 Realizing the potential for ICT enabled low carbon growth in China .............. 36 3.1.1 What are the barriers to technology adoption? .................................... 37 3.1.2 What should technology users do? ...................................................... 40 3.1.3 What tools and measures of support are already available? ................ 41 3.1.4 The need for collaboration ................................................................... 43

Annex...................................................................................................................... 49




Exhibits

Exhibit A: Relationship between ICTs and intensity goals ....................................... 5 Exhibit B: Summary of estimated impacts .............................................................. 5 Exhibit C: ICT sector emissions intensity fall faster than general economy ............. 6 Exhibit D: ICT enabled contribution to national carbon intensity targets ............ 7 Exhibit E: Key technology opportunities ................................................................ 8 Exhibit F: Key Questions and answers .................................................................... 8

Exhibit 1: ICTs and energy and carbon intensity impacts ...................................... 14 Exhibit 2: Investment in ICT asset base drives growth .......................................... 18 Exhibit 3: ICT contribution to economic growth, by % by region .......................... 19 Exhibit 4: Growth impacts of ICT .......................................................................... 20 Exhibit 5: China network readiness ...................................................................... 21 Exhibit 6: Supporting environment key to network readiness .............................. 22 Exhibit 7: IT Industry has grown faster than the rest of the economy .................. 23 Exhibit 8: ICT Exports are growing faster than general exports ............................ 23 Exhibit 9: The ICT value chain .............................................................................. 24 Exhibit 10: ICT brand’s own life cycle assessments of their product’s footprints 25 Exhibit 11: Carbon footprint of ICT in China ....................................................... 26 Exhibit 12: Opportunities for reducing the ICT carbon footprint ........................ 27 Exhibit 13: ICT sector emissions intensity could fall by 63% ............................... 28 Exhibit 14: ICT enabled emission reduction opportunities ................................. 29 Exhibit 15: International studies on ICT enabled emission reductions ................ 30 Exhibit 16:

ICT enabled emissions reduction potential ....................................... 31

Exhibit 17: ICT enabled contribution to national carbon intensity targets .......... 32 Exhibit 18: China ICT enabled emission reductions compared to other countries

32 Exhibit 19: China’s ICT enabled emission reduction potential compared to India33 Exhibit 20: China technology opportunities compared to other countries .......... 34 Exhibit 21: Stages in technological diffusion ...................................................... 37 Exhibit 22: Key steps for technology users ......................................................... 40 Exhibit 23: Life cycle assessment approach for ICT ............................................. 42




Summary

China is committed to a pathway of green growth based on scientific and

technological progress and innovation. As Wu Jichuan, Director-General of Chinese

Institute of Electronics and Former Minister of Ministry of Information Industry told

assembled business, policy and ICT experts at the China International ICT and Low Carbon Economy Development Forum, hosted by the Ministry of Industry and

Information, the Ministry of Science and Technology, and the Ministry of

Environmental Protection “ In the post financial crisis era, China has begun to adopt

practical measures to promote low carbon development. The Chinese government

has declared that carbon intensity will be reduced by 40-45% between 2005 and

2020, and the 12th 5 year plan aims to speed up energy efficiency and low carbon

development models. Within in this the ICT industry is the pioneer of energy

efficiency .”

Chinese policy makers and leading ICT businesses are beginning to recognize theimportant role that ICTs can play in driving low carbon growth. ICT is an amplifier of

industrial development and contributor to industrial upgrading while being much

less emissions intensive than other industries. Zhou Zixue Chief Economist of MIIT

told the forum “ ICT very important to promote the transformation of high carbon

industries into low carbon industries, which is a means towards sustainable

development.” This potential has been confirmed internationally through numerous

studies such as those by European Commission, The Climate Group, the Digital

Energy Solutions Campaign, the Global e-Sustainability Initiative and WWF.

MIIT is actively encouraging research and development into energy efficienttechnologies and the ICT industry, and is calling on industry to take leadership. The

aim is to increase the share of ICT in the overall economy and to encourage ICT to

contribute to energy conservation in energy intensive industries , “ We warmly

welcome both domestic and international companies to promote ICT for low-carbon

development in China” said Zhou. Bie Tao from the Department of Policies, Laws

and Regulations in the Ministry of Environmental Protection called on all of society,

but especially the ICT industry to hold the flag of low carbon development,

“ Companies can play a leading role here” he said, “ there is pressure but also a great

opportunity in the transition of the Chinese economy.”

Companies represented at the Forum, including Intel, Lenovo, HP and Nokia

indicated that they accepted this call to action. They highlighted the work that they

were doing to reduce their own green house gas emissions, as well as those of their

suppliers and customers, over the full life-cycle of ICT product use.

ICT can help to decouple economic growth from energy consumption and

emissions both by contributing to economic productivity, and by reducing

emissions.




Exhibit A: Relationship between ICTs and intensity goals

High level estimates indicate the significant contribution that ICT could make to

China’s low carbon development through each of these dimensions. These

estimates are tentative and provisional, due to many uncertainties, but nevertheless

show that there are large opportunities to drive productivity across the economy

through ICT adoption.

Exhibit B: Summary of estimated impacts

190Mt CO2 in 2007,

falling 64% in

intensity by 2020

2007年二氧化碳排

放量为1.9亿吨，2020年将下降64%

13-18% of 2020

emissions intensity

target

2020年实现13-18%

的减排目标

Each RMB of ICT

investment drives

RMB1.6 of GDP per

year

ICT产业每投资1元

人民币每年可创造

1.6元GDP

7.2% of GDP by 2020

2020年创造7.2%GDP

ICT enabled emission

reductions

利用ICT技术实现二氧化碳减排

ICT sector

value added

ICTY部门经济产值增长

ICT enabled

competitiveness

利用ICT技术提高竞争力

ICT sector

carbon footprint

ICT部门碳排放足迹




ICT use improves competitiveness and productivity. Breakthroughs in information

technology provide the basis for leaps in labor, capital, and firm productivity. In

developed countries it has been found that each US$ invested in the ICT asset base

results in the annual creating of around US$1.4 of added value from the productivityuplift of ICT on other sectors. In China, one estimate suggests that from 1995 to

2003, ICT was responsible for 8% of economic productivity growth.1

We estimate

that by 2020 China’s ICT sector will contribute 5.9 trillion RMB of added growth to

the economy, accounting for 7.2 % of the economy, and contributing 8.6% of overall

economic growth over the decade. This is crucial to achieving the shift from a heavy

industry to a knowledge and service sector oriented economy, which is core to

China’s low carbon, and overall economic development strategy.

The ICT sector can reduce its own carbon intensity. The ICT sector itself, has

relatively low energy and carbon intensity, although its absolute emissions are

growing. In 2007 the ICT industry contributed 2.4% of total China emissions and

about 1 trillion RMB of added value, giving an emission intensity of around 190 MT

CO2/M RMB. By 2020 it is projected that the ICT industry will produce 415 MT of

emissions, or 3.0-3.3 % of the country’s total emissions at the same time the sector

will provide 7% of economic output, giving an emissions intensity of 70 MT/M RMB.

This means the carbon intensity associated with the ICT sector could reduce by over

60%.

Exhibit C: ICT sector emissions intensity fall faster than general economy

11Note: Exchange rate of 6.831 USD/RMBSource: CEIC Database; “China’s Low Carbon Development Pathways by 2050 – Scenario Analysis of Energy Demand and Carbon Emissions” – by Energy

Research Institute of NDRC; Smart2020, NBS & MIIT from CCID Consulting, Jan 2009; team analysis

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

20202005

40-45%

Overall China emissions intensity

tCO2e/RMBm GDP

China ICT sector emissions intensity

tCO2e/RMBm value add

Overall China economy

China ICT sector

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

20202007

-64%




The largest potential is for ICT enabled emission reductions is in other industries,

where ‘smart’ technologies could abate 1.4 -.1.8 GT CO2e by 2020. This would

amount to between 13% and 18 % of the national GHG intensity reduction target for

2020. ICTs enable energy and emission savings through monitoring and optimizingenergy use (such as in heating, lighting and industrial processes), optimizing product

and service provision (such as through smart logistics and transport and traffic

controls), and by enabling substitution of virtual services such as virtual meetings,

and music downloads for real world office space, travel, products and shipping. The

emissions savings enabled by ICT use could be up to 4 times greater than the direct

emissions related to ICT over that period.2

Exhibit D: ICT enabled contribution to national carbon intensity targets

This estimate is based on cautious assumptions and technologies already on the

market internationally, in many cases being trialed and developed in China. Key

areas of opportunity are through ICT applications in electricity generation anddistribution (smart grids), energy efficient buildings and industrial processes,

optimization of logistics and dematerialization.

