Professional Documents
Culture Documents
The designations employed and the presentation of material in this publication do not imply the expression of
any opinion whatsoever on the part of the Secretariat concerning the legal status of any country, territory, city
or area, or of its authorities, or concerning the delimitation of its frontiers or boundaries.
Designations such as “developed,” “industrialized” and “developing” are intended for statistical convenience
and do not necessarily express a judgement about the state reached by a particular country or area in the devel-
opment process.
The mention of firm names or commercial products does not imply endorsement by UNIDO.
Material in this publication may be freely quoted or reprinted, but acknowledgement is requested, together with
a copy of the publication containing the quotation or reprint.
Page
xi Foreword
xiii Acknowledgements
xiv Technical notes and abbreviations
xv Glossary
1 Overview
52
Chapter 3 The environmental dividend from industrial energy
efficiency
52 Industrial energy use is a key lever for sustainable industrial development
53 Lessening the environmental impact of industrial energy use
60 Improving industrial energy efficiency by reducing materials and water use
62 Making industry more energy efficient
67 The mitigation potential is substantial
67 Notes
iii
Page
68
Chapter 4 The economic and social dividends from industrial energy
efficiency
68 The importance of energy costs to businesses
72 Risks and rewards of investing in industrial energy efficiency
Contents
125
Chapter 7 International collective action for industrial energy
efficiency
125 The rationale for international collective action
127 Setting international targets and standards
130 Facilitating technological and structural change
132 Contributing to international technology transfers
135 Procuring international financing
137 Establishing an international monitoring and coordinating function for industrial energy
efficiency
138 Notes
iv
Page
141
Chapter 8 Trends in manufacturing – before and after the global
Contents
financial and economic crisis
141 Manufacturing in developing countries
146 The impact of the 2008–2009 economic and financial crisis on manufacturing
151 Structure of global manufacturing employment
152 Notes
Annexes
176 1 Energy intensity data and methodology
177 2 Decomposition data and methodology
178 3 Energy and manufacturing value added sector data
179 4 Economies included in the energy-intensity analysis
181 5 Industrial energy intensity
183 6 How Competitive Industrial Performance index rankings change when new indicators are added
186 7 Technological classification of manufacturing value added data
187 8 Technological classification of international trade data
188 9 Data clarifications for the Competitive Industrial Performance index, by indicator
192 10 Components of the Competitive Industrial Performance index by economy
200 11 Indicators of the Competitive Industrial Performance index by region and income group
208 12 Summary of world trade, by region and income group
214 13 Country and economy groups
218 14 Industrial energy efficiency policy measures
221 References
v
Page
Boxes
10 1 Experiences of industrial energy-efficiency policies applied in selected developing countries
34 2.1 Decomposition analysis
39 2.2 Industrial energy-efficiency R&D case study: decreasing the inlet velocity required for
Contents
Figures
2 1 Growth in energy consumption and energy consumption per capita, 1990–2008
3 2 Global trends in manufacturing value added, industrial energy consumption and industrial
energy intensity, 1990–2008
3 3 Industrial energy intensity, by income group, 1990–2008
vi
Page
Contents
five years
24 1.1 Split in industrial energy consumption between manufacturing processes and feedstock,
1990–2008
25 1.2 Growth in energy consumption and energy consumption per capita, by economic sector,
1990–2008
25 1.3 Industrial energy consumption, by sector, 1990–2008
27 1.4 Global trends in manufacturing value added, industrial energy consumption and industrial
energy intensity, 1990–2008
27 1.5 Industrial energy intensity, by income group, 1990–2008
28 1.6 Industrial energy intensity in developing economies, by region, 1990–2008
30 1.7 Energy intensity, by industrial sector and income group, 1995–2008 (tonnes of oil equivalent
per $1,000 manufacturing value added, in 2000 prices)
35 2.1 Components of change in global industrial energy intensity, 1995–2008
36 2.2 Components of change in industrial energy intensity, by region and income group, 1995–
2008 (percent)
37 2.3 Components of change in industrial energy intensity by economy, 1995–2008 (percent)
39 2.4 Public sector R&D expenditure on energy technologies in selected countries, 1990–2008
43 2.5 Global average energy intensity and best available technology for ammonia, iron and steel,
aluminium and cement, 1960–2010
44 2.6 Energy savings potential in iron and steel making, 2006
46 2.7 System model of industrial energy use
48 2.8 Typical energy losses in energy conversion chains
49 2.9 Share of selected industrial sectors in global manufacturing value added, 1995–2008
54 3.1 Global greenhouse gas emissions, by greenhouse gas and sector, 2004
58 3.2 Variability in life-cycle emissions of principal air pollutants from electricity generation, 2004
60 3.3 Factors generally contributing to lowering process energy requirements
64 3.4 Breakdown of all greenhouse gas emissions from the industrial sector, 2004
66 3.5 Share of direct industrial carbon dioxide emissions from fossil fuel use and industrial
processes, by sector and region or country, 2006
66 3.6 Contributions to carbon dioxide emissions from fossil fuel combustion, by economic sector,
2008
71 4.1 Price differentials in natural gas and electricity
71 4.2 Implicit energy prices and energy costs in Germany and Thailand, by sector, 2000 and 2006
72 4.3 Criteria for making energy-efficiency project decisions
75 4.4 Valuation and risk drivers for energy-efficiency projects
77 4.5 Sectoral composition of UNIDO sample of industrial firms investing in energy efficiency,
2010
78 4.6 Payback period of UNIDO sample of industrial firms investing in energy efficiency
79 4.7 Internal rates of return of industrial energy-efficiency projects, by expected lifetimes
vii
Page
91 5.1 Energy efficiency and power supply reliability in selected countries, most recent year available
97 5.2 Percentage of firms mentioning specific barriers to energy efficiency as most significant, 2010
98 5.3 Ranking barriers to industrial energy efficiency in the Swedish pulp and paper sector
103 6.1 Breakdown of energy-efficiency targets incorporated in laws or programmes, by region, 2009
Contents
Tables
9 1 Technical and economic savings potential arising from industrial energy-efficiency
improvements
16 2 Manufacturing value added levels and growth, by region, 2005–2010 (US$ billions unless
otherwise indicated)
17 3 World manufactured export levels and growth, by region, 2004–2009 (US$ billions unless
otherwise indicated)
18 4 Rank on the revised Competitive Industrial Performance index, 2005 and 2009
42 2.1 Examples of best available technology uptake in China: technology diffusion as a share of
capacity, 2000 and 2006–2009 (percent)
45 2.2 Typical savings from efficiency measures for steam systems (percent unless otherwise indicated)
47 2.3 Resource-efficient and cleaner production approaches to improving industrial energy efficiency
69 4.1 Share of energy costs in total industry input costs, by sector, latest available year (percent)
84 4.2 Technical and economic savings potential arising from industrial energy-efficiency
improvements
viii
Page
Contents
2000 and 2010
144 8.2 Technology composition of manufacturing value added, by region and income group,
1995–2009 (percent)
145 8.3 Industry sector share of manufacturing value added for developing and developed
countries, selected years, 1995–2009 (percent)
146 8.4 Developing and developed countries’ share of global manufacturing value added by
industry sector, selected years, 1995–2009 (percent)
148 8.5 Leading producers in the five fastest growing industry sectors, 2000 and 2009 (percent)
149 8.6 Manufacturing value added levels and growth, by region and income group, 2005–2010
(US$ billions unless otherwise indicated)
151 8.7 Share of manufacturing employment for developing and developed countries, by industry
sector, selected periods over 1993–2008 (percent)
153 9.1 World exports, by product category, 2004–2009 (US$ billions unless otherwise indicated)
154 9.2 World manufactured exports, by region and income group, selected years, 1995–2009
(US$ billions)
156 9.3 Top 20 dynamic manufactured exports, 2005–2009
161 9.4 World manufactured export levels and growth, by region and income group, 2004–2009
(US$ billions unless otherwise indicated)
165 10.1 Rankings on the Competitive Industrial Performance index, 2005 and 2009
167 10.2 Change in rank on the Competitive Industrial Performance index between 2005 and
2009
170 10.3 Rank of developing economies on the Competitive Industrial Performance index, by
region, 2005 and 2009
178 A3.1 Correspondence between energy data and manufacturing value added data by sector
179 A4.1 All economies, by income group
180 A4.2 Developing economies, by region
181 A5.1 Industrial energy intensity by economy, 1990, 2000 and 2008 (tonnes of oil equivalent per
US$1,000 of manufacturing value added)
184 A6.1 Impact of changes in the Competitive Industrial Performance index methodology on the
rankings, 2005
186 A7.1 Technology classification of manufacturing value added, ISIC Revision 3
186 A7.2 Technology classification of manufacturing value added, ISIC Revision 2
187 A8.1 Technology classification of exports, SITC Revision 3
188 A9.1 Data years used for computing the Competitive Industrial Performance index
192 A10.1 Indicators of industrial performance by economy, 2005 and 2009
200 A11.1 Manufacturing value added per capita, 2005–2009 (2000 US$)
201 A11.2 Share of manufacturing value added in GDP, 2005–2009 (percent)
202 A11.3 Share of manufacturing value added in world manufacturing value added, 2005–2009
(percent)
ix
Page
203 A11.4 Share of medium- and high-technology production in manufacturing value added,
2005–2009 (percent)
204 A11.5 Manufactured exports per capita, 2005–2009 (current US$)
205 A11.6 Share of manufactured exports in total exports, 2005–2009 (percent)
Contents
x
Foreword
Since the Industrial its upward trajectory. The question that arises is how
Revolution and the to accommodate rising living standards in developing
introduction of steam countries while moderating the pernicious effects of
power, industrialization energy use.
has produced goods UNIDO’s Industrial Development Report 2011
that have improved liv- (IDR 2011) shows that increased industrial energy
ing standards around efficiency is one of the most promising routes to sus-
the world. The greater tainable industrial development worldwide, particu-
availability of a broader larly in developing countries. Industry remains among
range of manufactured the most energy-intensive sectors: its contribution to
products has been based on a substantial expansion in global GDP is lower than its global share of energy
the use of energy. Over the past 200 years, energy con- consumption. Industrial processes have an estimated
sumption per capita has increased, and overall energy technical efficiency potential of 25–30 percent. That
consumption is unlikely to decline in the foreseeable means that adopting best available technologies and
future. related business and engineering practices could even-
During the early stages of industrialization, energy tually enable industry to lower emissions of green-
seemed to be plentiful, without evident limits on its house gases and combat climate change and also
use. More recently, we have become aware that the fos- reduce other pollutants. The energy savings could be
sil fuels that have powered industrial development are redirected to meeting social needs for access to energy,
probably not as abundant as once thought. Even more particularly acute in developing countries, and could
important, their use has generated unintended and help companies everywhere to improve their bottom
undesirable environmental impacts. line.
Technological change has helped to address the The report provides further evidence that improve-
dual problems of growing resource scarcity and envi- ments in industrial energy efficiency continue apace.
ronmental degradation. New and emerging tech- During the past 20 years, developed countries, which
nologies that consume materials more efficiently, use are the largest energy users, have lowered their energy
waste heat or upgrade motor performance have spread intensity. Large developing countries have also real-
within the manufacturing sectors, boosting the energy ized the importance of boosting efficiency early in
efficiency of existing equipment, production processes their industrialization processes and have begun
and plants. Large price changes in global energy to adopt the technologies and other measures that
markets as well as national and international policy have led to unprecedented gains in energy efficiency.
responses to energy availability and environmental Low- and middle-income developing countries, which
impact have also helped to shift attention towards are gradually taking over manufacturing production,
industrial energy efficiency. are also contemplating ways of becoming more energy
However, we are far from conquering the chal- efficient.
lenges posed by fossil fuel–based energy depletion The report argues that the key to sustaining these
and greenhouse gas emissions. As developing coun- gains continues to be industrial technological change
tries raise their standards of living, take on a growing and the related economic and policy incentive sys-
share of manufacturing and engage in a wider range tem. Yet markets do not always work as expected, nor
of industrial activity, energy use is likely to continue are individual and corporate behaviour as rational as
xi
predicted by orthodox economic theory. Multiple bar- for All, and collaborations are planned with all rel-
riers block the path to full energy-efficiency levels. evant stakeholders in the public and private sectors
The report suggests that overcoming barriers to to raise public awareness and the financial resources
industrial energy efficiency will require public policy needed to combat energy poverty. The Sustainable
Foreword
measures, including a sectorally coordinated energy Energy for All initiative will bring these stakehold-
strategy; formal and informal mechanisms, tar- ers together in a global campaign to turn attention
gets, benchmarks and standards; and policy designs towards the importance of energy for development
grounded in the specific context at the country level. and poverty reduction. Energy is vital to almost every
Policy interventions involve choosing the right policy major challenge and opportunity that the world faces
mix, continuously assessing effectiveness and focus- today. Be it jobs, security, climate change, food pro-
ing on small and medium-size enterprises. Policy duction or poverty reduction, sustainable energy for
measures include official support for developing more all is essential for strengthening economies, protecting
efficient industrial technologies, disseminating best ecosystems and achieving equity.
available technologies, introducing fiscal incentives It also gives me great satisfaction to report that the
for innovation and diffusion of industrial energy effi- IDR 2011 has drawn on all of the knowledge resources
ciency, and establishing financial mechanisms to fund of UNIDO, bringing together the organization’s
improvements. expertise and experience in analytical research, tech-
The report recommends decisive international col- nical cooperation and policy advice. This has resulted
lective action, including reducing industrial energy in a comprehensive and multidisciplinary treatment of
intensity by 3.4 percent a year through 2030. It calls the critical issues covered in the report. Moreover, the
for international collaborative research and develop- IDR 2011 has a unique focus on developing countries,
ment and the establishment of information clearing- backed by a set of statistics unavailable anywhere else.
houses and information exchanges to identify best And as has become customary, the report includes
practices and compare the performance of different sections on trends in manufacturing value added and
technologies under varying conditions. Since the manufactured exports and on UNIDO’s Competitive
adoption of energy-efficient technologies involves the Industrial Performance index, which ranks econo-
acquisition of increasingly sophisticated technologi- mies according to multiple indicators of industrial
cal capabilities, the report points at ways in which the performance.
international community can assist in capacity devel-
opment. It also discusses the need for a well developed
framework for international financing of industrial
energy efficiency.
