DESC: ICT and Low Carbon Development in China - English

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March 2011 ICT and Low Carbon Development in China

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Developed for DESC China by Simon Zadek, Maya Forstater, Kelly Yu and Jon Kornik presents a quantitative analysis of the impacts of ICT on low carbon growth in China, and includes insights with key Chinese and international policy and industrial research groups on the possible policy measures and initiatives that could secure the contribution of ICT to reducing China’s carbon footprint whilst promoting scientific development.

Transcript of DESC: ICT and Low Carbon Development in China - English

Page 1: DESC: ICT and Low Carbon Development in China - English

March 2011

ICT and Low Carbon Development in China

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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, Lenovo, HP, 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 Summit on China ICT Industry Promoting Low-Carbon Economy Development, 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 Xuejun of Peking University, , Dr Tao Hongzhi, Xudong Chen, Gong Xun, and Paul Huang of Lenovo, Xu Haiyin and Zhao Jun of HP, 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, 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 Reform Committee, 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

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Contents

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

1 ICT and China’s low carbon growth goals........................................................ 12

1.1.1 The opportunity for green transformation ........................................... 12

1.1.2 The ICT sector contribution .................................................................. 15

2 The relationship between ICT, growth & emissions ........................................ 19

2.1.1 The ICT industry drives productivity and competitiveness .................... 19

2.1.2 The ICT contributes directly to economic growth ................................. 23

2.1.3 The ICT sector’s own footprint ............................................................. 25

2.1.4 ICT enabled carbon savings in other parts of the economy ................... 29

3 Realizing the potential for ICT enabled low carbon growth in China .............. 37

3.1.1 What are the barriers to technology adoption? .................................... 38

3.1.2 What should technology users do? ...................................................... 41

3.1.3 What tools and measures of support are already available? ................ 42

3.1.4 The need for collaboration ................................................................... 44

Annex...................................................................................................................... 50

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Exhibits

Exhibit A: Relationship between ICTs and intensity goals ....................................... 5

Exhibit B: Summary of estimated impacts .............................................................. 6

Exhibit C: ICT sector emissions intensity fall faster than general economy ............. 7

Exhibit D: ICT enabled contribution to national carbon intensity targets ............ 8

Exhibit E: Key technology opportunities ................................................................ 9

Exhibit F: Key Questions and answers .................................................................... 9

Exhibit 1: ICTs and energy and carbon intensity impacts ...................................... 15

Exhibit 2: Investment in ICT asset base drives growth .......................................... 19

Exhibit 3: ICT contribution to economic growth, by % by region .......................... 20

Exhibit 4: Growth impacts of ICT .......................................................................... 21

Exhibit 5: China network readiness ...................................................................... 22

Exhibit 6: Supporting environment key to network readiness .............................. 23

Exhibit 7: IT Industry has grown faster than the rest of the economy .................. 24

Exhibit 8: ICT Exports are growing faster than general exports ............................ 24

Exhibit 9: The ICT value chain .............................................................................. 25

Exhibit 10: ICT brand’s own life cycle assessments of their product’s footprints 26

Exhibit 11: Carbon footprint of ICT in China ....................................................... 27

Exhibit 12: Opportunities for reducing the ICT carbon footprint ........................ 28

Exhibit 13: ICT sector emissions intensity could fall by 63% ............................... 29

Exhibit 14: ICT enabled emission reduction opportunities ................................. 30

Exhibit 15: International studies on ICT enabled emission reductions ................ 31

Exhibit 16: ICT enabled emissions reduction potential ....................................... 32

Exhibit 17: ICT enabled contribution to national carbon intensity targets .......... 33

Exhibit 18: China ICT enabled emission reductions compared to other countries 34

Exhibit 19: China’s ICT enabled emission reduction potential compared to India 34

Exhibit 20: China technology opportunities compared to other countries .......... 35

Exhibit 21: Stages in technological diffusion ...................................................... 38

Exhibit 22: Key steps for technology users ......................................................... 41

Exhibit 23: Life cycle assessment approach for ICT ............................................. 43

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Summary

China is committed to a pathway of green development 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 the important role that ICTs can play in driving low carbon development. 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 efficient technologies 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.

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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.

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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年强度将下降

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$1.6 of added value from the productivity uplift 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 T CO2e/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 TCO2e/M RMB. This means the carbon intensity associated with the ICT sector could reduce by over 60%.

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

The largest potential is for ICT enabled emission reductions is in other industries, where ‘smart’ technologies could abate 1.4 -1.7 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 optimizing energy 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

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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 and distribution (smart grids), energy efficient buildings and industrial processes, optimization of logistics and dematerialization.

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Exhibit E: Key technology opportunities

Exhibit F: Key Questions and answers

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

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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, “for 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 verification of 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 “ICT 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 Zhang Jiutian, Director, Ministry of Science and Technology noted “Information exchange and learning is critical between ICT companies, suppliers, users and government. We need to enhance capacity building amongst all stakeholders”

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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 in China.

