Chinese Government Procurement Policy for Energy-efficient Products by btz89935

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									Chinese Government Procurement Policy for
         Energy-efficient Products

                         Liu Caifeng
                 Ph.D. Deputy Director
        China Standard Certification Center (CSC)
  China Certification Center for Energy Conservation Products (CECP)


                 July 2007, New Delhi




                                                                       1
               Overview

1. Why Energy-efficient Procurement?
2. Existing Procurement System
3. China EE Procurement Policy
4. Policy Analysis
5. Follow-up Policy Suggestions
6. Recent News


                                       2
    1. Why Energy-efficient Procurement?



     Energy Consumption in China
  Unit energy consumption that is 2.4 times
higher than world average (in 2000).




                                              3
      1. Why Energy-efficient Procurement?



         Energy Consumption in China
  In 8 high energy-consuming sectors, unit energy
consumption of major products is 40% higher than
advanced world level.

                                   Gap with world average (%):
coal consumption for power plant              22.5
comparable energy consumption of
                                              21.4
per ton steel
copper (smelting)                              65
cement                                        45.3
large-scale synthetic ammonia                 31.2
paper & paper board                           120
                                                                 4
         1. Why Energy-efficient Procurement?



           Energy Consumption in China

    Low efficiency of major energy-consuming equipment.


                                                 Gap with world
                              Efficiency, %
                                                  average, %
Industrial boiler                   65               15-20
Medium/small motor            87 (designed)      20 (operating)
Blower fan & water pump       75 (designed)      20 (operating)
Motor vehicles               9.5 litre/100 km     25 (Europe)
Trucks                       7.6 litre/100 tkm        100
Inland water transport              —                10-20

                                                                  5
     1. Why Energy-efficient Procurement?



 Energy Consumption in Public Sector

  62.8 billion kWh of power was consumed in public sector in
2000, close to the total domestic power consumption of
China’s 800 million rural residents.
  Energy audit in Chinese government agencies shows
that at least 20% energy cost can be reduced through
purchasing energy-efficient products and government
facilities management.




                                                               6
     1. Why Energy-efficient Procurement?



 Energy Efficiency: A hot topic in China

  For energy security and environment protection,
energy efficiency was highlighted in China in recent
years, especially with the advent of national resource-
saving society building initiative
 As market leadership, energy efficiency in public sector
was highlighted to facilitate energy efficiency of the
whole society.




                                                            7
     1. Why Energy-efficient Procurement?



        Government: A big market
  Ratio of Chinese government expenditure to GDP in
past 20 years is about 11-15%.




                                                      8
     1. Why Energy-efficient Procurement?



Why focus on energy-efficient procurement

  Save energy and money
 Enhance market transformation of energy-
efficient products
 Market leadership
 Reduce air pollution and CO2 emissions



                                            9
      2. Existing Procurement System



Rapidly Growing Government Procurement
  In 2004 the procurement scale reached 213.6billion
 RMB, nearly 68.9 times that in 1998.




                                                       10
     2. Existing Procurement System



   Procurement information resource
  Survey in 2003 shows that procurement officials
acquires information mainly from government.

                                     ot her
                         Websi t e     2%
                           12%
                                                 Gover nment
               Exi bi t i on                         34%
                    8%




             Manuf act ur e or
               suppl i er s                    edi
                                              M a
                   29%                         15%

                                                               11
    2. Existing Procurement System


 Factors Considered in Procurement Practice
 Price is the most important elements in
procurement practice.

                              ent
                  envi r onm al
                 pr ot ect i on, 6%
           r unni ng cost ,           pr i ce, 25. 70%
               11. 40%

              ener gy
          ef f i ci ency,
              15. 20%


                                      br and, 23. 50%
               af t er - sal e
            ser vi ce 18 10%
                                                         12
    2. Existing Procurement System



          EE Procurement barrier
  The biggest barrier for EE procurement is
lack of energy efficiency knowledge.
                    Lack of EE
                      pr oduct             o
                                         N EE
                            at
                   i nf or m i on   pr of essi onal
                         16%              11%
                                           I gnor ance of EE
                                                   11%
        Lack of EE l abel
               16%
                                           Added- cost
                                              18%

                     o
                    N qual i t y    Lack of EE
                    gur r ant ee         l
                                     know edge
                        19%             9%

                                                               13
     2. Existing Procurement System



                     Conclusion
 EE procurement will put heavy impact on the society
due to the rapid growth of procurement.
 To make EE procurement a policy is a cost-effective
way
 Too much emphasis on price would be a barrier for EE
procurement due to higher first cost of EE products
 Energy efficiency labels are cost-effective tools to solve
the problem that procurement officials are lack of EE
knowledge



                                                              14
     3. China EE Procurement Policy



                   Background
  In 2001, Chinese governments called on the society to
take actions to reduce energy consumption in public
sector, including procurement of EE labeled products
  Government Procurement Law requires to
preferentially procure environment-friendly products
   In 2004, China’s Ministry of Finance, in tandem with
the National Development and Reform Commission,
announced a new policy for government energy
efficiency procurement.