I am pleased to note that the IDR 2011 is a prelude
to the UN Secretary General’s Sustainable Energy
for All initiative. The General Assembly has declared Kandeh K. Yumkella
2012 as the International Year of Sustainable Energy Director-General, UNIDO
xii
Acknowledgements
The Industrial Development Report (IDR) 2011 was Arno Behrens, Mark Hopkins, Jim Lazar, Lynn
prepared under the overall guidance of Kandeh K. Mytelka, David Popp and Lynn Price, reviewed vari-
Yumkella, Director-General of the United Nations ous drafts and sections of the report. The final draft
Industrial Development Organization (UNIDO). benefited from substantive comments and sugges-
The report was prepared by a cross-organizational tions by Wilfried Luetkenhorst, Managing Director,
team led by Ludovico Alcorta, Director of the Strategic Research, Quality Assurance and Advocacy
Development Policy, Statistics and Research Branch, Division, UNIDO.
and comprising Morgan Bazilian, René van Berkel, The report also received support from a team of
Amadou Boly, Smeeta Fokeer, Dolf Gielen and Olga interns including Nargiza Abdullaeva, Eva Festl, Elisa
Memedovic. Many of the concepts developed in the Furuta, Vassilena Ivanova, Brian Klausen, Sushmitha
report were discussed and validated at workshops at Narsiah, Ijeoma Onyeji, Erik Schau, Jorge Vázquez
UNIDO in Vienna in November 2009 and at The and Juanshi Wu. Debby Lee, Fernando Russo and
Energy and Resources Institute (TERI) in New Delhi Iguaraya Saavedra provided clerical, administrative
in June 2010. and secretarial support, and Niki Rodousakis pro-
The IDR 2011 benefited from the support of vided copyediting assistance.
many international experts, including Robert Ayres, Many UNIDO colleagues participated in IDR
Nicola Cantore, Giuseppe De Simone, Wolfgang 2011–related advisory panels, task forces, steering
Eichhammer, Tobias Fleiter, Marta Foresti, Duke groups and working teams. Among them are Manuel
Ghosh, Mark Jaccard, Paul Kleindorfer, Ritin Albaladejo, Michele Clara, Edward Clarence-Smith,
Koria, Hoang Viet Le, Alexandra Mallett, Dirk Nobuya Haraguchi, Sam Hobohm, Anders Isaksson,
Masselink, Brian McCrohan, Mike Morris, John Eric Lacanlale, Heinz Leuenberger, Pradeep Monga,
Nyboer, Sheridan Nye, Martin Patel, Ascha Pedersen, Cormac O’Reilly, Dmitri Piskounov, Bettina Schreck
Amitav Rath, Fang Rong, Joyashree Roy, Joachim and Shyam Upadhyaya. Relevant parts of the report
Schleich, Steve Sorrell, Dirk Willem te Velde, Jeroen were reviewed and amended, as needed, by UNIDO
van den Bergh, Ernst Worrell and Shaojun Zeng. technical branches and publications committee.
Robert Ayres and Steve Sorrell offered advice and Meta de Coquereaumont, Bruce Ross-Larson and
comments throughout report preparation. Huijong Laura Wallace of Communications Development Inc.
Wang, Vice President of the Academic Committee were the principal editors of the report. Christopher
of the Development Research Center of China’s State Trott and Rob Elson, also with Communications
Council, and Girish Sethi, Director of the Industrial Development Inc., copyedited and proofread the
Energy Efficiency Division of TERI, together with report. Elaine Wilson designed and laid out the report.
xiii
Technical notes and abbreviations
In this report, industry refers to the manufacturing industry and sectors refers to specific manufacturing sectors.
This report defines developed countries or developed economies as the group identified as “high-income OECD
countries” by the World Bank and developing countries or developing economies as all other economies. See
Annex 13 for a complete list of economies by region, income level, least developed countries and largest develop-
ing economy in each region.
This report focuses on the energy consumed in industrial processes, so most of the analysis excludes feedstock
use.
Components in tables may not sum precisely to totals shown because of rounding.
xiv
Glossary
Best available technology. The most energy-efficient to extract, process and manufacture a product and
way of producing goods and services that is com- transport it to its point of use. This accounting
mercially viable and in use. concept sums the energy physically embodied in
Best practice technology. The top performing tech- the materials (which can be released by reversing
nologies and business practices for industrial the process) and the energy invested in creating the
energy efficiency among those in use by most plants processing conditions and bringing the materials
within an industry. together (including transport).
Combined sector. A sector that combines some of Energy. The ability to do work. In industry it com-
the characteristics of discrete and process product monly refers to the energy used to power manu-
sectors. (See also discrete product sector and process facturing processes. This report measures energy
sector.) in tonnes of oil equivalent to allow compari-
Decoupling. Weakening or breaking the link between sons of energy from various sources. Primary
environmental effects and economic activity so energy sources include biomass-based fuels (trees,
that output increases with a less than commensu- branches, crop residues), fossil fuels (coal, oil, natu-
rate increase (or with a decrease) in energy con- ral gas) and renewable sources (sun, wind, water).
sumption (Von Weizsäcker 1989; Enevoldsen, Secondary energy sources are derived from other
Ryelund and Andersen 2007). Absolute decoup- (usually primary) energy sources and have zero pol-
ling in industry is when the decrease in material, lution at the point of use (electricity, for example).
energy and pollution intensity is greater than the Energy efficiency. The ratio of a system’s energy
growth rate in manufacturing (OECD 2002; inputs to its output. Since inputs and outputs can
Spangenberg, Omann and Hinterberger 2002). be measured in more than one way, energy efficiency
Relative decoupling is when the growth rate of has no single meaning. (See also exergy.) An engi-
manufacturing value added is higher than that of neer’s definition will differ from an environmen-
industrial energy consumption. talist’s or an economist’s– m
ainly reflecting differ-
Discrete product sector. A sector that involves a vari- ences in the level of aggregation.
ety of production processes because of the differen- The energy-efficiency ratio is commonly called
tiated nature of the products and their constituent thermal or first-law efficiency, based on the first
components, each also requiring its own produc- law of thermodynamics. In any closed energy-
tion process. The equipment used depends on pro- conversion process, energy can be neither created
duction volume and technical complexity; large- nor destroyed; energy that goes in must come out
volume and low- to moderate-complexity output is or be accumulated in the system. But only a por-
largely automated. There are also sequential trans- tion of the energy output will be in a useful form
formation stages– numerous in more complex (for example, light) while the rest is waste, typi-
products– o ften linked through an assembly line cally low-temperature heat. The thermal efficiency
and requiring many parts. Throughput is trans- of a process is thus the ratio of useful energy out-
formed by temperature, force or chemical reaction; puts to total energy inputs.
output is counted in units rather than in weight or In engineering, energy efficiency is interpreted
volume. (See also process sector.) as conversion efficiency– the proportion of the
Embodied energy. The cumulative amount of com- energy input that is available as a “useful” output.
mercial energy (fossil, renewable, nuclear) invested For example, only 5–10 percent of the electrical
xv
energy fed to an incandescent light bulb is con- indirect impacts result from production and sup-
verted to useful light energy; the remaining 90–95 ply of the energy source.
percent is lost to the environment as “waste” Exergy. The maximum work that can be performed as
energy (low-temperature heat). In developed coun- a subsystem approaches thermodynamic equilib-
Glossary
tries, the average efficiency of conversion of heat rium with its surroundings– that is, the amount
energy from fuel to electric power delivered to of energy actually used to achieve an intended or
consumers is 33–35 percent (Ayres, Turton and desired end result in an end-use application or total
Casten 2006), so if this electricity is converted to energy used minus estimated losses. It is known
light energy using an incandescent bulb, the over- technically as “useful energy.”
all energy efficiency is just 3 percent. Unlike first-law energy efficiency, this con-
In economics, energy efficiency is the ratio cept takes into account qualitative differences
of the value of output to the quantity or cost of between types of energy, particularly their ability
energy inputs– the amount of economic activity to perform physical work (to move an object over
produced from one unit of energy. (See also energy a distance). For example, high temperature steam
intensity.) has a greater ability to perform physical work
Energy intensity. The amount of energy used to than low-temperature hot water. While first-law
produce one unit of economic activity. It is the efficiency is easy to grasp (energy is conserved;
inverse of energy efficiency: less energy intensity all of it must be accounted for as useful output or
means more energy efficiency. This report meas- waste). The problem is that the numerator (useful
ures energy input in physical terms (tonnes of oil output) is not rigorously defined. For instance, it
equivalent) and economic activity in monetary is easy to misinterpret a boiler’s efficiency (say, 80
terms (sectoral and manufacturing value added), percent if 80 percent of combustion heat goes into
so the energy intensity of a manufacturing process the water tank and 20 percent goes up the flue) as
is the amount of energy used to produce a unit of the efficiency with which a house or bathwater is
value added– for example, tonnes of oil equivalent heated by the boiler. In fact, the ratio reveals noth-
per $1,000 in manufacturing value added (in con- ing about how much energy would be required to
stant dollars). heat the house by the best (most efficient) available
Energy services. The physical services (light, torque technology.
or heat) delivered when energy is consumed. Some A more precise definition is the ratio of the
energy is used directly in manufacturing (for exam- minimum amount of energy theoretically needed
ple, fuel for direct-fired kilns or ovens), but most to perform a task (such as heating a house) to the
is converted by utilities into an energy service that amount of energy used in practice (the efficiency of
is then used in the manufacturing system, such as the furnace-plus-boiler system in heating a house is
process heating and cooling liquids, compressed likely to be around 5 percent, much less than the
air, motion and lighting. The aim of process econo- boiler’s 80 percent efficiency). An equivalent way
mies is to produce more products with less use of of expressing this idea is the ratio of the amount
energy services– for example, more beer per tonne of thermodynamic work performed by a process
of steam use or more cups per unit of fuel consump- (the numerator) to the maximum amount of work
tion in the firing kiln. that could be performed in theory (exergy). This
Environmental impacts of industrial energy use. ratio is second-law efficiency because it takes into
The environmental impacts of industrial energy account the unavoidable losses owing to the sec-
use differ by energy source. Direct impacts arise ond law of thermodynamics. While energy is con-
during energy use in industrial processes, while served, exergy, the useful component of energy, is
xvi
destroyed by every process or action, while the non- differently depending on the customer. See also
useful component of energy (anergy) increases. discrete product sector.
Eventually, all energy becomes anergy, because it Sectoral value added. See value added.
can do no work. Only second-law efficiency can Structural change. Changes in the long-term compo-
Glossary
show how well machines and systems are doing and sition and distribution of economic activities. (See
how much opportunity there is for improvement. also technological change.)
The first-law definition has often been used to Technological change. Improvements in technology.
claim that an economic system, or a process within Technological change involves a series of stages
it, is much more efficient than it really is. with multiple actors, relationships and feedback
Feedstock. Energy used as a raw material to generate loops– from invention, as a new technology is cre-
power. Most of the analysis in this report excludes ated and prototyped, to innovation, as it becomes
feedstock. commercially viable (Freeman and Soete 1997;
Gross energy requirement. The amount of energy IEA 2008a). In decomposition analysis, if data on
required to manufacture a product. Similar to manufacturing processes were available at the low-
embodied energy but product-specific. est level of aggregation, the measure of technical
Industrial energy efficiency. The ratio of the useful change would be actual physical efficiency and the
or desired output of a process to the energy input rest would be structural change (Jenne and Cattell
into a process; for a higher aggregated level (sector, 1983). Industrial energy intensity can be lowered
economy or global), the ratio of the amount of eco- by improving technology (technological change)
nomic activity produced from one unit of energy. and producing more goods that require less energy
Industrial energy intensity. The amount of energy (structural change).
used to produce one unit of economic activity Technological efficiency. The efficiency with which
across all sectors of an economy; related to the the economy converts raw materials into finished
inverse of energy efficiency but only at the sectoral, materials, or the ratio of actual work output to the
economy or global level. theoretical maximum. It is the result of technologi-
Manufacturing value added. See value added. cal change, system change and product upgrading.
Primary energy. The energy embodied in natural Technological intensity. The ratio of input use and
resources before they undergo any human-made service output across a specific manufacturing sec-
conversions or transformations; examples are coal, tor. It is the inverse of technological efficiency.
crude oil, sunlight, wind, running water in rivers, Technology. The application of knowledge to produc-
vegetation and uranium. tion. It comprises processes (organizational and
Process sector. An industrial sector that uses coal, management practices and production processes),
natural gas, metallic and non-metallic minerals knowledge (tacit and codified) and products and
or oil as raw material or feedstock; that involves machines (physical equipment and artifacts).
a sequence of linked transformation stages with Processes and knowledge are sometimes referred to
several supporting processes operating on site; that as “software” and products and machines as “hard-
requires a series of containers, pipes, vessels, com- ware” (IPCC 1996).
plex purpose-designed and fabricated plants and Total final energy consumption. The sum of con-
advanced control technologies; that employs high sumption in end-use sectors. For the most part,
pressures, high temperature and chemical reactions final consumption reflects deliveries to consumers
to transform throughput; and that delivers output (IEA 2010c).
in bulk, generally in units of weight or volume, Value added. A measure of output net of intermediate
although the output may be presented or packaged consumption, which includes the value of materials
xvii
and supplies used in production, fuels and electric- GDP (manufacturing net output). Sectoral value
ity consumed, the cost of industrial services such added is the net output produced by individual
as payments for contract and commission work sectors. The sum of value added from all manufac-
and repair and maintenance, compensation of turing sectors should equal manufacturing value
Glossary
employees, operating surplus and consumption of added, but limited coverage of activity units or
fixed capital. Manufacturing value added is the data items in manufacturing surveys can result in
contribution of the entire manufacturing sector to discrepancies.
xviii
Overview
Part A
Industrial energy efficiency for sustainable wealth creation:
capturing environmental, economic and social dividends
Key messages
• Improving industrial energy efficiency is a key route to sustainable industrial development worldwide – especially in
developing countries. Investing in energy-efficient technologies, systems and processes can provide environmental,
economic and social dividends to achieve green growth.
• In recent decades, industrial energy efficiency has been improving as industrial energy intensity has fallen (at an
average of 1.7 percent a year), though absolute energy consumption rose 35 percent over 1990–2008. Energy
consumption could grow even faster as developing countries reduce the income gap with developed countries and
grapple with rising demand for manufactured products from growing populations.
• In both developed and developing countries, investing in industrial energy efficiency makes financial sense. Yet the
potential for further investments remains high. Why are these investment opportunities not being realized? Because
countries face numerous barriers to investment – barriers stemming from market and behavioural failures.
• Public policy interventions will be needed to overcome these barriers, drawing on regulatory and market-,
k
nowledge- and information-based tools. A global consensus could be built to support such interventions through inter-
national collective action to reduce industrial energy intensity 3.4 percent a year, or 46 percent in total, through 2030.
The Industrial Development Report 2011 (IDR) not as abundant as once thought, overall energy con-
addresses the role of industrial energy efficiency in sumption is not likely to fall soon. Pollution, resource
sustainable industrial development. About a fifth of depletion and the waste of discarded products– each
global income is generated directly by the manufactur- at an all-time high– a re major causes of environmen-
ing industry, and nearly half of household consump- tal degradation and climate change. Policy-makers
tion relies on goods from industrial processes. People’s must address them as they remap development paths.
needs for food, transportation, communication, Industrial development must become sustain-
housing, health and entertainment are met largely able. Continued high resource consumption and reli-
by manufacturing. Since the Industrial Revolution, ance on carbon-intensive and polluting technologies
waves of innovation have shaped how people work and will sap the potential for growth and development.
live. During the 19th and 20th centuries, developed Innovative solutions, national and global, are vital
countries relied on manufacturing to reduce poverty to making industrial activity more sustainable– to
and improve the quality of life of their growing popu- attuning it to environmental, economic and social
lations. Today, developing countries are counting on needs. This “green industry” approach can provide the
industrialization to do the same for them. blueprint for sustained industrial development.
Improvements in the standard of living made Industrial energy efficiency is a key foundation
possible through industrialization have come at an for greener industry worldwide. By building on past
environmental cost. Energy consumption per capita successes, countries can develop their industries and
has increased nine-fold over the last 200 years (Cook generate employment while tempering the impacts on
1971). Materials use per capita more than doubled over resource depletion and climate change.