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1 ICT and China’s low carbon development 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 the face 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 carbon dioxide, 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 decreased around 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.

“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. "

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Low carbon growth has therefore to be part of an overall economic development strategy, consistent with goals to improve energy security, phase out inefficient enterprises and grow employment in the high-tech and service sector. As Industry and Information Technology Minister Li Yizhong recently said:5

Economic growth accelerates investment in new capital stock, giving the opportunity to invest in the most technologically advanced, energy and carbon- efficient solutions. Furthermore, China has a relatively high level of carbon intensity compared to developed countries. This suggests that adoption of high technology solutions, ascent of the business value chain, and industrial restructuring towards greater and higher value services will all contribute significantly to reducing the overall carbon intensity of the economy.

The government recognizes that addressing these complex dynamics mean that low carbon growth requires not just environmental policies, but a green economic strategy. A number of relevant medium term objectives have already been set, which are likely to form the basis for target setting in the 12th plan (see box 1). 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,

China energy intensity goals are supported by one of the world’s most ambitious programs to improve energy efficiency, aimed at adjusting and optimizing the economic structure, promoting energy-efficient technologies and establishing a strict management system and effective incentive mechanisms.6 Over the past five years,

“Key priorities for the economy are development of innovation, quality, development of brands, access to high value-added services, and a shift from relying on high consumption of material resources to relying mainly on advances in technology, quality and innovation in human resources and management. The other side of this is the opportunity to reduce consumption, reduce costs, reduce pollution and improve the conservation and intensive utilization of resources. Doing more with less, can fundamentally improve the quality and efficiency of economic development.”

“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.”

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efficiency improvements in the largest companies and closures of tens of thousands 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 development

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 has therefore 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 emerging 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

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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 are being 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

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The promotion of scientific and technological progress and innovation is core to reconciling 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 and efficient 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

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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

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There is an emerging groundswell of businesses and cities pursuing ICT enabled low carbon opportunities. There has also 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 achieving this potential and the opportunities for action by business, and public sector actors to overcome them.

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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 a direct 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

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

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.

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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 1.4 percent depending on technology.16

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Exhibit 4: Growth impacts of ICT

Percentage-point increase in economic growth per 10-percentage-point increase in telecom 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

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achieved if obstacles to international competitiveness on ICT were addressed. The World 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

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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 2008, 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 37% of the country's exports, and 25% of global output of global electronic products.20

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Exhibit 7: IT Industry has grown faster than the rest of the economy

Exhibit 8: ICT Exports are growing faster than general exports

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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.

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 overall emissions 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

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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 for infrastructure 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

5

Apple

Nokia

[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.

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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 same time the telecommunications, electronics and information technology industries 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 China will 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.

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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 intensity reduction of 63% for the sector from 2008 to 2020.

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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:

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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 further dematerialization 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.

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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' total emissions 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

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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 academic estimates 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

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

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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 energy used, 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.

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

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

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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 the WWF 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 smart buildings 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

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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 are intensity 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.

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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 intensity reduction 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 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 these smart 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.

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Exhibit 21: Stages in technological diffusion

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 are demonstrated and costs brought

down

Time

Market penetration

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.

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“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,

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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 role through 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 Changhua, China Director, The Climate Group

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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 energy management.

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 organization’s understanding of its emissions profile and can help identify the most effective reduction opportunities.

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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 where energy 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 to calculate 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

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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

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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 intensity sectors 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 or global 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

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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 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.

“ICT 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. 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 projects to have more persuasive evidence.”

Wu Chenghua, Climate Group

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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.

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.

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“We hope that the government can establish a good platform for creating awareness. 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 Changhua, Climate Group

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

Zhang Jiutian, Director, Ministry of Science and Technology

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1 Jorgenson, 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 Daily

5 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.html 6 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 Committee

8 World Bank ICT Glossary

9 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 Europe 10 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 Potential 13 Jorgenson, D., and K. Vu. Information Technology and the World Economy. Scandinavian Journal of Economics. Vol. 107, Issue 4. December 2005 14 Source: OECD Productivity Database, September 2005, www.oecd.org/statistics/productivity; World Bank Databank; team analysis 15 World Economic Forum (2010) ICT for Growth 16 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 2006 18 Liu, Y and Cao, S (2010)The Sustainable Development of ICT in China: The Rise and Future Development of the Internet, World Economic Forum 19 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 Bureau 21 GeSI/Climate Group (2008) Smart 2020 22 European Commission (2008) Impacts of Information and Communication Technologies on Energy Efficiency 23 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 Research 24 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 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

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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 Standard 30 Sullivan, J (2009) SAP White Paper – Excelling at Enterprise carbon management and sustainability 31 Tuppen, C (2008) British Telecom’s Climate Stabilization Intensity Targets, BT.

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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’.

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 responsibility consultancy 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 background in climate change, environment, energy and mining. He has a Bachelor of Business Science and a Masters in Finance from the University of Cape Town and is currently undertaking a Masters in Business Administration through Columbia

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Business School, where he is one of five candidates in his class to receive the Feldberg Fellowship.