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

20202005

-40%

33

40% emissions intensity reduction,

tCO2e/RMBm GDP

Assumes constant exchange rate over time of RMB6.83/USDSource: CEIC Database; “China’s Low Carbon Development Pathways by 2050 – Scenario Analysis of Energy Demand and Carbon Emissions” – by Energy

Research Institute of NDRC; Smart2020, team analysis


tCO2e/RMBm GDP

15.2 –

18.5%

ICT contribution to intensity reduction

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

20202005

-45%

13.5 –

16.5%




Exhibit E: Key technology opportunities

[Source: Smart 2020, team analysis]

Exhibit F: Key Questions and answers

Total

Dematerializa on 167

Smart Logis cs 274

Smart Motors 286

Smart Buildings 328

Smart Grids 481

1,536

Emission reductions from ICT enablement in China in 2020, MtCO2e

1,382 1,689

A

B

C

D

E




Achieving these opportunities for low carbon growth requires action by technology

providers and users, as well as enabling frameworks provided by public policy and

procurement. As Zhang Jiutian, Director, Ministry of Science and Technology told

the Forum, “calculation of emission reduction maybe not the most difficult task, but how feasible or realistic is if for the potential to be realized, and how to make it

known and accepted, are the key. “

Demonstrating and enabling ICT use in practice is as important as development of

technologies. Often when new technologies are developed they cannot be

immediately introduced within existing business models. Peng Jun, Director of China

Mobile’s Green Action Program highlighted this dilemma, “f or many energy

efficiency technologies, a large upfront investment is required with long payback

times. While China Mobile has implemented technologies with a 10 year payback for

energy savings many other companies will not be able to afford such an

investment.” He called for stronger measurement tools and third party verificationof savings opportunities, to help companies make the case for investment in these

measures.

Many participants highlighted the need for more in depth case study research to

demonstrate the benefits of ICT enabled emission reductions. Professor Cuizhong,

from the China Institute of Strategy and Management said “IICT is widely connected

with all industries and energy sectors, for each industry we need to find good

examples and then promote these. There must be standards to specify how energy-

efficiency can be achieved through ICT applications.” He called on companies to

show leadership in developing pilot projects, while initiatives such as DESC could

draw together and disseminate evidence, and best practice.

There is a need for more detailed policy analysis, alongside the technical and

commercial case studies Participants agreed that enabling national policy

frameworks are crucial. While China has a set of ambitious strategies both for energy

efficiency and for ICT, they are not strongly joined up, and as the World Economic

Forum’s ‘Network Readiness’ analysis highlights there is much still to be achieved.

Continuing to develop a stronger ICT infrastructure, and expanding broadband

access is crucial but further areas that should be explored include:

The role of public procurement in demonstrating the benefits of smart grid,

smart transportation, travel substitution, smart buildings and other smart

technologies.

The potential for adopting or creating protocols for measuring the energy-

efficiency and climate impacts of ICT in other economic sectors, and for the

interoperability of devices.

The potential for integrating ICT tools and approaches into training, tools

and incentives as part of the overall strategy for industrial energy efficiency.

Collaborative action by ICT industry players, MIIT and other relevant ministries,

and international collaborators in both developed and emerging economies could

help develop the tools and capacities needed for ICT to make a full contribution to




China’s low carbon growth. As Professor Zhang Junhua, Professor from the School

of Management at Zhejiang University noted “Information exchange and learning is

critical between ICT companies, suppliers, users and government. We need to

enhance capacity building amongst all stakeholders”

Key areas for immediate productive collaboration would include:

Development and sharing of detailed case studies covering technical,

commercial and policy aspects of technology adoption, to advance the level

of awareness and understanding in China, and provide a platform for mutual

learning.

Detailed investigation of ICT industry supply chain carbon footprint and

opportunities for carbon emission reduction.

Development of a policy roadmap through detailed policy analysis of the

critical gaps and opportunities for advancing low carbon ICT opportunities inChina.




1 ICT and China’s low carbon growth goals

1.1.1 The opportunity for green transformation

China is committed to proactively combating global climate change, as well as

improving the local environment, conserving resources and ensuring resilience in theface of environmental stress. The pathway envisaged is one of low-carbon, high

technology development. While water use, biodiversity and air quality are key issues

for green growth, the carbon and energy challenges remain core targets for policy

intervention.

The relationship between carbon emission and economic growth exemplifies the

complex relationship between economic development and environmental impacts.

China’s economy has achieved remarkable economic growth in recent decades, with

this comes increasing consumption of goods and services, and development of

resource intensive infrastructure such as roads and buildings. As the economy has

expanded, so too has the demand for energy, and with it emissions of carbondioxide, sulphur dioxide and other pollutants. The growth in energy demand creates

several risks for China’s continued economic and social development. Energy supply

constraints and the local impacts of environmental pollution are the most immediate

concerns, while the economic impacts of climate change are already significant.

China is one of the countries most susceptible to the adverse effects of climate

change, in the form of desertification, water scarcity and flooding. This impacts on

economic sectors including agriculture, forestry, transport and tourism, as well as

the infrastructure of coastal zones.3

One way to control carbon emissions is to slow the pace of economic growth. This

was seen in the aftermath of the global economic crisis, where emissions decreasedaround the world (Project Catalyst, 2010). It was also seen in China in the last

quarter of 2010, when in the closures and power blackouts were put in place in

order to meet energy intensity.4 As Premier Wen Jiabao said in September 2010,

while attending the “Summer Davos” meeting in Tianjin.

Slower growth is, however, not a realistic or desirable option. Not only would such a

policy imperil employment creation, but it would also constrain the transition from

heavy industry towards services and enforce a longer reliance on outdated and

inefficient equipment. China is therefore committed to a transition to a low carbon

development pathway that allows for sustained and rapid growth that does not

come at the expense of social or economic wellbeing.

Low carbon growth has therefore to be part of an overall economic development

strategy, consistent with goals to improve energy security, phase out inefficient

“ we are working to reduce high energy-consumption enterprises including

the elimination of small thermal power plants, small iron and steel plants,

cement plants and other high energy-consuming enterprises. We are willing

to achieve this goal at the cost of reducing GDP growth rate. "






of small and inefficient factories and power plants have enabled the country to reach

its 2010 energy intensity target. However, there has been less progress on industrial

restructuring, with the overall proportion of heavy industry continuing to rise.

Box 1: China’s targets for low carbon growth Economic growth. One of the most important objectives of economic policy is to

continue to enable economic growth to create jobs and enable China’s 1.3 billion

citizens to live well. China’s target is to maintain stable and relatively fast

economic growth, at least quadrupling per capital GDP between 2000 -2020.

Current growth targets are for 7.5% per year.

Reduction in energy intensity. The Government has recognised the economic

imperative to reduce the energy intensity of the economy and redirect

investment from power supply and energy intensive industries towards a more

balanced, environmentally favorable, and sustainable economic growth. It hastherefore set an ambitious, target to decouple economic growth from energy

consumption – with a medium term goal to quadruple per capita GDP between

2000 and 2020, while only doubling energy use. This was supported by a shorter-

term goal of achieving a 20% energy intensity reduction between 2006 and 2011.

Reduction in carbon intensity. Because most carbon dioxide emissions in China

are generated by fossil fuels, carbon intensity is very closely related to energy

intensity. Reflecting its energy intensity targets, in 2009 the State Council set a

target to reduce carbon intensity (the amount of carbon dioxide emitted for

every RMB of economic output) by 40-45% by 2020, as compared with a 2005

baseline.

Informatization. China has been pursuing a growth strategy based on

informatization since 1993. This seeks to accelerate transformation of the

economy towards higher value added, higher economic efficiency and resource

and energy efficiency by accelerating the development of ICT infrastructure and

utilization, capability of independent innovation of information technology and

the development of e-enabled public services.

High tech, green innovation driven growth – More recently seven key strategic

new industries have been identified for development these are include new-

generation information technology, energy-saving and environmental protection,new energy, biotechnology, high-end equipment manufacturing, new materials

and new-energy cars. The State Council has set a target that over the next five

years the added value contributed by these sectors should top 8 percent of GDP

by 2015 and 15 percent by 2020.7




1.1.2 The ICT sector contribution

Information and Communication Technologies (ICTs) refer to electronic computer

equipment and related software to convert, store, and process, communicate and

retrieve digitized information. This includes technology, equipment, software and

service elements and both ICT infrastructure and end-user devices. 8

In the national statistics of China, ICT comes under manufacture of Communication

Equipment, Computer and Other Electronic Equipment, as well as within the

statistics of Transport, Post and Telecommunication services. However, ICT devices

(chips, sensors and communicators) are increasingly pervasive and embedded into

infrastructure and other equipment – such as transport and energy systems, vehicles

and household appliances. Convergence between ICTs and consumer electronics

(such as TVs and games consoles) also means that in practice the boundary between

these two categories is increasingly difficult to set, as many of these devices arebeing used for two-way communication in a similar way to PCs and smart phones.