1900–2005 (Krausmann et al. 2008). And though the The IDR 2011 focuses on industrial energy-
fossil fuels that have fed industrial development are efficiency challenges in developing countries, which
1
“ Industry is the largest energy user
globally, and growth in industrial energy use
would have been higher over 1990–2008 but
for reductions in industrial energy intensity
are emerging as key actors in global industrial develop- Industry is the largest energy user, accounting
ment. The report looks in depth at long-term trends in for around 31 percent of world energy consumption
industrial energy intensity and related technological since the early 1990s. In developed economies, how-
and structural change; examines the environmental, ever, industry accounted for only 24 percent of energy
Overview
economic and social benefits of industrial energy effi- consumption (0.8 Gtoe), lagging behind the transport
ciency; and identifies obstacles to its promotion and sector (32 percent) and slightly ahead of the residential
uptake and ways to overcome them. sector (19 percent). In developing economies, energy
demand in industry rose much faster and remains the
Changing industrial energy trends main user of energy (1.7 Gtoe).
Final energy consumption worldwide increased from
6.0 gigatonnes of oil equivalent (Gtoe) in 1990 to 8.2 Industrial energy intensity is falling
Gtoe in 2008, a 35 percent rise. Per capita, the increase Growth in industrial energy use would have been
was far less steep, from 1.2 tonnes of oil equivalent higher over 1990–2008 but for reductions in indus-
(toe) in 1990 to 1.3 toe in 2008, or just above 7 percent trial energy intensity– the ratio of the amount of
(Figure 1). Developed economies saw a steady increase energy used to produce a unit of output (convention-
in energy demand to 3.4 Gtoe in 2008, equivalent to ally measured as $1,000 in manufacturing value added
3.5 toe per capita. Energy demand by developing coun- [MVA]). Over the past 20 years, developed economies
tries grew faster, reaching 4.7 Gtoe in 2008, or 0.9 toe have been reducing industrial energy intensity. In
per capita. addition, large developing economies such as China,
Figure 1
Growth in energy consumption and energy consumption per capita, 1990–2008
8 4
3
6 3
2
4 2
1
2 1
0 0 0
1990 1995 2000 2005 2008 1990 1995 2000 2005 2008 1990 1995 2000 2005 2008
World Developed economies Developing economies
1.5 4 1.0
Tonnes of oil equivalent per capita
1.2 0.8
3
0.9 0.6
2
0.6 0.4
1
0.3 0.2
0.0 0 0.0
1990 1995 2000 2005 2008 1990 1995 2000 2005 2008 1990 1995 2000 2005 2008
Mining and construction Agriculture, forestry and fishing Commercial and public services Energy Residential Transport Industry
2
“ Over 1995–2004, technological change
accounted for a slightly larger share of
the decline in industrial energy intensity
globally, but structural change has become
increasingly important since 2005
India and Mexico and transition economies such as manufacturing sector, adoption of more energy-
Azerbaijan and Ukraine began adopting technologies efficient technologies, optimization of production
and measures that produced unprecedented cutbacks systems and application of energy-efficient organiza-
in industrial energy intensity. Among the trends: tional practices. Structural change reflects changes in
Overview
• Global industrial energy intensity dropped some the contribution of each sector, including shifts from
25 percent over 1990–2000, but stabilized more or towards energy-intensive industries. Over 1995–
recently at around 0.35 toe per $1,000 of MVA (in 2004, technological change accounted for a slightly
constant 2000 prices; Figure 2). larger share of the decline in industrial energy inten-
• Industrial energy intensity has been inversely related sity globally (see Figure 4), but structural change has
to national income since 1990 (Figure 3). On aver- become increasingly important since 2005. By 2008,
age over 1990–2008, developed economies had the structural change (12.5 percent) had a larger effect
lowest energy intensity (0.2 toe per $1,000), and than technological change (9.8 percent).
low-income developing economies had the highest
(2.2 toe per $1,000). Structural change was the main driver of
Closer analysis of industrial energy intensity falling energy intensity over 1995–2008
trends over 1995–2008 for 62 economies meeting Reductions in energy intensity over 1995–2008 were
specific criteria for decomposition analysis shows a larger in developing economies than in developed
22.3 percent decline, or an average annual reduction economies (Figure 5). Structural change was the
of 1.9 percent (Figure 4). Both technological and driving force behind reductions in developed econo-
structural factors contributed. Technological change mies and in high-income developing economies as
occurs through changes in the product mix of each they shifted from energy-intensive industries towards
Figure 2 Figure 3
Global trends in manufacturing value added, Industrial energy intensity, by income group,
industrial energy consumption and industrial 1990–2008
energy intensity, 1990–2008
The higher the development level, the lower the industrial energy
Industrial energy intensity fell markedly in 1990–2000 but stabilized intensity
more recently
3
Tonnes of oil equivalent per $1,000 manufacturing value added
200
Index (1990 = 100)
150
2
Lower middle-income developing economies
1
Industrial energy intensity, 2008
0.35 tonnes of oil equivalent per US$1,000 Upper middle-income
50 developing economies
Developed economies
0
0 1990 1995 2000 2005 2008
1990 1995 2000 2005 2008
Note: Industrial energy intensity in 2000 US dollars. Note: See Annex 4 for economies in each group. Industrial energy intensity in 2000 US dollars.
Source: UNIDO 2010e,f,g; IEA 2010c. Source: UNIDO 2010e,f,g; IEA 2010c.
3
“ Reductions in industrial energy intensity after
1995 were around 30 percent for high-income
developing economies and for upper middle-income
developing economies and around 40 percent
for lower middle-income developing economies
intensity
100 the large gaps in energy intensity between developed
Percentage change from 1995
Figure 5
Components of change in industrial energy intensity, by region and income group,
1995–2008 (percent)
Technological change is the primary driver of lower industrial energy intensity in developing economies
Total change in industrial energy intensity Contribution of structural change Contribution of technological change
Developing economies
Developed economies
Developing Europe
East Asia and the Pacific
South and Central Asia
Middle East and North Africa
Sub-Saharan Africa
Latin America and the Caribbean
4
“ The IDR 2011 presents diverse
estimates suggesting that large savings
in energy use continue to be possible
from industrial energy efficiency
Large savings in energy use continue to be • A 450 scenario, limiting the average global increase
possible from energy efficiency in temperature to 2°C and the concentration of
Can the world satisfy the mounting demand for indus- greenhouse gases in the atmosphere to around 450
trial goods, particularly from developing countries, parts per million of carbon dioxide equivalent,
Overview
while keeping energy consumption growth in check? would add 3 Gtoe in savings to the current policies
Can developing countries’ legitimate demands for ris- scenario.
ing living standards and poverty reduction be made McKinsey & Company (2007, 2008, 2009) also
compatible with green industry? estimates that the growth in global energy demand
In 2008, per capita industrial energy consump- could be reduced, from 2.3 percent a year in the mid-
tion in developing economies was 29 percent of that 2000s to 0.7 percent a year by 2020 (from 3.4 percent
in developed economies. As per capita income in to 1.4 percent in developing countries), by seizing
developing economies converges to that in developed emerging opportunities to reduce energy intensity.
economies, the gap in per capita industrial energy Improving industrial energy efficiency can deliver
consumption is expected to narrow, with a potentially many well documented environmental, economic and
huge impact on global energy demand. In combina- social benefits. The IDR 2011 substantiates these divi-
tion with population growth, this could accelerate dends and then looks at how to overcome some of the
resource depletion and environmental degradation obstacles to cashing in on them.
and raise energy prices enough to impair economic
growth. Hence, to be sustainable, long-term industri- The three dividends: environmental,
alization in developing countries needs to be accompa- economic and social
nied by substantial improvements in industrial energy Continuing efforts to improve industrial energy effi-
efficiency. ciency should contribute to the global effort to halt
The IDR 2011 presents diverse estimates suggest- or reverse climate change while reducing other pol-
ing that large savings in energy use continue to be lutants. At the same time, these efforts should help
possible from industrial energy efficiency. According businesses improve their bottom line and optimize
to the International Energy Agency’s (IEA) 2010 strained energy systems to better meet social and eco-
World Energy Outlook, a reduction in global energy nomic needs. These environmental, economic and
intensity of 23 percent over 1980–2008 saved 32 per- social dividends are a win-win-win combination.
cent in energy consumption (5.8 Gtoe; IEA 2010e).
Looking forward, IEA (2010e) estimates several Environmental dividend
scenarios: Industrial firms transform raw materials into final
• A current policies scenario, which takes into goods through integrated, sequential and supporting
account only policies already formally adopted and processes that require energy to fuel them. The energy
implemented, anticipates a 28 percent reduction required depends on the nature of the technology and
in energy intensity by 2035, or savings of around on its efficiency in using raw and auxiliary materials.
6.5 Gtoe in primary energy consumption (2 Gtoe
from industry). Improving industrial energy efficiency can
• A new policies scenario, which assumes imple- yield a large environmental dividend
mentation of announced policy commitments to The environmental impact of industrial energy use
reduce greenhouse gas emissions and phase out fos- is direct, a result of energy demands for production
sil energy subsidies, foresees a 34 percent reduction processes, and indirect, a result of energy demands
in energy intensity, equivalent to an additional 1.3 on energy suppliers. The environmental impact of
Gtoe in savings over the current policy scenario. energy use includes emissions (to air, water and land),
5
“ The profitability of energy-efficiency
projects is well established in developed
countries. The IDR 2011 demonstrates that
substantial economic dividends can be
earned in developing countries as well
depletion of natural resources and alterations to land- water, which are intrinsically linked to manufac-
scape and biodiversity. Greenhouse gas emissions, par- turing. Processing materials and water in manu-
ticularly carbon dioxide, dominate the international facturing requires energy proportional to the
discussion because of their impact on climate change. throughput.
Overview
that are in line with the findings of a recent United energy efficiency and that firms in developing countries
Nations Environment Programme report (UNEP might not be aware of many of these opportunities.
2011). Many energy-efficiency projects perform sig-
nificantly better than the most lucrative financial Social dividend
Overview
investments, but their profitability varies widely and In many developing countries, inefficiencies in energy
is sensitive to the time horizon of the investments. Of use by manufacturing firms result in high running
119 industrial energy-efficiency projects that UNIDO costs, wasted energy and materials, underuse of indus-
assessed in developing countries, the average internal trial capacity and unnecessary investments in standby
rate of return was slightly more than 40 percent for equipment. For these countries, improvements in
those with an expected lifetime of five years (Figure industrial energy efficiency, promoted and imple-
6). Highly profitable projects often involve smaller mented through appropriate policy reforms, could
investments, process reorganization and housekeep- allow a better social use of energy resources. Energy
ing measures, and minor changes to infrastructure. could be redistributed towards the poorer segments of
Projects that involve larger investments and require the population. Energy efficiency improvements could
replacing machinery and equipment (mainly in pro- also free resources for investment in new machinery
cess industries) are typically less profitable and take and further improvements in the production process
longer to mature. But they can still have considerable – boosting competitiveness, productivity growth,
absolute impact on corporate profits. employment and wages. The productivity improve-
Does this mean that all industrial energy-efficiency ments in developing countries could be especially
projects are profitable under normal investment criteria? large in small and medium-size industrial enterprises,
Clearly not. Generally speaking, the data suggest that which tend to be less energy efficient than larger firms.
the more technologically and organizationally complex
the project, the lower the profitability. Many energy- Industrial energy-efficiency improvements can
efficient technologies are likely to remain unprofitable boost productivity and improve health outcomes
for some time, at least until environmental damages are Industrial energy-efficiency improvements can also
properly priced. But the data also suggest that there is boost skill levels, raising overall productivity. Many
a wide range of profitable opportunities in improving training programmes to increase industrial energy
Figure 6
Internal rates of return of industrial energy-efficiency projects with an expected lifetime of five years
100 100
75
50
75 75
50
50 50
25
25
25 25
0 0 0 0
Process Technology Total Less than $10,000– More than Total
me en Te ers ( )
nt t /c xtile 13)
fac ic s )
Au urin (15)
ev al ( )
a n M t i ve )
g )
pe )
t al 2 )
9)
qu p er a reu 2 )
t re eu )
me )
nt s )
W at i )
To 42)
9)
h 4
d b e t (4
nu a m ( 2 2
era 14
o 16
Pa es ( 9
Fu ovem (14
en re r (12
ce 2 0
iz (19
O t ls ( 1
To r (1
tem a s t o n ( 1
(11
(11
(
pla s e (
ipm t u s e
e
nt
ma er s
t ur
t al
ic a
e
t im
tio rast
Ch
op
r
mp
f
n s o f in
el
uip em
ni
od
Eq C
Fo
an r use
ula
D ir u a l
e
sid
te
t
P ip e t
di
ec
Re
B
es
7
“ To overcome market and behavioural barriers,
policy-makers need to formulate a coordinated
energy strategy– including formal and informal
mechanisms, targets, benchmarks and standards
–a
nd adapt policies to national and local contexts
efficiency enhance worker productivity across in best available technologies– t he most energy-effi-
the board, as workers acquire knowledge appli- cient way of producing goods and services that is com-
cable to multiple fields. Workers can also benefit mercially viable and in use– c ould save an additional
from improved health as factory emissions decline. 5–15 percent in costs. The potential energy savings
Overview
Lowering atmospheric emissions of pollutants such as from the best available technologies total 32.7 exa-
sulphur oxides, nitrogen oxides, smoke and airborne joules a year (0.8 Gtoe), roughly 30 percent of today’s
suspended particulate matter reduces the incidence global industrial energy consumption and 6 percent of
of acute and chronic respiratory illnesses and asthma total energy use worldwide (Table 1).
attacks and increases the life expectancy of factory
workers. And because many industries are clustered Why is so much improvement potential
in the same areas, emissions reductions can have ignored?
health benefits for local communities– e specially Why are so many of these potentially profitable invest-
poor communities, since pollution-intensive indus- ment opportunities overlooked? Because markets
tries in developing countries tend to be located in depart from the textbook ideal, and individual and
low-wage areas. corporate behaviour is not always rational. While long
Adopting industrial energy-efficiency technologies known and understood, the obstacles to improving
can improve the indoor environment as well, increas- energy efficiency are difficult to remove. Too often,
ing comfort and safety (Mills and Rosenfeld 1996). potential users are not aware of the advantages and
Variable speed drives and air blowers and energy- opportunities from investments in energy-efficient
efficient furnaces tend to be quieter than the equip- technologies. And when they are, they cannot easily
ment they replace. Exhaust heat recovery systems also obtain the funding to acquire the new equipment or
improve ventilation. Glazed windows keep occupants make the necessary plant modifications. Decision-
of households and factories cooler in hot weather and makers in firms do not always benefit directly from
reduce external noise. Efficient lighting technologies their decisions, and it is difficult to estimate all the
such as fluorescent lamps and light-emitting diodes costs, benefits and risks of projects. Furthermore, gov-
increase the likelihood that warning signs will operate ernment subsidies that lower energy prices can make
properly when needed, thus improving safety. these investments less attractive.
In developing countries, the barriers can be even
Overcoming obstacles to industrial greater because of institutional, economic and techni-
energy efficiency cal conditions. Where the supply of energy is irregu-
Despite the substantial environmental, economic lar, efficiency typically takes a back seat to availability.
and social benefits of investing in industrial energy Small and medium-size firms face the biggest obstacles
efficiency, the IDR 2011 finds numerous untapped to achieving energy-efficiency improvements.
opportunities. A study commissioned for the report
estimates that manufacturing industry spends some What policy tools are available?