                                                          15
   3. China EE Procurement Policy



                Policy Context
Coverage:
   Government organs at all levels, public sector non-
 profits units and organizations that using fiscal
 resources for procurement
Timeline:
    In 2005, implementation will be in the central
 first-level budget units and provincial (including
 centrally administered cities) budget units;
   in 2006, implementation will be extended to
 central second-level budget units and first-level
 budget units in cities and regions;
   in 2007, full implementation will take place.
                                                         16
   3. China EE Procurement Policy



                Policy Context
Procurement Criteria:
   CSC labeled products
Product categories:
    Presented by an Energy Efficiency List
    Details such as manufactures, product model, No.
 and effective date of CSC certification are included in
 the list
    9 product categories was included in 2005
   10 new product categories will be added this
 month

                                                           17
  3. China EE Procurement Policy



               Policy Context
Basic Requirements :
   Preferential procurement of energy-efficient
 products in the List


   Clear statement on energy efficiency requirements
 in the whole process of procurement practice




                                                       18
  3. China EE Procurement Policy



               Policy Context
Punishment :
  Procurement budget will not be appropriate


  Punished based on relevant laws and regulations




                                                    19
   4. Policy Analysis



           An Significant Policy
A breakthrough in Chinese energy efficiency policy
Highlighted by the whole society

  An recent survey shows that nearly all local
 governments promote and take the policy into effect
Rapidly growing qualified products

   By December 2005, for 9 product categories within
 the energy efficiency list, the growth rate of
 manufactures and product models that meet
 procurement criteria is 49.5% and 51.3%

                                                       20
   4. Policy Analysis



           An Significant Policy
Great energy-saving potential

  LBNL’s research shows that for the 7 energy
 efficient products in the current energy efficiency list,
 avoided electricity consumption in year 10 of the
 program would reach 4.65 TWh . And on a
 cumulative basis, avoided electricity use in year 10
 reaches 10.9 TWh, with discounted savings of ¥8.7
 billion (US$1.07 billion). This is equivalent to the
 emission of 10 million tonnes of CO2, 31.4 million kg
 of SO2, and 14.2 million kg of NOx


                                                             21
  4. Policy Analysis



          Energy Efficiency List
Advantages:

     Easy for procurement officers to identify, access
 and verify qualified products;
     Warranted product performance due to stringent
 certification system
    Easy to update the list




                                                         22
   4. Policy Analysis



          Energy Efficiency List
Disadvantages:

   The list will be very long with more and more
 product categories and qualified manufacturers
   Not easy to access the latest updated energy
 efficiency list, especially for those having bad
 information infrastructure




                                                    23
     4. Policy Analysis



        In-principle Policy Clause

   Hard to adopt the policy in normative way due to lack
of details on EE procurement activities
  Easy to implement the policy ineffectively due to in-
principle preferential procurement requirements




                                                           24
     4. Policy Analysis



               Policy Barriers

  Little awareness due to lack of promotion and
education
  Ineffective implementation of the policy
  Not enough budget for added cost for EE products
 Lack of professional energy efficiency knowledge for
most procurement officials




                                                        25
     5. Follow-up Policy Suggestions



     Make a more stringent policy

   Detailed requirements on responsibilities and rights
of organizations and individuals such as financial
administrators, central procurement organs, purchasers,
suppliers,
  Detailed targets in the development of procurement
budget, procurement plan, procurement program and
procurement volume,
  Detailed scheme to monitor and supervise the policy


                                                          26
      5. Follow-up Policy Suggestions



     Develop toolkit for purchasers
  Development of common purchase specifications and
methods, a learning-by-doing exercise where
procurement, officers’ practice to write call for tenders,
and to evaluate; these tenders, based on the purchase
specifications.
   Development of common information material and
simple “how-to” guides based on the experiences of the
pilot action.
  Development of life-cycle analysis tools to consider
both capital and running costs for end-use energy
consumed products
                                                             27
     5. Follow-up Policy Suggestions



 Information, training and education

  Hold training course for procurement officials and
manufacturers


  Provide rich information in Website




                                                       28
     5. Follow-up Policy Suggestions



  Explore international cooperation

   Explore international cooperation with topics such as
harmonization on procurement criteria with
international counterparts




                                                           29
       6. Recent news


             New mandatory policy
   Chinese governments realized the importance and flaw of
existing preferential procurement policy.
  In the Directive regarding energy efficiency and emission
reduction issued by the State Council in May 2007, it is specified
that a new mandatory policy will be introduced starting from
following product categories:
    Appliance: A.C.
    Office equipments: PC, printer, monitor, copier
    Lighting products
     Water conservation products
 Now the development of a detailed mandatory policy is underway
                                                                     30
Thank you for your attention!




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