The ICT sector itself has a comparatively low carbon intensity compared to others

such as steel, power, cement and airlines. Therefore it has often been ignored in

traditional analysis of the low carbon growth opportunity and challenge, which has

focused on energy intensive, high emissions industries. However, it is increasingly

recognized that ICTs can play an important role in driving low carbon growth.

Underlying the many of the economic and technological opportunities for green

transformation are ICTs that contribute both to economic growth, to carbon

emissions and to the potential for carbon emission reductions. The ICT industry

impacts on the carbon intensity of an economy in several ways:

Exhibit 1: ICTs and energy and carbon intensity impacts

The promotion of scientific and technological progress and innovation is core toreconciling China’s economic growth ambitions with those of resource-saving and




environment-friendly development. ICT I turn is core to this strategy, as has been

seen in the long-standing priority for ‘informatization’. However the potential for ICT

to contribute to China’s low carbon goals is now starting to receive particular

attention, as it offers opportunities for low carbon –high growth outcomes. This

emerging view of the importance of ICT to low carbon development is supported by

international studies, such as those by European Commission, the Climate Group,

the Digital Energy Solutions Campaign, the Global e-Sustainability Initiative, and the

WWF. These and others have helped to assess and articulate this potential at a

global level.

Other countries are already grasping the potential for ICT to play a key role in

meeting economic and social goals sustainably.

For example, the European Union’s 2020 strategy to get Europe back on track

following the global financial crisis is made up of seven pillars, of which one is

‘Europe’s Digital Agenda’. Faced with the demographic challenge of an ageing

population in the context of intensifying global competition, there is a recognition of the need to ‘work smarter’ and transform economies for sustainable and inclusive

growth. The Digital Agenda for Europe sets out to define the key enabling roles that

the use of ICT will have to play if Europe wants to succeed in its ambitions for 2020.9

This agenda is also being supported by industry, for example in agreement with the

European Commission and following a Commission communication in March 2009,

DIGITALEUROPE, GeSI, JBCE and TechAmerica Europe have launched an initiative

called ICT for Energy Efficiency (ICT4EE) Forum. The Forum focuses on driving

common methodologies for measuring and improving the energy and environmental

performance of ICT processes and developing partnerships and sharing best

practices to demonstrate how ICT can contribute to the more intelligent andefficient use of energy also in other sectors.

10

In India, the Confederation of Indian Industries has been working with DESC to study

the potential for ICTs to contribute to the national Action Plan on Climate Change.

Their research identified GHG emission savings of up to 450 million tonnes CO2 per

annum from ICT solutions in 2030, which is approximately 10% of estimated GHG

emissions in 2030 for the sectors covered in the study, and energy cost savings

equivalent to 2.5% of India’s current GDP.11

In China, there is strong government recognition of the role that ICT can play in the

economy, and the need for low carbon growth. China is working to address barriers

to ICT enabled growth through its policies for ‘informatization’ which has been a key

strategy since the 10th

five year plan. This is being supported by sustained

investment in the ICT infrastructure, R&D, skills and an enabling environment for

innovation. For example significant resources have been committed to spur

innovation in key strategic industries including next generation ICT, renewables and

energy efficiency. There is a plan for national R&D expenditures to reach 2.5 percent

of GDP 2020. A much higher proportion of people in China use ICTs than in any other

developing country with a similar per capita income, and the government is

continuing to expand access to telecommunications and broadband. Measures such

as tax incentives and public procurement priorities seek to promote indigenous

innovation. At the same China is pursuing plans to reduce the energy intensity of the




economy, through industrial energy efficiency, development of low carbon cities and

development of renewable energy and the associated smart grid.

But these two agendas are only just beginning to be brought together at the highest

level and in technical and industry research and collaborative endeavor.

“ICT is an amplifier of industrial development and contributor to

industrial upgrading, at the same time it is much less intensive than

other industries , and it improves the quality of people’s lives. ICT very

important to promote the transformation of high carbon industries into

low carbon industries, which is a means towards sustainable

development. MIIT is actively encouraging the R&D of energy efficient

and ICT industries, and the proliferation of the research results. We aim

to increase the share of ICT in the overall economy and also to

encourage ICT to lead energy protection and saving across all

industries, especially high energy consuming industries. We warmly

welcome both domestic and international companies to promote ICT

for low-carbon development in China.”

Zhou Zixue, Chief Economist, MIIT

“ We need to call for the whole society and especially the ICT industry to

hold the flag of low carbon development. Companies can play a leading

role here: there is pressure but also a great opportunity for China. This

is a very big opportunity to push the transition of the Chinese economy.

It is crucial to explore opportunities for low carbon development, to

gather information, attract researchers and media and raise more

attention from the governmental authorities to the potential for low

carbon development through ICT.”

Bie Tao, Department of Policies, Laws and Regulations, Ministry of

Environmental Protection

“There is tremendous potential and opportunities for furthering energy

efficiency and emission reductions. China’s 12th Five Year PLan focuses

on adjustment of economic and industrial structure, while the 7 key

emerging strategic sectors (including new generation information

technology) will contribute the added value between 8 to 15% in GDP by

2020 – this demonstrates an improvement of awareness about the role

that ICT can play in transforming the economy.”

Wu Changhua, China Director, The Climate Group




There is an emerging groundswell of businesses and cities pursuing ICT enabled low

carbon opportunities. There has also there has recently been research by WWF and

China Mobile, looking in particular at the potential for solutions such as e-books,

teleworking, smart transport solutions, smart city lights, smart appliances and smart

houses to contribute to carbon emission reduction in China.12

This paper builds on these foundations and aims to highlight, and to quantify, the

opportunities for ICT to contribute to China’s low carbon growth goals. It then draws

on the discussion by industry and policy experts at the ICT and Low Carbon Economy

Development Forum to highlight the barriers to to achieving this potential and the

opportunities for action by business, and public sector actors to overcome them.




2 The relationship between ICT, growth &

emissions

2.1.1 The ICT industry drives productivity and competitiveness

Leading academics, global organizations and industry analysts agree that there is adirect correlation between the use of ICT and positive macroeconomic growth. In the

US, ICT capital is estimated to have been responsible for 20% of productivity growth

from 1985 to 1995 and 25% from 1995 to 2003.13

Across the OECD, one estimate

indicates that on average every US$1 invested in the ICT asset base results in a

contribution by the sector to GDP of around US$1.6 per year. This multiplier has

increased over the past decade indicating that the sector’s ability to create economic

value accelerates as ICT penetration and technology advances.14

Exhibit 2:

Investment in ICT asset base drives growth

In developing countries the ICT contribution to growth has to date been lower, but is

increasing rapidly. In China, as in much of developing Asia the ICT asset base

contributed 2.5% to economic grow between 1985-1995 and 7.5% from 1995 - 2003.

1

Every dollar increase in the ICT asset base creates around $1.6 in GDP per year

$ of GDP per $ of ICT investment in OECD countries

Note: Calculated by comparing increase in ICT asset base to ICT contribution to GDP growth in each time period

Source: OECD Productivity Database, September 2005, www.oecd.org/statistics/productivity; World Bank Databank; team analysis




Exhibit 3: ICT contribution to economic growth, by % by region

Source: Jorgenson, D., and K. Vu. Information Technology and the World Economy.Scandinavian Journal of Economics. Vol. 107, Issue 4. December 2005

While developing countries are starting from a lower base of ICT capital, It has been

estimated that in emerging markets raising broadband penetration to OECD levels

could add US$300 to US$420 billion in GDP and create 10 to 14 million new jobs.15

The key mechanisms are through rising productivity in services and integration into

the global economy. A study by the World Bank estimates that a 10 percent increase

in the uptake of basic telecommunication and ICT technologies in emerging

economies, correlates with an incremental GDP increase of between 0.7 and 1.4percent depending on technology.