$1 trillion a year on energy, 55 percent of it in develop- How can developing countries overcome these mar-
ing countries (Saygin et al. 2010). It also shows that ket and behavioural barriers? Policy-makers need to
universal adoption of best practice technologies– the formulate a coordinated energy strategy– including
energy intensity of the top 10 percent of plants in the formal and informal mechanisms, targets, bench-
world– could yield annual savings in energy costs of marks and standards– a nd adapt policies to national
$65 billion in developed economies and $165 billion and local contexts. Measures should have a time hori-
in developing economies, corresponding to 23 percent zon of a couple of decades, including realistic interim
of total energy costs and 2 percent of MVA. Investing medium-term targets (typically 5–10 years), and be
8
“ The potential energy savings from the best
available technologies total roughly 30 percent
of today’s global industrial energy consumption
and 6 percent of total energy use worldwide
Table 1
Technical and economic savings potential arising from industrial energy-efficiency improvements
Technical improvement
potential Carbon dioxide
Total savings potential Share of energy costsa
savings potential Share of
Overview
(percent) (exajoules per year) (percent)
(tonnes of current
Developed Developing Developed Developing Developed Developing carbon dioxide emissions
Sector and product countries countries countries countries countries countries a year) (percent)
Process sectors
Petroleum
refineries 10–15 70 0.7 4.6 50–60
Chemical and
petrochemical 0.5 1.8 300 20
Steam cracking
(excluding
feedstock) 20–25 25–30 0.4 0.3 50–85
Ammonia 11 25 0.1 1.3
Methanol 9 14 0 0.1
Non-ferrous
minerals 0.3 0.7
Alumina
production 35 50 0.1 0.5 30 45b 12b
Aluminium
smelters 5–10 5 0.1 0.2 35–40 35–50
Other aluminium 5–10 5 0.1 0.2 35–40 35–50
Copper smelters 45–50 0 0.1
Zinc 16 46 0 0.1
Iron and steel 10 30 0.7 5.4 10–20 30 350 14
Non-metallic
minerals 0.8 2.0
Cement 20 25 0.4 1.8 25–30 50 450 23
Lime 40
Glass 30–35 40 0.4 0.2 7–20
Ceramics 30–50
Combined sectors
Pulp and paper 25 20 1.3 0.3 15–35 80 20
Textile 5–25
Spinning 10 20 0.1 0.3
Weaving 5–10 10–15
Food and
beverages 25 40 0.7 1.4 1–10
Other sectors 10–15 25–30 2.5 8.7
Total 15 30–35 7.6 25.1
Excluding
feedstock 15–20 30–35 12c
9
“ key policy approaches include laws
and regulations, negotiated agreements,
information-based instruments, new
technology and innovation support, market-
based instruments and financial facilities
sufficiently credible and stable to encourage firms There are many tools for overcoming barriers
to invest. Policy-makers need to continually assess to improving industrial energy efficiency
policy effectiveness and benchmark policies against There are many tools for tackling these barriers and
best international practice. They should also estab- considerable international experience with “what
Overview
lish local, regional and national bodies for imple- works.” The first steps are establishing quantified and
mentation and explore possibilities for international achievable efficiency targets, benchmarking the per-
cooperation. (See Box 1 for examples of industrial formance of different sectors and identifying opportu-
energy-efficiency policies applied in some developing nities to improve energy efficiency. Once realistic and
countries.) measurable targets are set, legislation and negotiated
Box 1
Experiences of industrial energy-efficiency policies applied in selected developing countries
Brazil. The National Electrical Energy Conservation also receive financial awards linked to energy savings.
Programme (Procel) introduced the Industrial Energy Effi- In 2007, Shanghai had 243 energy conservation projects
ciency Programme in 2003, stressing awareness-raising with a total investment of $439 million and estimated sav-
and capacity-building, implementation of demonstration ings of 600,000 toe. Weifang City in Shandong Province
projects, regulatory and legislative actions and estab- implemented 66 projects in 2007, with a total investment
lishment of financing lines for project replication. Procel of $1.28 billion. By June 2008, 26 projects were completed
Industria originally focused on electric motor-driven sys- with an energy-saving capacity of 121,000 toe per year.
tems, industrial processes, energy audits and industrial India. The objective of the Bureau of Energy Efficiency
facilities’ electricity losses. It used universities to provide is to reduce the energy intensity of the Indian economy.
training and develop analytical tools for manufacturers Within the overall framework of the 2001 Energy Con-
and provided financing for equipment and instrumenta- servation Act, the Bureau assists in developing policies
tion to enable self–energy auditing and implementation by and strategies that emphasize self-regulation and market
industry. Procel’s industrial energy-efficiency programme principles. Among its initiatives are the National Energy
was executed through the National Confederation of Conservation Award for Industries (14 industrial sectors
Industry (NCI) to strengthen NCI as a leader in indus- have set ambitious targets to cut energy use by up to
trial energy efficiency, to create a focus point instead of 40 percent through conservation measures), an energy-
having specific agreements with all sectors and to build efficiency labelling scheme, a model energy performance
a common agenda. It included an international survey of contract for energy services companies and organization
industrial energy-efficiency programmes and projects, of the National Certificate Examination for Energy Manag-
a national survey of industrial energy-efficiency projects ers and Energy Auditors.
results and mechanisms, and identification of barriers for South Africa. Through the Energy Efficiency Accord
energy-efficiency projects and of key success factors. signed with the Ministry for Energy and Minerals, the chief
China. In 2004, China launched its Ten Key Projects executive officers of 24 major energy users and seven
initiative, a $1 billion programme to provide financial industry associations voluntarily committed to work indi-
incentives for a range of industrial energy-saving pro- vidually and collaboratively to meet government targets for
jects. Funding is earmarked for 5 of the 10 key projects energy savings, promote demand management contracts
(coal industrial boilers and kilns, waste heat and power with energy suppliers, develop common reporting require-
recovery, petrochemical conservation, electrical machin- ments for energy use from all sources, forecast industry-
ery, energy-saving systems and energy system optimiza- specific energy use based on business-as-usual growth
tion). Applicants must undergo a comprehensive energy expectations, develop a generic energy-auditing protocol
audit, demonstrate adequate accounting and manage- that can be adapted by the sector and company signa-
ment systems and show that the project will save at least tories, and exploit opportunities to develop Clean Devel-
7,000 tonnes of oil equivalent (toe). If independent review- opment Mechanism energy-efficiency projects under the
ers conclude that a project is successful, applicants can Kyoto Protocol.
10
“ As industrial activity shifts towards
developing countries, information and
knowledge exchanges and international
coordination are needed to level the playing field
agreements can ensure their achievement. Some key and operational data– c an raise awareness of the
policy approaches include: benefits of energy efficiency at all levels in industry.
• Laws and regulations that remove the least efficient By making the lifetime costs of available technolo-
equipment and practices from the market and cut gies more transparent, these instruments make it
Overview
greenhouse gas emissions. Energy efficiency laws easier for firms to choose energy-efficient options.
generally establish government regulating, imple- The instruments have no direct impact on produc-
menting and coordinating agencies– a s well as tion costs or greenhouse gas emissions, but they
promotional and support organizations– a nd can affect stakeholder perceptions and decisions.
cover energy standards, energy-savings plans, Although fairly easy to implement, they require
regular reporting of energy consumption, energy- public funding and institutions to organize and
auditing and energy-conservation training, and develop campaigns– again, a major obstacle for
technical assistance. Laws can also stipulate priori- many developing countries.
ties and provide tax incentives, subsidies and pen- • New technology and innovation support– govern-
alties. But legislation can have drawbacks. Targets ment’s role includes funding research and devel-
may be unrealistic, and laws based on experiences opment (R&D) and supporting private sector
from a developed country might not be adequately research, encouraging adoption and diffusion of
adjusted to developing country contexts, putting best available technologies, promoting demonstra-
the targets at odds with other economic and social tion projects and engaging international research
goals. There is also a risk of technological “lock-in” partners. Best available technologies and innova-
at inappropriate levels determined by regulations tion are key drivers of industrial energy efficiency,
rather than by market conditions. Finally, inad- but they are beyond the means and capabilities of all
equate funds are typically allocated to implement, but a few developing countries and can take a long
monitor and enforce legislation. time to yield returns. Most developing countries
• Negotiated agreements for energy efficiency are will continue to rely on foreign technologies, but
contracts between government and industry– even this requires building local absorptive capacity.
typically including specific targets to meet within • Market-based instruments – such as carbon taxes,
set time schedules. The understandings can engage subsidies, accelerated depreciation of energy-
stakeholders in developing a long-term plan for efficient equipment and tradable energy-efficiency
greater energy efficiency. Some successful agree- certificates– are often central measures in energy-
ments contain elements that can be applied efficiency policy. They reinforce prices, create the
in other countries and sectors. Agreements in appropriate market for energy efficiency and drive
Denmark, Finland and the Netherlands have consumer choices towards the most socially cost-
been models for those in China. Such negotiated effective solutions. One merit of market-based
arrangements are seen as viable for meeting energy- incentives is that they are more cost-effective than
saving targets while adhering to market-oriented some non-market solutions. For instance, a carbon
policies. But the pressure of continuing economic tax is in principle the least costly way to provide
growth on energy demand, the environment and meaningful incentives for technology innovation
competition may force some countries to develop a and diffusion, cut greenhouse gas emissions and
stronger, more strategic policy on energy efficiency. drive energy efficiency. Demand management can
• Information-based instruments – such as informa- encourage less energy consumption by end-users
tion and awareness campaigns, labelling schemes, (including industry), and energy service compa-
offices to disseminate energy-efficiency informa- nies can promote energy efficiency for industries
tion and public repositories for energy-efficiency and firms.
11
“ Since 1990, industrial energy intensity has
fallen globally at an average annual rate of 1.7
percent, just half the rate needed to keep energy
consumption adequately in check. UNIDO proposes
an annual target of 3.4 percent through 2030
• Financial facilities – such as loans, guarantees, through 2030, or around 2.5 percent a year, but it set
revolving funds and venture capital funds– no goal for industrial energy intensity.
increase the availability of capital and lower its As a well established approach to achieving per-
cost, thus reducing risk. But there must first be formance objectives, setting measurable targets clearly
Overview
sound public financial institutions and a reason- identifies priorities and direction, allows for compari-
ably developed commercial banking sector, likely a son and benchmarking and acts as a focusing device
major obstacle in developing countries. for action. Targets are intended to improve perfor-
mance and to challenge those for whom they are set.
International collective action But they have to be realistic to maintain their moti-
through information exchange and vating power. And for international collective action
international coordination to combat climate change, targets must demand major
In addition to national policy initiatives, there is improvements from current trends. Ambitious targets
a need for international collective action. Many are justified not only on environmental grounds but
changes in industrial energy efficiency arise from also on financial grounds, because industrial energy-
technical and structural shifts within and across efficiency projects can yield significant financial gains.
industries, some being the result of international Since 1990, industrial energy intensity has fallen
movements of goods and capital. As industrial activ- globally at an average annual rate of 1.7 percent, just half
ity shifts towards developing countries, information the rate needed to keep energy consumption adequately
and knowledge exchanges and international coor- in check. Against this background, UNIDO proposes
dination are needed to level the playing field. And an annual target of 3.4 percent through 2030, or a total
because problems such as climate change are systemic of 46 percent. Because reaching a binding international
and involve global externalities and public goods, agreement on such a target will be difficult, countries
only international action can provide the basis for should make it part of their national development
solutions. plans. And countries that have already reached the tar-
get should strive to reduce energy intensity even more.
Five key areas for international collective To be effective, targets must be monitored. In
action to improve industrial energy efficiency developing countries, data are often limited, and con-
There are five key areas for international collective sequently a first step is to collect and harmonize data
action on industrial energy efficiency: setting global on energy intensity. Country performance can then be
performance targets and standards, facilitating tech- assessed, and cross-country comparisons can identify
nological and structural changes, contributing to where progress is and is not taking place. Processes can
international technology transfer, promoting finan- be set in motion to inform countries about their pro-
cial mechanisms to support those transfers, and estab- gress and examine reasons for deviations.
lishing an international monitoring and coordination Setting international standards can also help in
function for industrial energy efficiency. achieving targets. Standards can focus on harmoniz-
ing terminology and calculation methods for energy
Setting energy-intensity targets and standards efficiency, managing energy, retrofitting and refur-
In 2010, the Advisory Group on Energy and Climate bishing standards and standardizing energy-efficiency
Change to the UN Secretary-General recommended activities for buildings. These types of standards help
that international cooperation to ensure universal define, implement and monitor energy-efficiency poli-
access to modern energy services by 2030 give prior- cies at macro and micro levels. They also bring innova-
ity to boosting energy efficiency. It recommended tive energy-efficient technologies to the market faster.
reducing overall global energy intensity by 40 percent And they are objective metrics for regulations and
12
“ Since targets and transfers are
unlikely to materialize without financing,
a well developed institutional framework
for international financing of industrial
energy efficiency would be necessary
policy incentives to encourage greater use of innova- technology, because of lack of information or the large
tive energy-efficiency technologies. scale of the necessary investment. Host country gov-
ernments could develop local absorptive capacity,
Facilitating technological and structural change facilitate local spillovers, acquire international licences
Overview
Further reductions in energy use could be achieved and promote learning among industrial firms. Source
and more resource depletion avoided by launching country governments could increase technical and
major international efforts aimed at technological and financial assistance and capacity-building to improve
structural change for industrial energy efficiency. developing countries’ ability to acquire and absorb for-
Efforts should focus on R&D cooperation to eign technologies. They could also disseminate tech-
share knowledge, coordinate R&D priorities and pool nological knowledge and standards, promote joint
risk (Stern 2006). There has been some international research and establish grants for studying industrial
R&D cooperation on adopting low-carbon technolo- energy-efficiency experiences in developed and devel-
gies such as renewable energy sources and on the trans- oping countries.
fer and diffusion of clean energy technologies. But few International collective action could provide a
international efforts focus exclusively on R&D for coordinating mechanism to overcome problems in pri-
industrial energy-efficiency technologies. An inter- vate technology markets and negotiate rules for inter-
national programme aimed at gradually phasing out national technology transfers. That would require
energy-intensive products that have economically making scientific and technological knowledge widely
feasible alternatives could also be established. There is available, establishing channels for information
already significant international experience in phasing on successful technology acquisition programmes,
out chlorofluorocarbons worldwide and incandescent harmonizing processes for patents and standards
light bulbs in the European Union. and enforcing international law. Scaling up multi-
International collective action could ensure that lateral agreements such as the Clean Development
the global restructuring of industry considers energy Mechanism and the Global Environment Fund and
efficiency. An information clearinghouse and infor- establishing international information exchange net-
mation exchanges can help countries and industries works could ensure access to basic science and technol-
identify best available technologies and compare the ogy for industrial energy efficiency.
performance of different technologies under differ-
ent conditions before investing in them. International Promoting international financing
coordination could also help deploy industrial energy- Since targets and transfers are unlikely to material-
efficiency technologies and practices, especially in col- ize without financing, a well developed institutional
laboration with the private sector. Lead multinational framework for international financing of industrial
firms in global and local value chains and production energy efficiency would be necessary. Multilateral and
networks can speed the uptake of industrial energy bilateral sources of finance, direct or through imple-
efficiency in developing countries. menting agencies or local financial institutions, could
also provide financial assistance to industrial energy-
Contributing to international technology transfer efficiency projects in developing countries. Efforts
International energy-efficiency technology transfer could focus on assessing global financing require-
would involve the movement of skills, knowledge, ments and expanding carbon-trading programmes,
manufacturing methods, equipment and facilities again through the Clean Development Mechanism
across countries. A major difficulty developing coun- and the Global Environment Fund. Current funds are
tries face in adopting industrial energy-efficiency tech- inadequate for accomplishing the task (Stern 2006).
nologies is lack of access to international best available Further measures could establish a global fund for
13
“ Global industrial production is
shifting gradually from developed
countries to developing countries
industrial energy efficiency, introduce international Yet, only a few fragmented international initiatives
guarantees, facilitate lending by private financial insti- are overturning the barriers to industrial energy effi-
tutions and banks and create international energy ser- ciency. The IDR 2011 thus argues for an industrial
vice companies with a focus on developing countries. energy-efficiency function to help set and monitor
Overview
Part B
Trends in manufacturing and manufactured exports,
and benchmarking industrial performance
Key messages
• Over the last 20 years, manufacturing valued added (MVA) growth has remained at an average annual rate
of 1.7 percent in developed countries, below their annual GDP growth rate, highlighting a waning reliance on
manufacturing as a source of growth. Meanwhile, manufacturing has been buoyant in developing countries, with
MVA expanding at an average annual rate of 5.6 percent.
