CSR Report Addresses Reducing Carbon Emissions in China Through Improved Efficiency

China is currently the biggest carbon emitter in the world, and thus, one of the biggest causes of climate change.  While there is some debate about how to account for those carbon emissions, there are a number of less controversial ideas about how to reduce them. One of the most popular is improving efficiency. A recent report by Business for Social Responsibility (BSR) outlines a path forward for improving efficiency and reducing carbon emissions in China.

The report highlights the “win-win-win” nature of improving efficiency. First, it will reduce costs for producing goods. In China, the energy intensity to produce certain plastics and paint and coat products is three to eight times higher than in the US. Improving energy efficiency will immediately lower costs by reducing intensity.

Second, becoming more energy efficient will insulate companies from risk. In China, risk from energy inefficieny is twofold. First, as the population continues to grow and become more urban, energy demand will continue to rise. Brownouts are already a problem. Improving efficiency is a cheap compliment to improving the power grid to reduce these risks. In addition, China’s status as the number one carbon emitter means international regulations are likely to eventual limit China’s emissions. Working towards improving efficiency now will help suppliers get on track to reduce emissions in the future.

Finally, improvement in energy efficiency is likely to lead to other indirect gains to insure environmental sustainability. In the report, BSR notes:

“Companies are also likely to find synergies between efficiency and other resource-productivity issues, such as water savings, better process quality and throughput, and reduced downtime and maintenance costs. Once employees are tasked with saving energy, they are likely to find more “kaizen” (total quality management) type improvements.”

The main issues standing in the way for improving energy efficiency in China are an abundance of cheap energy, focus on economic growth, and a lack of Energy Service Companies (ESCOs). The first two are tied together. With an export-focused economy predicated on rapid growth, China needs a source of cheap energy. That cheap energy comes in the form of coal, which is one of the dirtiest sources of energy as far as carbon emissions. Thus, there is little incentive for businesses to improve efficiency.

ESCOs are abundant in energy efficient economies like the US, Europe, and Japan. However, there are very few in China, and those that exist tend to focus on large entities and not the medium and small sized enterprises that are found throughout China’s economic development zones.

To combat these challenges, the BSR report suggests that buyers such as Walmart and HP take the lead by offering incentives to suppliers in China to reduce energy use. The report also suggests that buyers share their own knowledge about improving efficiency so suppliers can make the right decisions. In the end, these strategies will help reduce energy intensive practices and indirectly reduce carbon emissions.

This makes sense in a carbon emissions scheme focused on consumption-based accounting. In such a set up, buyers are at least partially accountable for their suppliers’ emissions. In a country like China, which has relatively few resources to improve efficiency, large companies based in the US, Europe, and Japan should take more responsibility for their outsourced carbon emissions.

Efficiency is only one of the keys to dealing with climate change in China. The BSR report provides a good template for how to go about it. However, a truly holistic energy strategy that includes reductions in actual emissions in addition to improved efficiency is the only way to truly avert the worst effects of climate change.

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