16

-5

0

5

10

15

20

25

30

o r l d G 7

D e v e l o p

i ns i a

E .E u r o p e

S u b - s a h a r a n

f r i c a

o r t h

f r i c a

a n d

i d d l e

E a s t

C h i n a I n d

i a U S

1985-95

1995-2003

% contribution of ICT capital to GDP growth




Exhibit 4: Growth impacts of ICT

Percentage-point increase in economic growth per 10-percentage-point increase intelecom penetration

[Source: Source: World Bank, “Information and Communications for Development”, 2009 from Qiang, Christine, “Telecommunications

and Economic Growth”, unpublished paper, World Bank, 2008]

ICT use has delivered productivity enhancements for many traditional and new

Chinese businesses. For example in 2005 Shenhua Coal Mine Group reported

productivity tripled in 2005, through management, automation and informatization,

by using ICT Bao Steel was able to reduce its delivery time of hot rolled plates from

50 days to 12 days, and in the petrochemical industry, E-commerce application saved

procurement costs by RMB 2.5 billion.17 New industries that rely on the internet are

emerging and creating new jobs. For example, four Chinese web-based companies,

including Baidu and Alibaba have now taken their place amongst the global top 15 of

internet companies by market value, with average revenues exceeding 2 billion RMB

each. Over ten billion e-commerce employees working for small and medium sized

enterprises are linked into the Alibaba business-to-business network.18

However, an economy wide analysis of the factors underlying ICT driven

competitiveness indicates that there are likely to be significant further opportunities

for improvement. Analysis by the World Economic Forum indicates that although

China has made significant strides through ICT driven growth, more could be

achieved if obstacles to international competitiveness on ICT were addressed. TheWorld Economic Forum’s Network Readiness Index is a tool that assesses economies’




preparedness to leverage ICT advances for increased competitiveness and

development. The framework aims to measure the degree to which a national

environment is conducive to ICT development and diffusion, the extent which

individuals, the business sector, and the government are inclined and prepared to

use ICT in their daily activities and the actual levels of ICT use. The 2010 Index rated

China s leading amongst the lower middle countries. The country is ranked 37th out

of 133 (rising from 57 and 46 over the previous two years, and overtaking India, now

ranked at 43rd). Hong Kong is ranked separately and is number 8 in the world. The

Republic of Korea is 15th and Malaysia is in 27th position. China scores well for

individual readiness, reflecting high quality education, and in government readiness

and commitment to the sector. It also scores well in business usage, reflecting high-

tech exports and capacity for innovation. Areas where China lags are on

infrastructure and market environment, and the resulting levels of individual usage.

Exhibit 5: China network readiness

Source: Global Information Technology Report, 2009-2010, 2010 World Economic Forum; team analysis




Exhibit 6: Supporting environment key to network readiness

Source: Global Information Technology Report, 2009-2010, 2010 World Economic Forum; team analysis

2.1.2 The ICT contributes directly to economic growth

China’s ICT sector is concentrated in manufacturing and export of electronic

equipment but has also seen recent growth in software development, ICT enabled

service outsourcing and the development of domestic ICT enabled business to

business and consumer services.

The ICT industry has grown around twice as fast as GDP over the past 10 years, with

a combined contribution (from telecommunications and IT) of 7.5% of GDP by

2007.19

Looking just at the IT industry (computer equipment and software) in 2005,

the added value of was RMB 1.1 trillion or 4.2% of GDP. In the same year, exports of

ICT and electronic products accounted for 27% of the country's exports, and 25% of

global output of global electronic products.20




Exhibit 7:

IT Industry has grown faster than the rest of the economy

Exhibit 8: ICT Exports are growing faster than general exports

We estimate that by 2020 the IT sector will contribute 5.9 trillion RMB of added

value to the economy, accounting for 7.2 % of GDP and contributing 8.6% of overall

economic growth over the decade.

8

China ICT added value, 100M RMB

Note: 2020 figure estimated based on current % of ICT value added/GDP in USSource: NBS & MIIT from CCID Consulting, Jan 2009

11,459

9,948

8,155

6,701

5,193

3,5442,715

2,372

2007200620052004200320022001 … 2020 (E)

59,537

02008 (E)

5,000

60,000

10,000

XX % of GDP

2.22.3

2.6

3.2

3.6

3.9

4.0

4.2

7.2

8

Export revenue in China, $ billion

Source General Administration of Customs (GAC) & MIIT from CCID Consulting, Jan 2009

2001

266

65

2005

762

268

2004

593

208

2003

438

142

2002

326

92

1,218

2006

969

2008 (E)

1,452

2007

460537

364

ICT industry export revenue: Growth rate = 35% p.a.

Total export revenue: Growth rate = 27% p.a.




2.1.3 The ICT sector’s own footprint

The carbon footprint of ICT is made up of the carbon emitted across the whole value

chain, from the extraction of raw materials, manufacturing of components and

equipment, energy demand from the use of ICTs (both by end users and in the

underlying telecommunications and data processing infrastructure) and finally

through disposal at the end of life.

Exhibit 9: The ICT value chain

Globally it has been estimated that ICT use is responsible for 2-3 % of current green

house gas emissions. This estimate includes key contributions from PCs and data

monitors (40%) data centers (23%) and fixed and mobile telecommunications

(24%).21

Energy use by data centers is the fastest growing area, driven by demand

for new Internet services. If the energy use from consumer electronics such as

televisions, set top boxes and DVD players is included in the ICT footprint, the overallemissions of the sector is likely to be significantly higher. For example, the European

Commission includes consumer electronics in their assessment and estimates that

nearly 8% of electricity use in the EU is associated with ICT use (by end users and

infrastructure).22

The well-known ‘Moore’s Law’ describes the long-term trend in the history of

computing hardware in which the number of transistors on a chip doubles every two

years. This leads to an exponential growth in the performance of computing

equipment, and in the associated performance per unit of energy used. However,

the cost of computer technology tends to fall at double exponential rates (chips are

getting both smaller and cheaper), leading to more powerful devices being used by

more people, and being embedded in more equipment. Therefore, despite the

increasing energy efficiency of ICT hardware, the growing proliferation of devices

and increase in demand for processing power and high-bandwidth communication

mean that the total energy demand of the installed hardware base is growing, and is

predicted to continue growing, to reach 6% of global energy use by 2020.23

Overall it is estimated that the carbon generated from materials and manufacture is

about one quarter of the overall ICT footprint, the rest coming largely from the use

phase. There is little greenhouse emission associated with disposal, since ICT

equipment is composed mainly of metals, plastic and glass. However recycling of e-




waste recovers material, saving energy otherwise used for their primary

production.24

Emissions from the materials and manufacturing stage of consumer electronics and

ICT products tend make up a greater proportion of the overall footprint of these

devices, as they often replaced well before the end of their useful life. While forinfrastructure products the use phase is more dominant. For example, Apple

estimate that 43% of their product emissions are from transport and manufacture,

and Nokia estimate that 72% of product emissions are from materials,

manufacturing and transport. The assessments by different companies should not be

directly compared as the assumptions and data behind the calculations can be very

different. There are ongoing standardization initiatives for example in ITU that aim at

providing a standardized method for assessing the life cycle impacts of ICT.25

Exhibit 10: ICT brand’s own life cycle assessments of their product’s footprints

[Source: Apple (2010) Website, Nokia (2010) Sustainability Report]

Manufacturing and materials related emissions are particularly important in

considering the emissions footprint of the ICT industry in China, because of the

importance of manufacturing.

In China, as in other countries the ICT sector itself, has relatively low energy and

carbon intensity. As part of the GeSI/Climate Group ‘Smart 2020’ report the overall

ICT footprint for China (encompassing materials, production, use and disposal) was

calculated at 190 Mt CO2e, or about 2.4% of the country’s emissions. At the sametime the telecommunications, electronics and information technology industries

Apple

Nokia




combined in China were approaching 8% percent of China’s economic output. This

means that the ICT industry creates more than three times as much wealth per unit

of emissions as the average for China.26

By 2020 China’s ICT related emissions will reach 415 Mt or 3% of the estimated

national total. This reflects a projection that by 2020 up to 70% of people in Chinawill be able to afford ICT devices, and will have caught up with developed countries’

ownership levels.

Exhibit 11: Carbon footprint of ICT in China

This estimate takes into account the significant potential to control and reduce

emission growth associated with ICT use, particularly through the development of

more efficient data centers.

4

2.4%

190

415

13,344

2020

8,060

China footprint (Mt CO2)

2007

ICT Total

3.1%

China footprint (Mt CO2)

ICT vs. Total

Note: Future ICT footprints are calculated after taking into account expected developments in improved efficiency (e.g. shift from PC ’s to laptops, replacement ofcathode ray tube screens with low energy alternatives, reduction in PC and dat a centre power consumption). However, potential breakthrough technologies which

would reduce the footprint even further have not been taken into account.