• Developing countries’ share of world manufactures trade has also been rising steadily to a 39 percent share in world
manufactured exports, a trend that is likely to continue as developing countries increase their industrial production
capacity and more manufacturing activities are relocated to these countries to reduce production costs.
• The financial crisis affected the manufacturing industry in developed countries more than in developing countries. In
2009, while developed countries faced an 8.1 percent reduction in MVA, developing country MVA grew 2.9 percent.
The crisis abruptly halted the growth in manufactured exports, which fell 18.7 percent in developing countries and
23.2 percent in developed countries in 2009.
• UNIDO’s 2009 Competitive Industrial Performance index, which assesses industrial performance using indicators
of an economy’s ability to produce and export manufactured goods competitively for 118 economies, revealed that
Singapore, the United States, Japan, Germany and China were the overall leaders.
Global industrial production is shifting gradually than 80 percent of exports since 1990. While
from developed countries to developing countries as developed countries have traditionally dominated
firms move to benefit from cheaper labour, quality world manufactures trade, developing countries’
infrastructure, lower social costs and large markets in share has risen steadily– a s has their exposure to
some countries. Changes in world MVA reflect greater trade shocks (Montalbano 2011). To benchmark
integration of national economies through trade liber- national industrial performance, UNIDO has
alization, wider availability of financial resources and developed the Competitive Industrial Performance
increased flows of foreign direct investment. (CIP) index, which assesses industrial performance
Trade expansion has been central to economic using indicators of an economy’s ability to produce
globalization, and manufactures make up the bulk and export manufactured goods competitively
of world trade, consistently accounting for more (UNIDO 2003).
14
“ developing economies’ share in world
manufactured exports climbed from 20.4
percent in 1992 to 39.0 percent in 2009
Overview
countries, below their annual GDP growth of 2 per- facturing employment in developing countries.
cent, highlighting a waning reliance on manufacturing
as a source of growth and the increased role of services. The 2008–2009 economic and financial crisis
In developing countries, by contrast, manufactur- affected manufacturing more in developed
ing was buoyant, registering a remarkable 5.6 percent countries than in developing countries
annual growth rate in MVA over the period, even Global MVA grew an average 2.7 percent a year over
higher than their 4.8 percent annual increase in GDP. 2000–2004 and 2.4 percent over 2005–2010, peak-
ing at $7,350 billion in 2008 (Table 2). In 2009, how-
Shares in manufacturing value added ever, the global recession led to a 4.5 percent drop in
The 15 largest developing economies accounted for MVA over 2008, to $7,020 billion. The crisis affected
83.0 percent of developing economy MVA in 2010, up developed countries more, with MVA falling 8.1 per-
from 73.2 percent in 1990. The increase is attributable cent from 2008 to 2009. MVA growth in developing
mainly to China, which has emerged as a factory to countries slowed to 2.9 percent in 2009, down from an
the world, more than tripling its share of developing annual average of 6.8 percent over the previous eight
economy MVA over 1990–2010 to 43.3 percent. years.
Both developed and developing economies The financial crisis affected developing regions
increased their share of medium- and high-technology differently through a region-specific mix of channels
products over 1990–2009, as the global share of these including trade, remittances, financial flows, foreign
products rose from 41.3 percent to 55.8 percent. direct investment and development assistance. MVA
Developing economies– particularly in East Asia grew 7.7 percent in East Asia and the Pacific and 4.8 per-
and the Pacific– have become more integrated into cent in South and Central Asia but fell in other regions.
global value chains and production networks, with Europe was most affected, with MVA dropping
their accelerated technology transfer and better mar- 7.1 percent from 2008 to 2009. Latin America and
ket access. Moving on from an early focus on low-end, the Caribbean’s MVA fell 6 percent. In the Middle
low value-added products, economies such as China, East and North Africa, MVA fell 0.5 percent between
Malaysia and Taiwan Province of China have diversi- 2008 and 2009. Despite declining oil revenues, some
fied their manufacturing production by moving into oil-exporting countries used their substantial foreign
more technologically advanced products. exchange reserves for large investment programmes.
In 1995, the dominant manufacturing sectors Worryingly, sub-Saharan Africa’s industrial base has
worldwide were food and beverages (11.8 percent), been eroding, a process likely to be accelerated by the
chemicals and chemical products (10 percent) and depletion of much needed resources for investments in
machinery and equipment (8.5 percent). By 2000, productive capacity and infrastructure.
radio, television and communication equipment had Despite the crisis, MVA in the least developed
surpassed all three, at 13.9 percent, and by 2009 that countries grew 6.3 percent between 2008 and 2009.
share had soared to 20.7 percent, riding the surge This growth may conceal long-term adverse effects
in demand for electronic goods (computers, mobile of the crisis on industrialization because of increased
phones and other electronic devices). international competitive pressures and the countries’
Global manufacturing employment has been still fledgling manufacturing sectors and vulnerability
shifting from developed to developing countries. This to external shocks.
15
“ In 2009, 54.8 percent of developing countries’
exports were medium- and high-technology
products, up from 48.6 percent in 1995
Table 2
Manufacturing value added levels and growth, by region, 2005–2010 (US$ billions unless otherwise
indicated)
Average annual
Overview
growth rate
(percent)
Region 2005 2006 2007 2008 2009 2010 2001–2005 2006–2010
World 6,570 6,900 7,260 7,350 7,020 7,390 2.7 2.4
Developed economies 4,710 4,880 5,040 5,010 4,600 4,760 1.4 0.2
Developing economies 1,870 2,020 2,220 2,340 2,410 2,630 6.2 7.1
Region
East Asia and the Pacific 966 1,060 1,200 1,290 1,390 1,540 8.6 9.8
Excluding China 320 342 365 370 375 406 4.8 4.9
Europe 148 156 171 176 164 169 5.9 2.8
Excluding Russian Federation 81 91 101 105 101 105 6.3 5.3
Latin America and the Caribbean 373 392 411 423 397 423 1.9 2.5
Excluding Brazil 262 279 293 302 281 294 1.5 2.3
Middle East and North Africa 183 198 210 217 216 229 4.4 4.6
Excluding Turkey 116 125 134 140 143 150 4.4 5.2
South and Central Asia 149 166 179 185 194 210 7.4 7.0
Excluding India 58 64 69 72 75 79 8.6 6.2
Sub-Saharan Africa 47 49 51 53 52 54 3.2 3.0
Excluding South Africa 20 21 22 23 24 26 3.6 4.6
Least developed countries 24 26 28 30 32 34 6.6 7.1
Source: UNIDO 2010g.
Trends in world manufactured exports developing economies have also made some inroads,
World manufactured exports peaked at $12,095 bil- increasing the technological complexity of their exports
lion in 2008 (Table 3), having grown faster than both and gaining market share. In 2009, 54.8 percent of
MVA and GDP over 2005–2008. Trade liberalization, developing economies’ exports were medium- and high-
tumbling transportation costs and globalization of pro- technology products, up from 48.6 percent in 1995;
duction contributed to the growth. Trade in primary developing economies accounted for 35 percent of global
products increased even faster, likely fuelled by strong exports of medium- and high-technology products.
demand from fast-growing developing countries. With Although developing economies’ share of world man-
growth rates higher than in developed countries, devel- ufactures trade is rising, some economies contribute more
oping countries’ share in world manufactured exports than others. China, in particular, is changing the land-
climbed from 20.4 percent in 1992 to 39.0 percent in scape of world manufactures exports. Its exports grew
2009. This trend is likely to continue as developing 14.6 percent annually over 1992–2001 and a staggering
countries increase their industrial production capac- 27.9 percent a year over 2001–2008 after China joined the
ity and more manufacturing activities are relocated to World Trade Organization. Ranked 13th in manufac-
these countries to reduce production costs. tured exports in 1992, China steadily improved its posi-
tion, becoming the global leader in 2008, with a world
Shares in world exports market share of 11.3 percent and manufactured exports
While developed economies account for more than totalling $1,370 billion. The second largest importer in
60 percent of medium- and high-technology exports, the world, China’s share of world imports was 8.7 percent
16
“ World manufactured exports growth of 9.6
percent annually over 2000–2004 continued
into the second half of the decade, but the
financial crisis slashed sales abroad, reducing
annual growth over 2005–2009 to 5.2 percent
in 2009, behind the United States and ahead of Germany, 5.2 percent on average (Table 3). From 2005 to 2008,
helping fuel global demand. growth in manufactured exports in developing econo-
Trade between developing economies grew 14.9 per- mies (17.3 percent) was far greater than in developed
cent annually over 2004–2009, reaching $2,247 billion economies (11.0 percent). The 2008–2009 crisis
Overview
in 2008 before dropping to $1,871 billion in 2009. This abruptly halted the growth in manufactured exports,
trade accounted for 51.8 percent of developing economies’ which fell 18.7 percent in developing economies and
total trade in 2009, up from 39.9 percent in 2000. The 23.2 percent in developed economies in 2009.
share is likely to continue to rise as production fragmenta- In 2009, manufactured exports from East Asia
tion expands, trade continues to develop and large coun- and the Pacific dropped 20.4 percent to the European
tries such as Brazil, China and India grow and reinforce Union and 14.5 percent to the United States. Declines
their trade ties with other developing economies. were even sharper for Europe, Latin America and the
Caribbean, and the Middle East and North Africa.
The economic and financial crisis halted Sub-Saharan Africa was hit hardest, with a 35.7 percent
the growth in manufactured exports plunge in combined exports to the European Union
World manufactured exports growth of 9.6 percent and the United States. The decline in manufactured
annually over 2000–2004 continued into the second export revenues, along with falling commodity prices,
half of the decade, but the financial crisis slashed sales has constrained imports of vital production inputs and
abroad, reducing annual growth over 2005–2009 to the ability to mitigate the effects of the crisis.
Table 3
World manufactured export levels and growth, by region, 2004–2009 (US$ billions unless otherwise
indicated)
Average annual
growth rate
(percent)
Region 2004 2005 2006 2007 2008 2009 2000–2004 2005–2009
World 7,379 8,252 9,448 10,845 12,095 9,490 9.6 5.2
Developed economies 4,974 5,409 6,066 6,890 7,542 5,792 7.9 3.1
Developing economies 2,405 2,844 3,382 3,955 4,554 3,699 14.0 9.0
Region
East Asia and the Pacific 1,468 1,736 2,081 2,446 2,732 2,308 13.7 9.5
Excluding China 910 1,013 1,159 1,278 1,362 1,153 8.9 4.9
Europe 252 306 366 455 575 402 20.4 9.7
Excluding Russian Federation 183 214 258 326 398 293 20.8 9.9
Latin America and the Caribbean 318 378 419 455 534 415 8.9 5.4
Excluding Brazil 250 292 320 344 401 318 7.8 4.9
Middle East and North Africa 218 240 299 359 432 335 17.0 9.0
Excluding Turkey 160 173 222 261 314 248 16.1 9.1
South and Central Asia 100 129 154 171 197 181 16.6 12.6
Excluding India 35 42 49 46 41 31 16.4 –1.8
Sub-Saharan Africa 48 56 64 69 83 58 14.4 3.8
Excluding South Africa 21 23 29 27 32 22 19.8 0.9
Least developed countries 19 19 22 21 15 – 45.7 –
– is not available; about half the least developed countries have yet to report 2009 data.
Source: UN 2011.
17
“ The IDR 2011 adds two new indicators to the
Competitive Industrial Performance index used to
benchmark an economy’s industrial performance
Despite a better than average showing for the least Benchmarking industrial
developed countries on manufactured imports from performance: the Competitive
major importing countries, the collapse in export rev- Industrial Performance index
enues is likely to hurt these countries in the long term, UNIDO developed the Competitive Industrial
Overview
perhaps jeopardizing years of development progress, Performance (CIP) index to benchmark an economy’s
by affecting investments in productive capacity, infra- industrial performance. The index assesses industrial
structure and social programmes. performance using indicators of an economy’s ability
Table 4
Rank on the revised Competitive Industrial Performance index, 2005 and 2009
18
“ The Competitive Industrial
Performance index now comprises eight
indicators classified in six dimensions
to produce and export manufactured goods competi- in manufactures international trade). The CIP index now
tively (UNIDO 2003). comprises eight indicators classified in six dimensions:
The IDR 2011 adds two new indicators to the CIP • Industrial capacity, measured by MVA per capita.
index– the share of an economy’s MVA in world MVA (to • Manufactured export capacity, measured by man-
Overview
measure impact in world manufacturing production) and ufactured exports per capita.
the share of an economy’s manufactured exports in world • Impact on world MVA, measured by an economy’s
manufactured exports (to measure an economy’s impact share in world MVA.
Table 4 (continued)
Rank on the revised Competitive Industrial Performance index, 2005 and 2009
Source: UNIDO.
19
“ In 2009, East Asia and the Pacific
performed best on the index, followed by
Europe, the Middle East and North Africa,
Latin America and the Caribbean, South and
Central Asia, and sub-Saharan Africa
• Impact on world manufactures trade, measured by the United States, Japan and Germany were the over-
an economy’s share in world manufactured exports. all leaders (Table 4). China ranked fifth in 2009. At
• Industrialization intensity, measured by the aver- the bottom of the rankings were Mongolia in East
age of the share of MVA in GDP and of medium- Asia and the Pacific; Algeria, Azerbaijan and Yemen
Overview
and high-technology activities in MVA. in the Middle East and North Africa; Panama in
• Export quality, measured by the average of the Latin America and the Caribbean; and Sudan and
share of manufactured exports in total exports Gabon in sub-Saharan Africa.
and of medium- and high-technology products in At a regional level, in 2009 East Asia and the
manufactured exports. Pacific performed best on the index, followed by
Europe, the Middle East and North Africa, Latin
Ranking economies using the Competitive America and the Caribbean, South and Central Asia,
Industrial Performance index, 2005 and 2009 and sub-Saharan Africa. The 2005 regional rankings
The CIP index was computed for 2005 and 2009 for were similar, except that the Middle East and North
118 economies with sufficient recent data. Singapore, Africa was behind Latin America and the Caribbean.
