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Using Financial and Market-based Mechanisms to improve Building Energy Efficiency in China

Energy Savings in buildings

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Technologies and measures which are aimed at reducing the use of energy in buildings could have several advantages, such as lower energy bills, increasing comfort of living or working, and reduced impact on the environment, including reduction of CO2 emissions. The options considered for energy savings particularly leading to CO2 emission reductions include the following:

Clean Development Mechanism market status: 

[this information is kindly provided by the UNEP Risoe Centre Carbon Markets Group]

Project developers of energy efficiency in buildings projects in the CDM pipeline mainly apply the following methodologies:

AMS-II.E “Energy efficiency and fuel switching measures for buildings”
AMS-II.C “Demand-side energy efficiency activities for specific technologies”
AMS-II.J “Demand-side activities for efficient lighting technologies”
AM0046 “Distribution of efficient light bulbs to households”
Further information on these metholodogies can be found here.

The energy efficiency household projects are currently representing 0.1% of the CDM projects in the pipeline. Presently, there are six CDM projects registered in energy efficiency for households - four of them are based on lighting/insulation and two on improved stoves. The lighting/insulation projects are located in India and one in South Africa. The improved stove projects are based in Zambia and Nigeria.


Example CDM project:
Title: Visakhapatnam (India) OSRAM CFL distribution CDM Project (CDM Ref. No. 1754)
The “Visakhapatnam (India) OSRAM CFL distribution CDM Project” involves the distribution of approximately 450,000 to 500,000 OSRAM long life Compact Fluorescent Lamps (CFLs) in the district of Visakhapatnam, which numbers about 700,000 households. The CFLs used are OSRAM DULUX EL LONGLIFE, and have the capacity of 15,000 hours and 80% lower energy consumption than a conventional light bulb.
Project investment: USD 2,036,000
Project CO2 reduction over a crediting period of 7 years: 51,116 tCO2e
Expected CER revenue (assuming USD 10/CER): USD 511,160

Financial and market-based mechanisms offer a route to increase take-up of energy efficiency measures in buildings.  While market based mechanisms, principally the Clean Development Mechanism, have acted as a trigger in the development of many large, industrial scale energy efficiency projects in China, there has not been, as yet, a similar uptake of projects involving energy efficiency improvements to buildings.

There is however significant potential to improve building energy efficiency and this project will

  • Consider the appropriate financial and, in particular, market-based mechanisms to trigger action in this area and develop a road-map to suggest a suitable route forward.
  • Increase stakeholder awareness on the potential to improve building energy efficiency though financial and market based mechanisms.

This project will build on work carried out by the ERI in 2005, which involved a high-level review of incentive policies used internationally for building energy efficiency, by focussing specifically on financial and market-based mechanisms and the role that they can play.


39° 55' 44.04" N, 116° 23' 16.8" E
Main activity and output: 
  • Investigate existing mechanisms (including building codes and standards) to improve building energy efficiency in China.
  • Consider appropriate financial and market mechanisms being developed or used in other parts of the world. This will include taxes, subsidies, soft loans and other incentives; Tradable White Certificates (TWCs); CDM Programme of Activities and the Voluntary Emissions Reductions (VER) market.
  • Assess the suitability of proposed mechanisms for China and investigate key issues such as which actors should be targeted by measures (e.g. building residents, district heating companies) and links to other policy objectives such as improved living conditions for residents.
  • Develop a road-map for improving building energy efficiency in China through the use of financial and market-based mechanisms, in consultation with key stakeholders including, for example, the ERI, the China DNA and CDM and VER project developers.
Expected impact: 
  • An increased understanding of the role that financial and market-based instruments, particularly the regulated and voluntary carbon markets, can play in reducing building energy consumption in China.
  • A policy framework to create a favourable environment for implementation of market based instruments for energy efficiency in buildings.
  • Increased awareness and readiness within the industry for the use of market mechanisms for energy efficiency.