Source: GESI/Climate Group (2008) Smart2020: Enabling the low carbon economy in the information age ; Netherlands Environmental Assessment Agency




Exhibit 12: Opportunities for reducing the ICT carbon footprint

Technology Opportunity Potential *

Personal

computers

Improvements in power management

of PCs, switch from desktop to laptop

computers and from cathode ray

screens to LCD screens

Longer product life

73%

Data centers Improved energy efficiency of servers

Optimization of cooling, including

natural ventilation and cooling

Virtualization and sharing of data

processing

48%

Telecoms

devices

Smart chargers

Low energy standby settings

Longer product life (service and

software rather than handset upgrades)

64%

Telecoms

infrastructure

Network optimization

Renewable energy powered base

stations

Energy efficiency improvements

Natural ventilation

35%

* Reduction in energy use against current trends expected through ongoing

technology adoption

[Source: adapted from GESi/Climate Group (2009) Smart 2020]

These are technologies and management approaches that are readily available and

ready for application. There may well be further possibilities for energy efficiency,

such as utilizing the heat generated by the data centers and servers for district

heating – this is currently being trialed in Finland.

Taking into account both growth in added value by the sector, and immediately

applicable energy efficiency improvements, this results in an emission intensityreduction of 63% for the sector from 2008 to 2020.




Exhibit 13: ICT sector emissions intensity could fall by 63%

2.1.4 ICT enabled carbon savings in other parts of the economy

ICTs can help to green other industries – for example by using sensors and controls

on heating, air conditioning and industrial motors, through the development of

Smart Grids to optimize power distribution and through the dematerialization of

products (such as CDs and books) as well as travel and retail premises using virtual

communication. New technologies allow people to do more with less, for example

checking emails on a tiny smartphone rather than a desk top computer.

Convervegence of consumer devices may also mean that many products such as a

CD player, camera, alarm clock, navigation device and e-book reader can all be

replace by a single smart phone.

The Smart 2020 report outlines five key categories of ICT enabled emission

reductions as outlined below:

11Source: NBS & MIIT from CCID Consulting, Jan 2009

China ICT emissions intensity, [tCO2 /M RMB]

191

70

0

50

100

150

200

ICT sector intensity(tCO2/M RMB)

2007

-63.5%

2020




Exhibit 14: ICT enabled emission reduction opportunities

WWF and Ecofys outline further applications such as in changing knowledge and

behavior through electronic labeling, simulation and analysis tools, and in furtherdematerialization such as e-health and e-government, and precision agriculture.

27

A number of international studies have sought to quantify the potential of these

opportunities. The SMART 2020 Report estimates there is a potential for abating 7.8

Gt CO2eq of emissions in other sectors using existing ICT technologies – meaning

that overall for every ton of CO2 emissions associated with ICT use globally up to

2020 there could be five tons of savings.




Exhibit 15: International studies on ICT enabled emission reductions

Study Energy/emission

saving potential

Ratio of

savings to

use

Key opportunities

GESI/Climate

Group

7.8 GtCO2e emissions

savings globally by

2020. This represents

15% of emissions in

2020 based on a

business as usual

estimation.

5:1

(carbon

emissions)

Smart grid

Smart buildings

Smart logistics

Smart motors

Dematerialization (inc. Telework)

European

Commission

In Europe, by 2020 ICT

could be responsible of

energy savings of up to

32% of projected use.

7:1

(energy

use)

3:1

(carbon

emissions)

Energy use in buildings (control of HVAC)

Ecofys/WWF 1-8 Gt GtCO2e (low,

medium and high

scenarios)

In-vehicle ICT (smart transport)

E-commerce and dematerialization

Smart buildings

ICT for energy efficiency in industry

Transport mode switching

IDC 5.8 GtCO2e in 2020 in

the G20 countries,

representing more

than 25% of G20

countries' totalemissions in 2006.

Buildings (energy management, teleworking)

Power(smart grid)

Transport (smart logistics, eco driving,

navigation, efficient vehicles)Industry (dematerialization, smart motors)

American

Council for

Energy

Efficient

Economy

25% of projected US

energy use could be

saved by 2030 through

intensive semi-

conductor technology

use.

1:10

(energy

use)

Power supply and management

Ecommerce and telecommuting

Smart motors , sensors and controllers

LEDs and Smart lighting systems

Alternative energy applications and smart

grid

[Source: GESI/Climate Group (2008) Smart 2020:, European Commission (2008) Impacts of

Information and Communication Technologies on Energy Efficiency, Ecofys/WWF (2008) Outline for

the first global IT strategy for CO2 reductions: A billion tons of CO2 reductions and beyond through

transformative change, American Council for Energy Efficient Economy (2009) Semi-conductor

Technologies: the potential to revolutionize US Energy Productivity]

As the international studies indicate, the potential for ICT enabled emission

reductions is much larger than the direct footprint of the production, use and

disposal phase of ICTs themselves. We have looked at the potential to apply the

technologies, as identified by Smart 2020 to China’s growing economy.

Overall we estimate that ICT enabled solutions could result in a saving of 1.4 – 1.7 Gt

CO2e by 2020, if these technologies are taken up at rates comparable with

international trends. This estimate is in line with one produced by the International

Data Corporation (IDC) as part of a broader study of G20 countries. They used a




similar methodology, although with somewhat different assumptions on the impacts

of smart metering, ecodriving, teleworking and smart motors. The individual

technology assessments and assumptions are included in the annex to this report.

In order to estimate the potential for these technologies to achieve emission

reductions in China, we have used where possible, existing credible academicestimates of enablement potential for particular ICT technologies in China (for

example smart motor systems). Where the potential has not been calculated we

developed a measure of sectoral footprint in each area and used this as the basis for

determining the ICT enablement impact, using the international benchmarks derived

from the Smart 2020 research. The assumptions we used were chosen to represent

a realistic achievable level, rather than a technical maximum. For example, The

penetration rate of ICT controlled variable speed motor systems was projected as

60%, while the penetration rate of ICT driven automation was projected as 30%.

Exhibit 16: ICT enabled emissions reduction potential

[Source: Smart 2020, team analysis]

Our estimate highlights a significant opportunity for ICT enabled emission reductions

to contribute to China’s emission intensity targets. As official baseline measures

have not been released it is impossible to say with certainty how large this

contribution would be, but initial estimates are that it would amount to between 13

and 18 % of needed intensity reduction, compared to a 2005 baseline.28

Total

Dematerializa on 167

Smart Logis cs 274

Smart Motors 286

Smart Buildings 328

Smart Grids 481

1,536

Emission reductions from ICT enablement in China in 2020, MtCO2e

1,382 1,689

A

B

C

D

E




Exhibit 17: ICT enabled contribution to national carbon intensity targets

The opportunity for carbon emission enabled reductions in China are larger in

absolute terms than those in the US and Germany, although smaller in relation to

China’s projected overall emissions in 2020.

In general, the greatest potential for ICT enabled energy savings, per unit of energyused, comes through smart logistics (i.e. transport substitution impacts) while there

are less energy savings to be made through smart motors. Given that energy

consumption is dominated by industry in China and by transportation in the US, the

ICT enabled energy savings potential is greater in the US.

Exhibit 18: China ICT enabled emission reductions compared to other countries

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

20202005

-40%

33


tCO2e/RMBm GDP

Assumes constant exchange rate over time of RMB6.83/USDSource: CEIC Database; “China’s Low Carbon Development Pathways by 2050 – Scenario Analysis of Energy Demand and Carbon Emissions” – by EnergyResearch Institute of NDRC; Smart2020, team analysis


tCO2e/RMBm GDP

15.2 –

18.5%

ICT contribution to intensity reduction

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

20202005

-45%

13.5 –

16.5%




Exhibit 19: China’s ICT enabled emission reduction potential compared to India




Exhibit 20: China technology opportunities compared to other countries

[Source Smart2020 Country studies, team analysis]

Our estimate is significantly higher than that produced by WWF and China Mobile in

their study. They examine a more limited range of solutions (mainly focused on

transport substitution and dematerialization impacts) and estimate that a total of

0.6 GT CO2e could be saved by 2020, rising to 1.3 GT in 2030.

A key factor that shapes the ICT enabled emission reduction opportunities in China

in the medium term is industrial energy efficiencies (which was not included in theWWF study). Industry consumes about 70% of China’s total energy, a share that has

been growing due to massive investment in energy-intensive industries producing

steel, aluminum and glass to support domestic construction of roads and buildings.