20
Part A
Industrial
energy
efficiency for
sustainable
wealth
creation:
capturing
environmental,
economic
and social
dividends
21
Section 1 Setting the scene
Chapter 1
This 2011 Industrial Development Report (IDR) Increasing industrial energy efficiency is a key
addresses industrial energy efficiency in sustain- foundation for green industry worldwide. By building
able development. Around a fifth of global income on past successes, countries can develop their indus-
is generated directly by manufacturing industry, tries while tempering the impacts on resource deple-
and nearly half of household consumption relies tion and climate change. The IDR 2011 emphasizes
on goods from industrial processes. People’s needs industrial energy efficiency in developing countries,
for food, transportation, communication, housing, which are emerging as key actors in global industrial
health and entertainment are all met by industry. development. The report takes an in-depth look at
Since the Industrial Revolution, waves of innovation long-term trends in industrial energy intensity as well
have shaped how people work and live. During the as related technical and structural change, examines
19th and 20th centuries, developed countries relied the environmental and economic benefits of industrial
on manufacturing to spur economic growth. Today, energy efficiency and identifies ways of overcoming
developing countries are counting on industrializa- obstacles.
tion to reduce poverty and improve the quality of life
of its growing populations. Decoupling industrial energy use and
But improvements in the standard of living made economic growth
possible through industrialization have come at an Industrial energy consumption, still growing in
environmental cost. Before the late 1960s, energy developed countries, is soaring in developing coun-
consumption per capita had increased nine-fold over tries. Developed countries remain the largest per
the previous 200 years (Cook 1971, 1972). Since then, capita users of both total energy and industrial
energy consumption per capita has increased by a fur- energy, but developing countries are quickly catching
ther 25 percent (IEA 2010c). Materials use per capita up– satisfying domestic demands for improved liv-
more than doubled over 1900–2005 (Krausmann et ing standards and import demands from developed
al. 2008). And though the fossil fuels that have fed countries– a nd becoming large energy consumers.
industrial development may not be as abundant as Their need for energy is expected to continue to rise
once thought, overall energy consumption is not likely for the foreseeable future.
to fall soon. Pollution, resource depletion and the Although energy use has been rising, industrial
waste of discarded products– e ach at an all-time high energy intensity has been declining in all regions and
– are major causes of environmental degradation and in countries at all levels of development, implying a
climate change. Policy-makers must address them as gradual decoupling of industrial energy use and eco-
they remap development paths. nomic growth, though with considerable variation
Industrial development, therefore, must become across regions and industries. Part of the reduction
sustainable. Continued high resource consumption in industrial energy intensity results from govern-
and carbon-intensive and polluting technologies ment policy. Another important part is an outcome
will sap the potential for growth and development. of technological progress, industrial restructuring and
Innovative solutions, national and global, are vital changes in fuel mix and production-oriented initia-
to making industrial activity more sustainable– to tives. And while globally 1990–2000 saw an absolute
attuning it to environmental and social needs. This decoupling of manufacturing value added (MVA)
“green industry” approach can provide the blueprint growth from industrial energy intensity (a decrease in
for sustained industrial development. industrial energy intensity greater than the increase
23
“ Developed countries are the largest energy
consumers per capita, but developing countries are
driving the global increase in final energy demand
consumed?
A first step in evaluating global industrial energy inten- 2
23%
sity is to take stock of how energy is consumed. Industry
uses fossil fuels in manufacturing processes and as a raw
material (to generate power). In the 134 economies ana- 1
24%
lysed for this report (see Annex 4), energy used to power
manufacturing processes accounted on average for
about 76 percent of industrial energy consumption over 0
76% 76% 77%
Figure 1.2
Growth in energy consumption and energy consumption per capita, by economic sector, 1990–2008 1
Industry is contributing to the rise in global energy consumption
8 4
3
6 3
2
4 2
1
2 1
0 0 0
1990 1995 2000 2005 2008 1990 1995 2000 2005 2008 1990 1995 2000 2005 2008
World Developed economies Developing economies
1.5 4 1.0
Tonnes of oil equivalent per capita
1.2 0.8
3
0.9 0.6
2
0.6 0.4
1
0.3 0.2
0.0 0 0.0
1990 1995 2000 2005 2008 1990 1995 2000 2005 2008 1990 1995 2000 2005 2008
Mining and construction Agriculture, forestry and fishing Commercial and public services Energy Residential Transport Industry
Figure 1.3
Industrial energy consumption, by sector, 1990–2008
Within industry, metals, chemicals and non-metallic minerals consume the most energy
World
3.0
Gigatonnes of oil equivalent
2.5
Non-specified (industry) Paper, pulp and printing
Wood and wood products Non-metallic minerals
2.0
Transport equipment Petrochemicals
Textile and leather Chemicals and chemical products
1.5
Machinery Metals
1.0 Food and tobacco
0.5
0.0
1990 1995 2000 2005 2008
Developed economies Developing economies
1.0 2.0
Gigatonnes of oil equivalent
0.8
1.5
0.6
1.0
0.4
0.5
0.2
0.0 0.0
1990 1995 2000 2005 2008 1990 1995 2000 2005 2008
2008, average annual energy consumption per capita tion of energy resources shifts– usually towards ser-
stood at 0.9 toe– an annual increase of 3.2 percent vices and away from industry and energy (Enevoldsen,
since 2001. Even so– a nd despite ignoring the energy Ryelund and Andersen 2007). During periods of rapid
embodied in exported goods– this is less than a quar- economic expansion, additions to capital stock are
ter of the average in developed economies. high, resulting in a newer and more energy-efficient
A striking trend is the annual 2.3 percent growth industrial infrastructure, a trend that can be strength-
in developing economies’ total energy consumption ened with effective policy support.
over 1990–2008, more than 2.5 times the 0.9 percent
annual growth in developed economies. And with What has happened to industrial
emerging market economies poised to grow faster energy intensity globally and
than the more advanced economies, energy demands regionally?
in developing economies are poised to rise even more. As energy consumption rises, what happens to energy
A key driver of these differences in growth of energy intensity?2 This section looks at changes in industrial
consumption is the disparity between developing energy intensity globally and regionally; the following
economies’ 0.6 percent annual rise in industry’s share section looks at sectoral patterns.
of energy consumption and developed economies’
0.7 percent annual decline. Driving the increase in Global trends
developing economies are population growth and a Global industrial energy consumption fell 0.3 per-
shift towards more energy-intensive activities– s uch cent a year over 1990–1995, recovered over 1995–
as paper and plastics– and construction activities for 2002, and has been rising since at 3.8 percent a year
infrastructure and housing. In addition, production (Figure 1.4). MVA had a sustained increase over the
capacity in many sectors is shifting from developed to period, averaging 3.1 percent annual growth.3 While
developing economies, which are producing goods for average industrial energy intensity fell 26 percent
export to developed economies. over 1990–2008 – an average decline of 1.7 percent
annually– two distinct phases are evident: a marked
decline in 1990–2001, averaging 2.6 percent a year,
Energy consumption trends
and a levelling off at a 0.2 percent annual decline
• From 1990 to 2008, especially since the early
2000s, energy consumption has risen in both since.
developed and developing economies. Per capita, Thus, MVA was decoupled from industrial energy
the overall consumption increase has been less use during 1990–2001. That means that industry pro-
striking, levelling off in developed economies and duced considerably more value added from a relatively
rising slightly in developing economies.
small increase in energy consumption. Since 2001,
• Developed economies have traditionally been the
largest energy consumers, but developing econ- global industrial energy intensity has stabilized at
omies’ share now surpasses that of developed around 0.35 toe per $1,000 of MVA.
economies, and emerging market economies are
growing faster than more advanced economies.
Trends by income group
• Industry consumes a higher proportion of energy
per unit of output in developing economies than in
Have all economies and regions, whatever their levels
developed economies. of development, seen their energy intensity fall? The
pattern since 2000 is that industrial energy intensity
26
“ developed economies have the lowest level
of industrial energy intensity, followed by high-
income and upper middle-income developing
economies and– farther behind– by lower middle-
income and low-income developing economies
Figure 1.4
Global trends in manufacturing value added,
Figure 1.5
Industrial energy intensity, by income group, 1
industrial energy consumption and industrial 1990–2008
energy intensity, 1990–2008
The higher the development level, the lower the industrial energy
150
2
Lower middle-income developing economies
1
Industrial energy intensity, 2008
0.35 tonnes of oil equivalent per US$1,000 Upper middle-income
50 developing economies
Developed economies
0
0 1990 1995 2000 2005 2008
1990 1995 2000 2005 2008
Note: Industrial energy intensity in 2000 US dollars. Note: See Annex 4 for economies in each group. Industrial energy intensity in 2000 US dollars.
Source: UNIDO 2010e,f,g; IEA 2010c. Source: UNIDO 2010e,f,g; IEA 2010c.
wanes as development waxes (Figure 1.5). On aver- 3.4 percent), compared with 31 percent in developed
age over 1990–2008, developed economies have the economies (2.0 percent annually). Among devel-
lowest level of industrial energy intensity (0.2 toe oping economies, lower and upper middle-income
per $1,000 MVA), followed closely by high-income economies reduced their energy intensity the most (58
(0.4) and upper middle-income developing economies percent and 46 percent). The biggest overall declines
(0.8) and– f arther behind– b y lower middle-income came during the 1990s, except in high-income devel-
(1.2) and low-income developing economies (2.2). Part oping economies. The oil price shock of 1990 and the
of the decline in energy intensity with rising devel- subsequent recession likely played a role. Despite the
opment may be due to a shift from lower to higher overall decline, individual economies show consider-
quality energy sources, which has not been corrected able diversity.
for. UNIDO (1991) reported the same trends 20 Does the stage of industrialization shape energy
years ago, indicating a long-term correlation between use? Our study suggests the following patterns:
industrialization/income level and industrial energy • Total industrial energy intensity tends to be high
intensity. While prior studies have found that the rela- at early and intermediate stages of industrializa-
tionship between income and energy use is linear, this tion, when energy-intensive materials process-
study suggests that it is closer to a U-shaped Kuznets ing industries dominate, technical energy effi-
curve (Cantore 2010). ciency is poor and low-quality fuels (such as coal)
Although average industrial energy intensity in predominate.
developing economies is five times that in developed • Industrial energy intensity decreases at later stages
economies, it fell 46 percent over 1990–2008 in of industrialization, as the structure of indus-
developing economies (an average annual decline of try shifts from energy-intensive raw material
27
“ Regional energy intensity trends have
been affected by international shifts in the
location of manufacturing activity from
developed to developing economies
some regions
• Industrial energy intensity declines substantially 3.5
Sub-Saharan Africa
Industrial energy-efficiency trends minerals and 0.6 for chemicals and chemical products,
each above the global industry average of 0.35. These
1
• Global industrial energy intensity has been drop-
ping since 1990 but has stabilized in recent years. sectors also have the highest proportion of energy costs
• The more advanced the level of development, the in total input costs (see Chapter 4). Technologically,
1 Figure 1.7
Energy intensity, by industrial sector and income group, 1995–2008 (tonnes of oil equivalent per
$1,000 manufacturing value added, in 2000 prices)
Process industries have the highest energy intensity and discrete product sectors the lowest
Trends in industrial energy efficiency
Average, 1995–2008
1995
2008
Metals Non-metallic minerals Chemicals and chemical products
World World World
5 4 2.5
Lower 4 Lower Lower 2.0
middle-income Developed middle-income 3 Developed middle-income Developed
developing 3 economies developing economies developing 1.5 economies
2
economies 2 economies economies 1.0
1 1 0.5
0 0 0.0
Upper Upper
middle-income Developing middle-income Developing
developing economies developing economies
economies economies
Upper Upper
middle-income Developing middle-income Developing
developing economies developing economies
economies economies
30
“ While the same sectors are the most
energy intensive in both developed and
developing economies, developing economies
use about three times more energy per
unit of manufacturing value added
Energy intensity trends among industrial intensity down just 6 percent since 1995. In upper
and lower middle-income developing economies, met-
1
sectors
• At the global level, metals, non-metallic minerals, als was the most energy-intensive sector (3.2 toe per
and chemicals and chemical products have the $1,000), but with a 41 percent decline in energy inten-
added data were available for the petrochemical not included in the analysis.
32
Chapter 2
Technological and
structural change for
industrial energy efficiency
Chapter 1 showed that energy intensity (energy use per intensity, particularly in developed countries and in
unit of manufacturing value added [MVA]) has been some upper middle- and lower middle-income devel-
falling globally and in most countries. Average indus- oping countries. The growing demands from develop-
trial energy intensity fell 26 percent over 1990–2008 ing countries for a higher standard of living, the inter-
– a n average annual decline of 1.7 percent. Despite national relocation of productive activities to lower
the improvement, rapidly rising industrial energy con- cost sites and the structural change in many of these
sumption in developing countries continues to push countries towards energy-intensive industries seem to
global energy consumption higher. be exerting counter-pressures to the forces advancing
Can the world satisfy rising demand for industrial the adoption of improved technologies, thus slow-
goods, particularly from developing countries, while ing the pace of improvements in industrial energy
keeping industrial energy consumption growth in intensity.
check? Can the demand for better standards of living This chapter examines:
and reduced poverty in developing countries be made • The process of innovation and technological change
compatible with sustainable industrialization? In 2008, in industrial energy efficiency.
per capita industrial energy consumption in developing • The potential for improved energy efficiency.
countries was only 24 percent of that in developed coun- • Trends in the composition of global MVA that
tries. But as per capita incomes converge, so too will per would explain the observed structural effects.
capita industrial energy consumption, potentially run-
ning up global energy demand and more than doubling What drives changes in industrial
it in industrial energy alone. Population growth would energy intensity?
push energy demand even higher, so that the burden on Industrial energy intensity can be reduced through
the environment and the pressures on energy prices and technological progress and system changes that
supplies could impede further economic growth. improve technical energy efficiency– changes that
To address these challenges, we need to under- increase output using the same amount of energy or
stand what drives changes in industrial energy inten- that deliver the same output using less energy. These
sity. This chapter looks at the two main drivers: tech- changes include replacing old technologies, adopting
nological change and structural change.1 It shows that energy-saving technologies (preferably best available
new and more energy-efficient technology has had technologies), improving processes and optimizing
a large role in lowering energy intensity globally and systems, and employing energy management practices.
in many countries– especially developing countries. They also include using more high-quality energy, such
Lower energy intensity has resulted largely from incre- as gas and electricity; innovating product designs; and
mental improvements in a range of technologies rather changing the output mix. These improvements, espe-
than from a single major breakthrough: cially those related to new technologies and processes,
• Applying the findings of basic and applied research. vary in complexity– from simple add-ons to complex
• Optimizing and integrating production systems. system change – and in the rewards, as discussed later
• Improving air and heating systems. in this report.
• Introducing better motors, pumps and compressors. If data on fabrication processes were available at
• Applying good housekeeping principles. the lowest level of aggregation, the measure of techno-
Changes in the structure of industry have been logical change would be actual physical efficiency and
even more instrumental in reducing industrial energy the rest would be structural change (Jenne and Cattell
33
“ new and more energy-efficient technology
has had a large role in lowering industrial
energy intensity globally and in many
countries, but changes in the structure of
industry have been even more instrumental
cal energy efficiency can be a useful indicator of tech- technological factors had in lowering
nological progress (Ayres 1998). industrial energy intensity?