NDRC’s report on “Scenario analysis of Energy Demand and Carbon Emissions” and

DRC’s “2050 China Energy and CO2 Emissions Report” both predict that industry’s

energy use will significantly decrease from 70% to 50%, but that this won’t take

place until after 2020. While modernized enterprises and large state owned

corporations have adopted technological solutions and reduced energy intensity to

international competitive levels, a large number of medium and small enterprises

still rely on inefficient and outdated equipment. While smart logistics and smartbuildings are responsible for a smaller proportion of the potential emission savings

in China up to 2020, compared to the immediate gains to be made in industrial

efficiency, they are likely to grow in importance after that. In the next two decades,

nearly 350 million people are expected to migrate to China’s cities, a number

exceeding the current total population of the United States. This will mean

increasing demand for energy as the use of air conditioners, home appliances and

cars increases. A large share of China’s buildings, transport and energy infrastructure

in 2020 – including 50,000 new high-rise buildings and 170 new mass transportation

systems are yet to be built. It is much more cost effective to adopt high-productivity

solutions for new systems than to retrofit older ones. This means that China has




opportunities to introduce cutting edge technologies at an earlier stage of

development than other countries, effectively leapfrogging older, inefficient

technologies. Developing low-carbon buildings, infrastructure, transportation and

neighborhoods over the next ten years will help to create productive, livable and

inclusive cities, and achieve significant carbon emission abatement in the longer

term.

These longer-term emission reduction potential reflects the ability for ICT to catalyze

transformative solutions, new business models, lifestyle changes and new ways of

organizing public services, rather than just incremental efficiency improvements.

Conversely if these opportunities are not taken the result is a long term high-carbon

lock-in of infrastructure.

Our estimates do not take into account the ‘rebound effect’ that can occur when

technology enables time, money and energy savings together. People may use the

time and money freed up by ICT efficiencies to engage in other, more energy

intensive activities. However, given that China’s low carbon growth targets areintensity targets which incorporate the need for economic growth and rising level of

consumption this may be less of a problem in relation to this analysis than in other

countries which are already facing the need for absolute emission cuts.

Finally, our analysis looks at China as a whole. There is significant regional diversity in

levels of carbon intensity between costal developed regions and inland provinces, as

well as in the energy producing, heavy industry dominated Western regions, and the

opportunities to apply ICTs to reduce emissions will also need to be tailored to these

different challenges. These disparities relate to economic development and structure

and the level of technological adoption and are reflected in different regional energy

and carbon efficiency goals.




3 Realizing the potential for ICT enabled low

carbon growth in China

This paper has gone some way in identifying and quantifying the potential for ICTs to

contribute to China’s low carbon development. The potential for carbon intensityreduction is based on an analysis of existing technologies that are already on the

market internationally, and in many cases are being trialed and developed in China.

However, as Zhang Jiutian, Director, Ministry of Science and Technology (newly

added panelist, need confirm with DESC) highlighted “calculation of emission

reduction maybe not the most difficult task, but how feasible or realistic is if for the

potential to be realized, and how to make it known and accepted, are the key. “

Companies such as HP, Lenovo and Nokia highlighted how they are taking leadership

in improving, reporting and benchmarking their own energy and carbon

performance, and that of their suppliers. In this way they are showing how it is

possible to save energy through applying smart technologies and sound corporate

processes in their own buildings, manufacturing and logistics.

Beyond the ICT sector itself, some technologies such as smart motors are already at

the ‘early majority’ stage, and have been adopted by many larger businesses. For

example one company, SUPCON began research, development and implementation

of advanced process control technology in 1993, and released multivariable

predictive control software, which was successfully applied in many industries,

including petrochemical, oil refining and chemical industry. Such software solutions

not only enhance total performance of the system but also help factories to reduce

energy consumption by between 3 to 5%, as well as reducing waste. However thesesmart solutions have tend to be introduced in the larger and most modernized

enterprises, and there remain significant opportunity for expansion.

However, many of the technologies such as smart logistics, smart grids and smart

buildings remain at the ‘early adopter’ stage in China.




Exhibit 21: Stages in technological diffusion

3.1.1 What are the barriers to technology adoption?

Experts and industry players at the ICT and Low Carbon Development Forum

discussed the barriers that they see to greater uptake and adoption of ICTs for

energy saving. Many emphasized the problem of basic lack of Information and

awareness on the opportunities for cost-effective energy saving. Without common

metrics of performance, and systems for sharing this it is impossible to assess, and

communicate the energy and emission reduction performance of different ICT

products and solutions.

Maturity Laggards

R&D – technology development Innovators

Demonstrating viable business model Early adopters Demonstrate and localise

Achieving critical mass Early majority

Becoming industry standard Late majority

Technology diffusion stage Adopting business

Take up solution once benefits aredemonstrated and costs brought

down

Time

Market penetration




“ In general, people are not clear about how ICT can work to help

emission reduction. Both engineers and entrepreneurs, companies and

the public need education. Their primary concern is about cost and

investment. Energy saving effect cannot be seen very easily and

instantly. So we can think of new operational models to solve this

conflict and prove the effects. Therefore pilot projects should be

initiated, specially for ICT’s potential for reducing emissions in other

industries – that helps to realize the potential in practice.”

Wen Zongguo, Director,

China Circular Economy Industry Research Center, Tsinghua University

“ICT probably constitutes one of the single biggest suites of options to

decarbonize the world economy. This is not a new concept – the way we improve our quality of life is by improving our productivity. ICT

helps to improve our energy productivity. But there is a gap between

actual and potential of ICT: it comes down to market failures. It takes

action by government, collaboration between industry and government

to overcome these failures.”

Stephen Harper, Global Director, Environment and Energy Policy,

Intel Corporation

First of all, there’s lacking of awareness in understanding ICT’ s role in

emission reduction. We hope an effective platform could be established

with support from the government. Secondly, a healthy industrial value

chain should be formed which government can also play an important

role. The upfront investment in energy efficient equipment is huge and

the payback is long-term – China Mobile has initiated various programs

but most companies may not be able to afford. Meanwhile the effects of

energy efficiency need to be proved but convincing methodology to

calculate the benefits is still lacking. Lastly, assessment and verification

of return on investment is needed, which should be reflected in the policy considering characteristics of specific industries and sectors.”

Peng Jun, Department of “Green Initiative” China Mobile

While ICT enabled efficiency delivers both financial and carbon savings, there remain

financial barriers to investment. One is simply that the lacking of indicators and

methodology to measure ICT use effects means that benefits are not clearly

demonstrated and companies are therefore reluctant invest. Sometimes, however,

opportunities for energy and money saving exist but the pay-back periods are too




long in relation to the risk and the cost and availability of capital for investors, or

their willingness to sustain the opportunity costs of lost business and time to switch

to new systems in the face of competitive pressures. Therefore it is not just

technology adopting firms, but also financial institutions that need to be convinced

that energy saving ICT delivers good and stable returns.

Capability to implement and integrate ICT enabled solutions can also be a key issue,

particularly amongst small and medium sized enterprises. There is often poor

awareness of the business case for reducing energy use and a lack of capacity and

skills to operate and integrate ICT solutions into current processes such as buildings

management, production systems, architecture and transport planning.

Often when new technologies are developed they cannot be immediately introduced

within existing business models. Finding new ways of bringing together partners and

aligning incentives between who pays for up-front investment and who benefits

from total cost of ownership savings are critical to enabling technologically feasible

solution to be adopted. Energy service companies (ESCOs) are own key mechanism

that serve to bridge the gap between the savings opportunities, and the knowledge

and ability for individual firms to invest to save. ESCOs identify and finance energy

conservation projects and use the energy savings to pay back the initial investment,

however at present they are not making full use of ICT enabled savings

opportunities.

Other studies, such as those by Smart 2020 and WWF have also highlighted the

problem of coordination, when seeking to go beyond incremental efficiency gains

and use ICTs to enable radically different ways of organizing logistics, transportation,buildings and commerce. Existing infrastructure which ties many businesses into

high-carbon systems can make it difficult to find a pathway for transition. For

example, electric vehicles may be more efficient to run than gasoline cars, but for

consumers to use them depends on having a network of charging stations. Pursuing

opportunities for the most transformational ICT enabled low carbon growth

opportunities such as smart cities and logistics, is often a coordination problem of

ensuring action on many fronts, or interoperability between different systems.

What is clear is that for low carbon ICT solutions to move up the technology diffusion

curve and reach a critical mass, firms must take action, both as ICT technology

providers and technology adopters, and governments can play an enabling rolethrough procurement, regulation, price incentives and subsidies and standard

setting.

.

“Any individual party alone cannot make things happen, there must be

collaborations between government, enterprises, and NGOs.

Government and companies should be aligned, and can learn from

each other to turn the vision into actions and policies.”

Wu Chenghua, China Director, The Climate Group




3.1.2 What should technology users do?

In order to overcome the barriers to adoption, ICT enabled opportunities for

reducing carbon emission intensity, need to be understood and managed as part of a

broader process for energy and carbon saving, integrated into business processes in

buildings and industrial process design, materials choices, logistics and energymanagement.

Companies such as Intel, HP, Lenovo and Nokia highlighted how they were already

doing this in their own operations.

Exhibit 22: Key steps for technology users

The key steps for energy users are:

1. Develop a firm level inventory of carbon emissions, and understand the role

that carbon plays in their organizations, in terms of energy and fuel

consumption and direct emissions from land use, agriculture and chemical

processes. Compiling a comprehensive GHG inventory improves a

Assess carbonemissions in a

firm levelcarbon

inventory

Iden fyopportuni esfor saving and

benefit

Priori zeinvestments

Assess overallemission

reduc on planand set overall

target

Implement plan




organization’s understanding of its emissions profile and can help identify the

most effective reduction opportunities.

2. Identify opportunities. A carbon emission inventory areas identifies areas of

high carbon emissions, and provides a basis for identifying opportunities to

reduce emissions. Given the pervasiveness of energy and emissions impacts,

and the need for strategic transformation companies have found that

creating a dedicated cross-functional team is crucial to identifying and

prioritizing initiatives across the organization. Key people that need to be

involved then include chief financial officers, and chief information officers,

and those involved in decision making on product design, industrial systems,

logistics and buildings, as well as those directly concerned with energy

generation and use. Ideas may come from employees or a review of

previously-identified opportunities, they also be the result of energy audits or

other third-party evaluations of a company’s operations, as well as from

suppliers of new equipment, technologies and solutions.

3. Align incentives. There are often opportunities to early quick wins whereenergy is being needlessly wasted, and could easily be conserved through low

cost measures. Longer term measures that involve more involved changes,

and investments will need to be identified, compared and prioritized in order

to decide where best to invest resources. Budgeting cycles, capital planning,

available subsidies, equipment downtime and many other variables need to

be taken into consideration.

4. Set and manage towards to meet a reduction goal is crucial to

communicating progress to investors and regulators, and to engaging

employees, suppliers and customers. Once projects have been defined and

an implementation timetable developed it is possible for the organization tocalculate the projected impact on emissions and costs over time. They can

then consider whether this level of performance would be an aggressive and

competitive goal, or whether a more ambitious goal should be set. Firm level

intensity goals allow organizations to account for increases in activity over

time and thus provide the basis for key performance indicators (KPIs) over

time and benchmarks between companies. Normalizing factors may be

physical units, such as tons of steel or measures of economic value added.

Setting a goal and tracking and reporting performance ensures accountability

for performance and creates cycles of learning and continuous improvement.

3.1.3 What tools and measures of support are already available?

A number of key tools already available to help technology users realize the

potential energy and carbon savings to be made through ICT use.

Tools and approaches to encourage and support technology adopters to choose and

use the most efficient solutions include:

Standards for measuring organization, project and product level emissions.

Internationally recognized tools such as the World Resources Institute/ World

Business Council for Sustainable Development Greenhouse Gas Protocol(GHG Protocol offer a basis to understand, quantify, and manage greenhouse




gas emissions and develop a baseline for comparison and a starting point for

evaluation.29

In China MIIT is taking the lead by developing framework

guidance and a catalogue of examples for how ICT can be used effectively.

Energy audits and energy and carbon management software. While a first

round of carbon emission accounting may be done using basic spreadsheet

software, leading companies are recognizing the benefits of energy

management software, automatic metering sensors and controls to manage

carbon emissions.

Life cycle analysis. Life cycle analysis provides robust data to enable choices

to be made between different products or design solutions based on their

total impacts over their life cycle. GESi working with the Boston Consulting

Group has developed a lifecycle assessment methodology for ICT enabled

carbon reductions which provides a step by step guide to identifying,

assessing and communicating product level emissions impacts.

Exhibit 23: Life cycle assessment approach for ICT

Total cost of ownership accounting models. Making the case for energy

saving measures often involves comparing different design and technology

options on a ‘full cost of ownership’ basis. In some cases this may mean

making accounting changes within the business, such as in accounting for

electricity costs within individual cost centers, rather than as an overhead.30

Public procurement standards and incentives. Carbon and energy

performance measures can be built into specifications for building design and

equipment purchase. For example, in the EU Member States have agreed to

include specifications for total lifetime costs for public lighting in public

procurement. In China there has already been leadership shown by the




government in terms of private sector education and public private

partnerships. Many of the long term opportunities in buildings and logistics

can best be realized through coordination between transport, ICT, land

planning, procurement and building codes at the city scale. A number of

‘Smart City’ plans and partnerships have already been developed at the city

level in Guangdong, Liaoning, Hubei, Shanxi, Yunnan; Tianjin, Chongqing,

Shenzhen, Xiaomen, Hangzhou, Nanjing, Guizhou, and Baoding – seeking to

connect transport, communications, energy and building infrastructure to

achieve better outcomes for the livelihoods, health and lifestyles of city

residents.

Financial incentives. For example, in the case of smart motors take up has

been supported by measures such as government subsidies to pay the

difference between regular and high-efficiency motors and research by the

Ministry of Science and Technology in areas such as motor system energy-

saving technology for the mining industry.

External benchmarks for target setting. Firm level targets for high intensitysectors are often set following technical and economic analyses of energy-

saving technologies and potential. They may be negotiated at sector level

between industry body and government, or set of a firm-by-firm level. The

key question in setting such reduction goals is what is an appropriate,

achievable and ambitious goal is for a particular company or organization,

within an overall global, national or sectoral target. One approach to this is

the ‘Climate Stabilization Intensity Target’ methodology developed by British

Telecom. It provides a simple and effective tool for setting company level

reduction targets, linking company’s financial and environmental

performance to the necessary carbon reductions needed to reach national orglobal targets.

31

Learning and leadership networks. Learning and leadership networks can

provide companies and organizations with practical peer-to-peer support and

targeted training. The US Energy Star, the UK’s Carbon Trust, China’s top

1000 enterprises program, WWF’s Climate Savers program and the

WRI/WBCSD national networks linked to their GHG protocol implementation

are just some of the public, private and voluntary initiatives working to build

capacity in this way.

3.1.4 The need for collaboration

Many participants highlighted the need for more in depth case study research to

demonstrate the benefits of ICT enabled emission reductions. They highlighted the

need for businesses in the sector to work with others to enhance understanding of

the technological risks, opportunities and barriers to key technologies and to

develop common training, product standards, benchmarking and measurement tools

which would enable successes to be communicated and replicated.. This might

include a bottom-up process technology, economic and stakeholder research to

understand context in which individual technologies are being rolled-out in China

and the cost and other barriers that are in place. Associated with this is the adoption




and use of standardized metrics and measurement tools to assess and communicate

the carbon reduction potential and performance of key technologies.

There is a need for more detailed policy analysis, alongside the technical and

commercial case studies Participants agreed that enabling national policyframeworks are crucial. While China has a set of ambitious strategies both for energy

efficiency and for ICT, they are not strongly joined up, and as the World Economic

Forum’s ‘Network Readiness’ analysis highlights there is much still to be achieved.

Continuing to develop a stronger ICT infrastructure, and expanding broadband

access is crucial but further areas that should be explored include:

The role of public procurement in demonstrating the benefits of smart grid,

smart transportation, travel substitution, smart buildings and other smart

technologies.

“ICT is widely connected with all industries and energy sectors, for eachindustry we need to find good examples and then promote these. There

must be standards to specify how energy-efficiency can be achieved

through ICT applications. Currently there is no standard for evaluation and

assessment. It should be drafted by companies and then upgraded into

industry standards or government policy. We therefore need leadership

from companies, and pilot projects. DESC should choose some samples to

demonstrate how to realize the emission reduction potential of ICTs. Once

the best practice is disseminated, people will have the right reference to

benchmark, and will improve or optimize their own practice. There should

be cases in individual sectors to specify each process. “

Cuizhong, Professor, China Institute of Strategy and Management

“For many energy efficiency technologies, a large upfront investment is

required with long payback times. For example, some technologies that

China Mobile has implemented have a 10 year payback – many other

companies will not be able to afford such an investment. We need third

party verified proof of savings..”

Peng Jun, “China Mobile Green Action Program”, China Mobile

“We need to do more case studies and implement more pilot pro jects to

have more persuasive evidence.”

Wu Chenghua, Climate Group




The potential for adopting or creating protocols for measuring the energy-

efficiency and climate impacts of ICT in other economic sectors, and for the

interoperability of devices.

The potential for integrating ICT tools and approaches into training, tools

and incentives as part of the overall strategy for industrial energy efficiency.

International collaboration and experience sharing might be useful here, focused

on public policy approaches in China and abroad. The EU Digital Agenda for Action

for example is pursuing a number of relevant actions in this area where lessons,

models and experiences could usefully be shared.C

Collaborative action by ICT industry players, MIIT and other relevant ministries,

and international collaborators in both developed and emerging economies could

help develop the tools and capacities needed for ICT to make a full contribution to

China’s low carbon growth. Key areas for immediate productive collaboration

would include:

Development and sharing of detailed case studies covering technical,

commercial and policy aspects of technology adoption, to advance the level

of awareness and understanding in China, and provide a platform for mutual

learning.