Industrial energy intensity can also be affected How much of the changes in energy intensity have
by structural changes in an economy– long-term come from technological change and how much
changes in the composition of economic aggregates, from structural change? We explore this question by
including modifications in output shares across sec- decomposing energy intensity changes into its two
tors (Chenery, Robinson and Syrquin 1986; Syrquin components, focusing on 62 of the 134 economies
2007). Structural change can have a strong effect (see Annex 4) studied in Chapter 1 because of stricter
on economic growth. Shifting from low-productiv- data requirements. (See Annex 2 for the methodol-
ity, labour-intensive sectors to more value added–, ogy and Box 2.1 on decomposition analysis.) But
capital-, skill-, and technology-intensive sectors can while this smaller sample is more homogeneous (there
generate the financial and knowledge resources to are no low-income developing countries), it might
expand economic activity even faster. A shift towards not be fully representative of all developing coun-
sectors with lower energy use per unit of MVA– tries. Nonetheless, to our knowledge, this is the first
brought about by changes in product demand, prod- attempt to apply a decomposition technique to data
uct specialization or relocation of production– c an covering such a wide selection of developing countries.
reduce industrial energy intensity. Shifting from Trends in total industrial energy intensity reflect
“brown sectors” (with higher energy-intensive prod- changes in technology, energy management, and out-
ucts and processes) to “green sectors” (with lower put volume and composition. Total industrial energy
Box 2.1
Decomposition analysis
Decomposition analysis has been widely applied to his- The two main index decomposition analysis methods
torical trends in energy and material consumption. There are the Laspeyres Index and the Arithmetic Mean Divisia
have been numerous applications to manufacturing in Index (Ang and Zhang 2000). The Laspeyres Index meas-
Organisation for Economic Co-operation and Develop- ures the percentage change in some aspect of a group of
ment (OECD) countries; most Eastern European countries, items over time, using weights based on values in a base
including the Russian Federation; and such large develop- year. The impact of that aspect is computed by allowing it
ing countries as Brazil, China, India, the Republic of Korea to change while holding all other factors at their base-year
and Mexico. These studies have used various methods, values. The Divisia Index is a weighted sum of logarith-
time periods, data sources and levels of sectoral aggrega- mic growth rates, where the weights are the components’
tion. Decomposition studies can focus on one country or shares in total value in the form of a line integral. Both
involve cross-country comparisons. indexes can be multiplicative or additive.
The two main types of decomposition analysis are The decomposition method employed here is the
index decomposition analysis, which uses sectoral pro- Fisher Ideal Index, a multiplicative energy-intensity index.
duction and energy use data, and structural decomposition To ease the interpretation, the factoral contributions of
analysis, which uses energy input-output analysis. There is the structural and technical effects were transformed
no consensus on which method is best. When selecting a into percentage points of the changing total industrial
method, researchers generally consider theoretical foun- energy intensity, so the overall change in industrial energy
dation, adaptability, ease of use and ease of understand- intensity can be expressed as the sum of the percentage
ing. This report uses index decomposition analysis. changes in structural and technical effects.
34
“ Technological change has reduced
industrial energy intensity in a majority of
economies, while structural change has
reduced it in most developed economies
tural effect measures the impact of changes in the Due to technological improvement
share of output from different sectors of industry (Liu
and Ang 2007). A decline in either indicates that it 80
has helped reduce industrial energy intensity from the
Industrial energy intensity
base-year level (an improvement in energy use).
70
Split between technological and structural
effects at the global level
The estimated split between technological and struc-
0
tural effects depends on the level of sectoral aggre- 1995 2000 2005 2008
gation. For this report, industry was disaggregated Source: UNIDO 2010e,f; IEA 2010c
into 11 sectors: food and tobacco; textile and leather;
wood and wood products; paper, pulp and printing;
petrochemicals; chemicals and chemical products; intensity in a majority of economies, while structural
non-metallic minerals; metals; machinery; transport change has reduced it in most developed economies.
equipment; and non-specified industry. (See Annex 3
for details on the composition of these sectors.) The Technological and structural effects by
study found wide variation in the contributions of region and income group
technological and structural effects to energy intensity Average industrial energy intensity fell in all income
across countries and over time, confirming the results groups over 1995–2008 (Figure 2.2). 2 In developed
of an earlier UNIDO (1991) study. economies, the structural effect was stronger in lower-
Global industrial energy intensity for the 62 econ- ing energy intensity; in developing economies, struc-
omies included in the decomposition analysis declined tural change increased energy intensity marginally, an
22.3 percent over 1995–2008 (Figure 2.1), for an aver- impact more than offset by the reduction in energy
age annual reduction of 1.9 percent. Structural change intensity from technological change. Technological
(12.5 percent) had a slightly larger effect than techno- improvements were thus the main driver of the drop
logical change (9.8 percent). in industrial energy intensity in developing econo-
Developed economies and, to a lesser extent, high- mies, except among those with high incomes. These
income developing economies are largely responsible high-income developing economies, entering a more
for lowering global industrial energy intensity. With mature phase of industrialization and with an increas-
structural effects as the major contributor to lower ing share of skill- and technology-intensive output, are
energy intensity in these economies, it is not surpris- beginning to resemble developed economies in many
ing that structural effects contribute so strongly to respects.
lower industrial energy intensity at the global level. Latin America and the Caribbean was the only
Technological change has reduced industrial energy region with an overall increase in industrial energy
35
“ The average industrial energy intensity
fell in all income groups over 1995–2008
2 Figure 2.2
Components of change in industrial energy intensity, by region and income group, 1995–2008 (percent)
Technological change is the primary driver of lower industrial energy intensity in developing economies
Technological and structural change for industrial energy efficiency
Total change in industrial energy intensity Contribution of structural change Contribution of technological change
Developing economies
Developed economies
Developing Europe
East Asia and the Pacific
South and Central Asia
Middle East and North Africa
Sub-Saharan Africa
Latin America and the Caribbean
intensity, due mostly to technological change. Among developing economies, energy intensity
Industrial energy intensity declined in the other fell in China, India, the Russian Federation, South
regions, with technological change being the major Africa, Tunisia, Turkey and Ukraine, among others.
contributor except in South and Central Asia, The technological effect was the main cause, but it
where the structural effect was marginally stronger. was supported by the structural effect in China, the
Although the Middle East and North Africa and Russian Federation, Turkey and Ukraine. The struc-
sub-Saharan Africa experienced a structural change tural effect was found to have a small increasing effect
in favour of more energy-intensive industries, techno- on energy intensity in India, South Africa and Tunisia
logical changes offset this effect. but was easily offset by the technological effect.
On a country or economy basis, several results Energy intensity increased in Argentina, Armenia,
stand out (Figure 2.3): Brazil, Chile, Colombia, Côte d’Ivoire, Gabon
• Industrial energy intensity fell in 52 of the 62 and Kyrgyzstan. The technological improvements
economies. in Argentina, Brazil, Côte d’Ivoire, Gabon and
• The technical effect contributed to declining Kyrgyzstan were not sufficient to offset a shift towards
industrial energy intensity in all economies but more energy-intensive industries. In Chile and
Armenia, Chile, Colombia, Moldova and the Colombia, shifts towards less energy-intensive indus-
United States. tries could not offset adverse technological effects.
• For 34 economies, structural changes favoured less Overall, developing economies shifted slightly
energy-intensive industries; for 28 economies, it towards energy-intensive industries due to rising
favoured more energy-intensive industries. demand from growing populations and the upsurge
In developed countries, the combined technologi- in manufacturing for export. The combination of this
cal and structural effects lowered industrial energy high export orientation, poor energy infrastructure,
intensity. In the Netherlands, New Zealand, Portugal reliance on low-quality and carbon-intensive fuels,
and Switzerland detrimental structural effects were and less efficient industrial technology makes indus-
offset by technological effects. In the United States, trial activities in these economies carbon intensive as
detrimental technological changes were offset by well as energy intensive.
strong structural changes towards less energy-intensive While most developing countries are net export-
industries. ers of energy and carbon (embodied in manufactured
36
“ In developed economies, the combined
technical and structural effects lowered
industrial energy intensity, while in developing
economies there was a slight overall shift
towards energy-intensive industries due to
rising demand from growing populations and
the upsurge in manufactured exports
Figure 2.3
Components of change in industrial energy intensity by economy, 1995–2008 (percent) 2
Technological change has lowered energy intensity for most economies, but structural change has a mixed record
37
“ Innovation in industrial energy efficiency and
in systems optimization and systems solutions
are the key elements of technological change
2 Trends in industrial energy intensity older capital and, through this process, change the
attributes and age of the capital stock and thus its pro-
• Since 1995, technology has contributed most
to reducing industrial energy intensity globally – ductivity (Davidsdottir and Ruth 2004, 2005, 2008;
especially in developing countries. De Beer 1998; Doms and Dunne 1998; Lempert et al.
Technological and structural change for industrial energy efficiency
Figure 2.4
Public sector R&D expenditure on energy
Box 2.2
Industrial energy-efficiency R&D case study: 2
technologies in selected countries, 1990–2008 decreasing the inlet velocity required for
pneumatic and hydraulic conveying
Public sector R&D has shot up since 2001
Percent
Other energy R&D
Other energy efficiency R&D researchers, whether in academia or the private sector.
Industry energy efficiency R&D
Energy R&D as share of total R&D (percent) One example is a series of research studies at the Uni-
versity of Nottingham on reducing the energy required
15 15 for pneumatic or hydraulic conveying, one of the most
common methods of transporting bulk solids.
The research has shown that a three-lobed helical
pipe can induce swirl and increase local turbulence,
10 10
useful for increasing the turbulent energy of the flow
to lean-phase pneumatic and hydraulic conveying
to reduce particle settlement and blockage. In early
development, the pipe has reduced the need to pump
5 5
the conveying fluid into the system at high velocity, low-
ering electricity use as much as 20 percent, depending
on applications. The swirl pipe has other advantages
0
over traditional swirl-generation devices: it is not intru-
0
1990 1995 2000 2005 2008 sive to the flow or prone to blockages, and it contains
no moving parts. Again, this saves on electricity use
Note: Analysis includes Austria, Canada, Denmark, Finland, France, Germany, Italy, Japan, the as obstructed pipelines require higher conveying fluid
Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Turkey and the United States.
Source: IEA 2010d. velocity. This application of the helical pipe has been
patented by the university but is not yet on the market,
as it is being refined before commercial demonstration.
sector R&D expenditure on energy efficiency has been Source: Fokeer, Lowndes and Kingman 2009.
growing steadily, reaching €2.3 billion in 2008. About
a fifth of it was allocated to improving the energy effi-
ciency of industrial processes and developing more to identify, but it is thought to be substantial (IEA
efficient technologies for industrial application. 2010d). Equipment suppliers and large energy users
Grubb (2004) and Murphy and Edwards (2003) conduct most industrial energy-efficiency R&D–
argue that public sector R&D in energy, with its working to improve product design, feedstock and
potential for profitability and environmental benefits, process technology– because the energy efficiency
is far lower than it should be. The commercial failure of production processes strongly influences competi-
of earlier large-scale public sector expenditures on tiveness. Because no single innovation– not even a
technologies, such as breeder reactors and synthetic handful– c an improve energy efficiency dramatically,
fuels, has made governments wary of targeting R&D R&D often combines technologies from different
to particular energy technologies. But major transi- suppliers. Improved energy efficiency in production
tions in energy technologies can take decades and processes is also frequently an unexpected by-product
entail massive investments in capital equipment and of investments in new process technologies aimed at
infrastructure that are beyond the reach of most pri- increasing capacity, throughput or product quality
vate investors. (Box 2.2).
But while government R&D expenditure is
important for reducing energy intensity, it is neither Diffusion of new technologies– b est available and best
the only nor the largest such investment. Private sec- practice technologies. Invention and innovation are
tor R&D expenditure on energy efficiency is difficult followed by diffusion, as new technologies penetrate
39
“ Faster uptake of best available technology
would greatly reduce energy intensity
of technologies, the unexpected nature of many because capital costs are so much higher than energy
energy-efficiency gains and the ongoing evolution of costs. Continuously upgrading to best available tech-
technological diffusion mean that users have a wide nology entails retiring equipment earlier or retrofit-
range of technological options, each with different ting it sooner, although premature replacement might
effects on industrial energy efficiency. The potential not be economical (Table 2.1). China, for example,
for industrial energy efficiency reflects these options. closed energy-inefficient plants before the end of their
Best available technology is the most energy- “extended” technical life to meet ambitious targets for
efficient way of producing goods and services that is industrial energy efficiency.
commercially viable and in use. It refers to the most There can be great differences, however, in tech-
advanced usable technologies and methods of opera- nical performance across new and similar technolo-
tion, the way installations that deploy them are built gies. Equipment manufacturers often trade techni-
and operated, and the economic feasibility of the cal quality for price and availability (CERF/IIEC
technologies. Best available technologies come from – Asia, 2002). For example, China has emerged as a
the best plant in an industry (Saygin et al. 2010). major equipment supplier. In many sectors, the cost
Normally the newest technologies in an industry, best of Chinese equipment can be half that of its Western
available technologies are always changing due to con- competitors. But in some cases, the energy efficiency
tinuous radical and incremental innovation. is also lower, and the equipment tends to deteriorate
Best practice technology, a related concept, focuses faster because of lower quality materials. While a full
on the best performers among plants with widely dif- cost assessment should be done to properly measure
fused industrial energy-efficiency technologies and the return on investment, for many companies in
business practices. In some cases, best available tech- developing countries, with limited access to capital,
nologies and best practice technologies are identical. the upfront cost of equipment is generally the over
But in most cases best practice technology differs riding investment criterion.
in that it considers all the plants that have adopted
energy-efficient technologies, at all times and under Technological evolution in selected industrial sectors.
all conditions. Saygin et al. (2010) places the top 10 Over time, global average industrial energy efficiency
percent of energy-efficiency performers worldwide in and best available technology in specific sectors
this category. both improve, sometimes in parallel and sometimes
By definition, the average energy efficiency of exist- converging, with typical energy reductions of 20–60
ing plants is always lower than the best available tech- percent (Figure 2.5). This implies that innovation and
nology average. Current investments in new equip- best available technology uptake must go together.
ment and best available technology are generally more This section focuses on advances in the major
efficient than previous investments in old equipment. industrial sectors.
If annual efficiency gains from best available technol- In chemicals and petrochemicals, the main
ogy accelerate, or if equipment lifespans lengthen, the best available technologies are process integration,
gap widens. Faster uptake of best available technology cogeneration (combined heat and power), recycling
would greatly reduce energy intensity (Box 2.3). and heat recovery. Worldwide, potential savings from
Most industrial plants and much energy-intensive these measures are estimated at 235 million tonnes of
capital stock have long technical life spans, slowing oil equivalent a year in final energy and 290 million in
40
“ The average energy efficiency of the motor
stock lags substantially behind that of motor sales,
implying an opportunity for policy intervention
to expedite uptake of best available technology
Box 2.3
Uptake of best available technology is generally slow: the case of energy-efficient motors 2
Energy-using capital stock generally has a long lifespan, The more efficient motors are generally cost-effective
increasing the time lag between the introduction of best where energy prices are high. Initial capital costs are typi-
IE3 IE3
75 IE2 75
IE2
50 50
25 25
IE1
IE1
IE0 IE0
0 0
1995 2000 2005 2010 2015 1995 2000 2005 2010 2015
Note: IE3 is the highest international efficiency standard for electric motors.