Supply chain investigation of ICT industry supply chain carbon footprint and

opportunities for carbon emission reduction.

Development of a policy roadmap through detailed policy analysis of the

critical gaps and opportunities for advancing low carbon ICT opportunities in

China.




“ We hope that the government can establish a good platform for creatingawareness. China should develop world class standards otherwise you are

always passively responding to standards. Telecom equipment

specification standards are needed nationally. For example, data center

can save energy use by 20% but there’s no standard to follow, so the

current equipments are operating in low energy-efficiency and poor

reliability.”

Peng Jun, “China Mobile Green Action Program”, China Mobile

“ICT covers so many industries, so many interrelated policies are needed. There is tremendous potential and opportunities to furthering energy

efficiency and emission reductions. China’s 12th FYP focuses on adjustment

of economic and industrial structure, while the 7 key emerging strategic

sectors (including new generation information technology) will contribute

the added value between 8 to 15% in GDP by 2020 – this demonstrate an

improvement of awareness about the potential of ICT to contribute to

China’s low carbon development.”

Wu Chenghua, Climate Group

“Information exchange is critical between ICT companies, suppliers, usersand government. We need to enhance capacity building amongst all

stakeholders”

Zhang Junhua, Professor, School of Management, Zhejiang University




1Jorgenson, D., and K. Vu. Information Technology and the World Economy. Scandinavian Journal of

Economics. Vol. 107, Issue 4. December 2005.2 Growth rate estimated based on historical correlation of GDP and emissions’ growth in 2006-2009,

and on NDRC GDP growth estimate for 2010-2020. CECEIC Database, NRDC (2009) China’s Low carbon

growth Pathways by 2050 – Scenario Analysis of Energy Demand and Carbon Emissions abd

Netherlands Environmental Assesment Agency.3

State Council of the People’s Republic of China (2008) China’s Policies and Actions on Addressing

Climate Change, Information Office of the State Council, Beijing.4

Jing, Li (2010) Fight hard and long to save environment, Wen tells nation, 2010-03-06, China Daily5

Li (2010) 李毅中接受专访谈 “ 十二五 ” 工业领域核心任务 , MIIT 28/09/10

http://www.miit.gov.cn/n11293472/n11293832/n13095885/13429977.html6 Information Office of the State Council of the People’s Republic of China (2007) China’s Energy

Conditions and Policies.7

CPC (2010) Full Communique of the 5th Plenum of the 17th CPC Central Committee8 World Bank ICT Glossary9

European Commission (2010) Communication from the Commission to the European Parliament,

The Council, The European Economic and Social Committee and the Committee of the Regions, A

Digital Agenda for Europe10

www.ict4ee.eu 11

DESC/CII (2010) ICT’s Contribution to India’s National Action Plan on Climate Change, December

2010.12

YANG, T, HU, Y, ZHENG, P and Pamlin, D (2010) 5 Low Carbon Telecommunication Solutions in

China: Current Reductions and Future Potential13

Jorgenson, D., and K. Vu. Information Technology and the World Economy. Scandinavian Journal of

Economics. Vol. 107, Issue 4. December 200514

Source: OECD Productivity Database, September 2005, www.oecd.org/statistics/productivity ;

World Bank Databank; team analysis15

World Economic Forum (2010) ICT for Growth16

Qiang, C. and Rossotto, C. (2009). ‘Economic Impacts of Broadband’. In World Bank (ed.),

Information and Communications for Development 2009: Extending Reach and Increasing Impact.

Washington, D.C., USA: The World Bank.17

Zongzhou, L (2006) China’s Informatization Strategy and its Impact on Trade in ICT Goods and ICT

Services, UNCTAD Expert Meeting In Support of the Implementation and Follow-Up of WSIS, Jointly

organized by UNCTAD, OECD and ILO 4 - 5 December 200618

Liu, Y and Cao, S (2010)The Sustainable Development of ICT in China: The Rise and Future

Development of the Internet, World Economic Forum19

CNII Reuters (2007) Information industry accounted for 7.5% of GDP, up to a good start to achieve

Eleventh Five-Year http://www.cnii.com.cn/20070108/ca403505.htm

20 National Statistic Bureau21GeSI/Climate Group (2008) Smart 2020

22European Commission (2008) Impacts of Information and Communication Technologies on Energy

Efficiency23

Hilty, L et al (2009) The Role of ICT in Energy Consumption and Energy Efficiency, Technology and

Society Lab Empa, Swiss Federal Laboratories for Materials Testing and Research24

Hischier, F et al (2005) Does WEEE recycling make sense from an environmental perspective?

Environmental Impact Assessment Review 25, 2005.25

http://www.itu.int/ITU-T/studygroups/com05/index.asp 26

Author’s calculation based on Dutta, S and Mia, I (2010) Global Information Technology Report

2009 –2010: ICT for Sustainability, Insead/WEF

and GESi/Climate Group (2008).27

Ecofys/WWF (2008) Outline for the first global IT strategy for CO2 reductions: A billion tonnes of CO2 reductions and beyond through transformative change

http://www.miit.gov.cn/n11293472/n11293832/n13095885/13429977.html

http://www.ict4ee.eu/


http://www.oecd.org/statistics/productivity


http://www.itu.int/ITU-T/studygroups/com05/index.asp






http://www.miit.gov.cn/n11293472/n11293832/n13095885/13429977.html




28 Growth rate estimated based on historical correlation of GDP and emissions’ growth in 2006-2009,

and on NDRC GDP growth estimate for 2010-2020 Source: CEIC Database; “China’s Low carbon

growth Pathways by 2050 – Scenario Analysis of Energy Demand and Carbon Emissions” – by Energy

Research Institute of NDRC; Netherlands Environmental Assesment Agency.29

WRI/WBCSD (2004) Corporate Accounting and Reporting Standard30 Sullivan, J (2009) SAP White Paper – Excelling at Enterprise carbon management and sustainability31

Tuppen, C (2008) British Telecom’s Climate Stabilization Intensity Targets, BT.



Annex
















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ABOUT THE AUTHORS

Dr Simon Zadek is a non-resident Senior Fellow at the Centre for Government and

Business of Harvard University’s Kennedy School, an Honorary Professor at the

University of South Africa and an Associate Senior Fellow and the International

Institute of Sustainable Development. He founded, and was until recently Chief Executive of AccountAbility, where he established the organization’s global

leadership in sustainability standards, collaborative governance and responsible

competitiveness, extending its impact from bases in Beijing, Sao Paulo, London and

Washington, and through activities in South Africa and across the Middle East. Simon

sits on the International Advisory Board of the Brazilian business network, Instituto

Ethos, the Advisory Board of the sustainability fund manager, Generation Investment

Management, and the Boards of the International Centre for Trade and Sustainable

Development and the Employers’ Forum on Disability. In 2003 he was named a

World Economic Forum ‘Global Leader for Tomorrow’. www.zadek.net

Maya Forstater has worked for fifteen years in the field of sustainable business,leading research and helping organizations learn, improve and communicate on

issues ranging from climate change to supply chain labor standards. She has worked

with major corporations, multi-sector partnerships and business groupings in the

energy, ICT, apparel, mining and minerals and mobility sectors, and has written

extensively on a range of issues related to sustainability and business. She has

worked with Project Catalyst on analysis of best practice in Low Carbon Growth

Plans and with the World Business Council for Sustainable Development’s Mobility

Working Group on prospects for sustainable mobility in cities in emerging

economies.

Kelly Yu is one of China’s pioneering practitioners in corporate social responsibilityconsultancy and a dedicated professional in sustainability research, she has

significant experience working with both local and international institutions in China,

including companies, government agencies, think-tanks and development

organizations. Her background spans from inside company operations, consulting

firm services, to collaborative delivery of research, networking, consulting and

training across various institutions. Her recent work includes working with DRC

(Development Research Center of State Council) to implement the breaking-through

research, “Responsible Business in Africa: Chinese Business Leaders’ Perspectives on

Performance and Enhancement Opportunities”.

Jon Kornik J has lectured on finance, strategy and economics at the University of

Cape Town, focusing primarily on fixed income securities and derivatives, and

consulted with McKinsey and Company in Johannesburg, focused on transport and

logistics, mining and energy. Jon is founder of the Sub-Saharan African office of

South Pole Carbon Asset Management, a Swiss international carbon firm, specializing

in carbon financing and climate change consulting and has assisted the C40 Cities

develop their thinking on reducing their transport sector emissions. He has a

http://www.zadek.net/




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