Source: Brunner 2010.
primary energy– w ith the greatest potential savings does not apply, however, to the quarter of the world’s
in the United States (IEA 2010e).4 In ammonia pro- ammonia production that originates in China, where
duction, adopting the best available technology could production is coal-based and uses about a third more
halve energy use. The best practice technology energy energy than best practice technology. As China
requirement for the most efficient decile of ammonia develops natural gas fields in its western regions and
producers is 32 gigajoules (GJ) per tonne of ammo- pipelines to population centres in its east, the energy
nia. Revamping less efficient plants could increase required for ammonia production is likely to fall.
energy efficiency and reduce carbon dioxide emissions In the metals sector, the potential energy savings
by some 10 percent (IFA 2009).5 This calculation of for iron and steel from applying today’s best available
savings based on the use of best practice technology technology is about 20 percent (4.1 GJ per tonne of
41
“ Continuously upgrading to best available
technology entails retiring equipment
earlier or retrofitting it sooner
2 Table 2.1
Examples of best available technology uptake in China: technology diffusion as a share of capacity,
2000 and 2006–2009 (percent)
Sector and technology 2000 2006 2007 2008 2009 Energy efficiency impact
Technological and structural change for industrial energy efficiency
Steel
Continuous casting 83 99 99 99 99 Energy savings of 200 kg coal equivalent per
tonne (ce/t) billets produced
Coke dry quenching 6 40 45 50 >70 Energy savings of 100 kg ce/t processed coke
Blast furnace top gas 50 95 96 99 100 Energy generation of 30 kilowatt hours per tonne
recovery turbine (kWh/t) of pig iron
Coke
Mechanical coke making 72 88 91 96 99 Reduced consumption of coking coal of 170 kg
ce/t mechanical coke
Aluminium (electrolytic)
Prebaked cell 52 82 83 86 90 9 percent savings (compared with Soderberg
cell)
Chemicals
Caustic soda production 25 31 38 50 55 Electricity savings of 123 kWh/t (compared with
membrane process diaphragm process)
Cement
Bulk processing 28 39 45 46 46 Net savings of 24 kg ce/t cement from
4.5 percent savings in reduced losses and
3.3 million cubic metres savings in timber use for
paper bags (compared with bagged cement)
New suspension 12 50 55 63 73 Fuel savings of 40 percent (compared with
preheater dry process mechanized vertical shaft kilns)
Glass plate
Floating process 57 82 83 83 83 Energy savings of 16 percent
Construction
Replacing clay bricks with 28 46 48 50 52 Energy savings of 40 percent
new wall materials
Source: Wang 2008.
steel). Replacing small-scale blast furnaces promises For aluminium, the main opportunities for
the most savings, followed by recovering more residual energy-efficiency improvements involve replacing
gases and waste heat (Figure 2.6). Energy require- old smelter technologies with modern prebake cells,
ments per tonne of steel have fallen by half over the developing process controls to optimize cell operat-
past 50 years for primary steel making from ore and ing conditions, improving insulation to reduce heat
for steel recycling in electric arc furnaces, reflecting losses and reducing electricity use in auxiliary equip-
large declines in energy use through best available ment, such as compressors and fans. The produc-
technology. Energy efficiency in US electric arc fur- tion of primary aluminium is electricity intensive:
naces increased 1.3 percent a year over 1990–2002, aluminium smelters accounted for some 3.5 percent
and similar savings have been achieved globally (IEA of total global electricity consumption in 2009. In
2007a). Slightly more than half the improvement recent years, smelter performance has improved
came from replacing old furnaces; the rest came from considerably, but considerable scope for energy sav-
retrofitting, which is more cost-effective in the short ings remains (about 15 percent). New world-class
run (Worrell and Biermans 2005). For furnaces using plants can achieve around 13.5 megawatt hours per
recycled scrap, the long-term potential energy savings tonne, a savings of 13 percent over the current world
is about 3.5 GJ per tonne. average. Aluminium recycling is extremely energy
42
“
by advances in best available technology
over time, energy intensity falls, driven
Figure 2.5
Global average energy intensity and best available technology for ammonia, iron and steel, 2
aluminium and cement, 1960–2010
50
Best available 20
technology Average, scrap and
25 electric arc furnaces Best available technology,
scrap and electric arc furnaces
0 0
1960 1970 1980 1990 2000 2010 1960 1970 1980 1990 2000 2010
Source: UNIDO.
efficient, using less than 10 percent of the electricity In the bricks and ceramics subsector, coupled kilns
required for primary smelting. As economies develop, and dryers, furnace upgrades and cogeneration tech-
the availability of aluminium scrap for recycling will nologies offer the greatest potential for improving
likely also increase. energy efficiency. For glass, these strategies include
In the non-metallic minerals sector, total poten- developing and using advanced refractory materials
tial energy savings in the cement subsector is an esti- in kilns and new technologies such as oxyfuel firing
mated 2.5 exajoules (EJ) a year, about a quarter of cur- and electric boost that increase production capacity.
rent energy use. Potential fuel savings are greatest in The optimal electricity consumption using best avail-
cement clinker production. Average thermal energy able technology is about 2.32 GJ per tonne of molten
consumption per tonne of clinker has fallen some 15 glass. Actual consumption, however, is 30 percent
percent since 1990. And while the current global aver- higher because of inefficiencies in glass-melting fur-
age thermal energy intensity is 3.9 GJ per tonne of naces, where 40 percent of the energy goes to heating
clinker, actual thermal energy consumption depends the batch, 30 percent is lost through the furnace struc-
on the type of kiln. Efficient dry kilns with preheat- ture and 30 percent exits with stack gases (Worrell
ers use about 3.3 GJ per tonne of clinker, while a wet et al. 2008).
kiln can use 5.9 GJ–6.7 GJ per tonne (IEA 2009a).
Vertical-shaft kilns, with even higher energy needs, Systems improvements
are being phased out in China but are still widely used A system is a set of connected unit operations or pieces
elsewhere. of equipment that perform a service together. There is
43
“ There is growing evidence that systems
optimization and systems upgrading hold
the greatest potential for energy-efficiency
gains and environmental benefits
2 Figure 2.6
Energy savings potential in iron and steel making, 2006
120 8
6.1 6.1
90 6
5.3
4.7
4.1
3.7 3.6
60 4
2.4
2.1 2.0
30 2
1.4 1.4
0 0
World China Ukraine India Brazil Russian South Canada OECD United Korea, Rep. Japan Other
Federation Africa Europe States
Steel finishing Efficiency power generation Switch from open hearth furnace Increased basic oxygen Blast furnace Coke oven Coke dry quenching Specific
improvements from blast furnace gas to basic oxygen furnace furnace gas recovery improvements gas recovery (or advanced wet savings
quenching) potential
(steel)
Source: IEA 2009a.
growing evidence that systems optimization and sys- The energy-using systems that support these produc-
tems solutions (systems upgrading) hold the greatest tion patterns might be relatively energy efficient under
potential for energy-efficiency gains and environmen- the initial production design conditions, but energy
tal benefits (see, for example, UNIDO 2010a). efficiency can regress as production patterns change.
Thus, systems need to be optimized over time as well
Systems optimization. Energy-efficient components as across equipment components.
in industrial systems, while important, will not yield Globally, the energy-consuming systems with the
the expected energy savings if the entire system is not highest potential energy savings are motors, compres-
properly designed and operated. Experience shows that sors and steam systems. 6 Motor-driven equipment
while efficient energy components, such as pump, steam accounts for about 60 percent of manufacturing final
and compressed air systems, can raise average efficiency electricity use and is ubiquitous worldwide. Motor
2–5 percent, system optimization measures can yield systems, consisting of drives, pumps and fans, are a
20–30 percent gains– with a payback period of less largely untapped, cost-effective source of industrial
than two years (see, for example, the survey of Tunisian energy-efficiency savings that could be realized with
manufacturing companies conducted for this study by existing technologies (see Box 2.3). Some 55 percent
Fokeer 2010). Further gains can be achieved if systems of the electricity used by motor systems (16 percent of
are optimized in tandem with production processes, for total industrial energy consumption) is lost before the
example, by reducing raw materials or other inputs. motor systems do any work. Losses can be reduced by
An industrial facility may upgrade processes– using more efficient motors and variable speed drives,
change production volumes, schedules or type of prod- sizing motors appropriately and optimizing motor-
uct manufactured– m any times during its useful life. driven systems, such as pumps and conveyors.
44
“ Motor systems are a largely untapped,
cost-effective source of industrial
energy-efficiency savings that could be
realized with existing technologies
Table 2.2
Typical savings from efficiency measures for steam systems (percent unless otherwise indicated)
45
“ global experience suggests important
energy-saving opportunities from cooperation
and energy systems integration among firms
Input
energy consumption by 4.5 EJ. The potential for elec- energy
tricity generation is greatest in China (200 TWh), the Industry
Technological and structural change for industrial energy efficiency
Table 2.3
Resource-efficient and cleaner production approaches to improving industrial energy efficiency 2
Common improvement practices for industrial energy efficiency at the utility and manufacturing levels
Of the 22.3 percent decline in global industrial Changes in demand patterns as standards of liv-
energy intensity over 1995–2008, 56 percent was due ing improve account for much of the shift in the
to changes in industrial structure. There has been a structure of industry. Long-term studies show that
major reduction in the share of energy-intensive pro- as disposable income grows, so does the demand for
cess sectors in global MVA and a large increase in the certain products (Schäfer 2005). At lower incomes,
share of the machinery sector (from plant equipment demand is greatest for basic infrastructure– housing,
to consumer electronics and electrical appliances)– roads and other services. This requires energy-inten-
from around 29 percent in 1995 to 44 percent in 2008. sive inputs like steel rods, aluminium castings, and
47
“ Of the 22.3 percent decline in global industrial
energy intensity over 1995–2008, 56 percent
was due to changes in industrial structure
2 Figure 2.8
Typical energy losses in energy conversion
at a GDP per capita of roughly $5,000 (in 1985 prices;
Schäfer 2005).
chains
Fuel energy
input (coal) changes in international competitiveness arising
100 units
from absolute and relative differences in the cost
t
Energy output
ent
20 percen
ent
t
ent
ent
es 9 percen
9.5 units
of labour, energy, physical assets and raw materials.
es 33 perc
sses 2 perc
es 10 perc
es 25 perc
Throttle loss
Motor loss
Pump loss
Power plant
losses
70 percent more rapid in developed countries– a s cheaper gar-
on and dist
Figure 2.9
Share of selected industrial sectors in global manufacturing value added, 1995–2008 2
Structural change in developed countries generally follows the global trend
World
1995–2008
40
30
20
10
0
Food and Textile and Wood and Paper, pulp Petrochemical Chemicals and Non-metallic Metals Machinery Transport
tobacco leather wood products and printing chemical products minerals equipment
Developed countries
60
Percent
1995–2008
50
40
30
20
10
0
Food and Textile and Wood and Paper, pulp Petrochemical Chemicals and Non-metallic Metals Machinery Transport
tobacco leather wood products and printing chemical products minerals equipment
Developing countries
30
Percent
1995–2008
20
10
0
Food and Textile and Wood and Paper, pulp Petrochemical Chemicals and Non-metallic Metals Machinery Transport
tobacco leather wood products and printing chemical products minerals equipment
49
“ there is enormous potential for improving
energy efficiency in all industrial sectors, both
by adopting the best available technologies
and by shifting the technological frontier
economies.
Structural changes in developing countries are Can developing countries use technological change
heavily influenced by changes in middle-income and and focus on certain sectors to avoid the environmen-
rapidly industrializing economies, as the emerging tally destructive paths taken by industrial countries
middle classes replicate the consumption patterns as they developed? Yes, if countries can accelerate the
in developed countries. In Eastern Europe and the technological processes already under way or can shift
countries of the former Soviet Union, 30–40 per- manufacturing sectors over to “greener pastures.” As
cent of households owned an automobile by the this chapter demonstrates, there is enormous poten-
mid-1990s, 80 percent a washing machine, and 90 tial for improving energy efficiency in all industrial
percent a refrigerator (Schäfer 2005). In Brazil, shifts sectors, both by adopting the best available technolo-
to a more affluent lifestyle and population growth gies and by shifting the technological frontier. While
over 1970–1996 contributed to the changing indus- it may always be necessary to have energy-intensive
trial structure and energy-use patterns (Wachsmann industries globally, individual countries may choose
et al. 2009). combinations of sectors with lower energy intensity.
China’s industrial structure, too, reflects a large The International Energy Agency’s (IEA) 2010
and growing middle class demanding consumer prod- World Energy Outlook estimates that a reduction in
ucts such as cars. It also reflects China’s position as global energy intensity of 23 percent over 1980–2008
“factory to the world” and its immense infrastructure saved 32 percent in energy consumption (5.8 Gtoe;
development. Exports and investment accounted for IEA 2010e). Looking forward, IEA (2010a) estimates
more than 70 percent of GDP in China in the early several scenarios:
2000s, and that investment alone accounted for a • A current policies scenario, which takes into
staggering 43 percent of GDP in 2006 (Kahrl and account only policies already formally adopted and
Roland-Holst 2009). Such investment influences the implemented, anticipates a 28 percent reduction
industrial structure as construction increases demand in energy intensity by 2035, or savings of around
for cement and steel, and equipment purchases drive 6.5 Gtoe in primary energy consumption (2 Gtoe
up the demand for chemicals and chemical products, from manufacturing).
petrochemicals, metals and machinery. • A new policies scenario, which assumes imple-
As income grows, structural shifts in the econo- mentation of announced policy commitments
mies of developing countries will continue to affect to reduce greenhouse gas emissions and phase
industrial energy intensity, but not in the same out fossil energy subsidies, foresees a 34 percent
ways. For example, regional climate differences will reduction in energy intensity, equivalent to an
affect demand for cooling and heating equipment additional 1.3 Gtoe in savings over the current
(Schäfer 2005). Countries well endowed with energy policies scenario.
sources, such as the Russian Federation and some in • A 450 scenario, limiting the average global increase
Central Asia, will continue to emphasize energy- and in temperature to 2°C and the concentration of
material-intensive industries, while countries with greenhouse gases in the atmosphere to around 450
limited space and large populations will develop parts per million of carbon dioxide equivalent,
mass transport industries. Low-income developing would add 3 Gtoe in savings to the current policies
countries will likely face an initial stage of structural scenario.
50
McKinsey & Company (2007, 2008, 2009) also
estimates that the growth in global energy demand
than more service-oriented economies, so a lower
intensity may reflect different types of economic
2
could be reduced, from 2.3 percent a year in the mid- activity rather than different levels of energy effi-
2000s to 0.7 percent a year by 2020 (from 3.4 percent ciency within a sector. These measurement prob-
51
Section 2 The basis for sustainable wealth creation
Chapter 3
Industrial development has brought unprecedented air tools and controls with direct drives and electronic
improvements in standards of living– b ut at an envi- controls).
ronmental cost. Over the years, industrial develop- Another complement to increased industrial
ment has overexploited natural resources, polluted the energy efficiency is environmental management,
air and water, altered the climate and resulted in enor- because every energy source has environmental
mous accumulations of waste from industrial facilities impacts. Minimizing the negative ones means advanc-
and from products discarded at the end of their life or ing pollution control technologies to reduce or treat
displaced by newer models. common emissions from fuel combustion (such as fly
Industry does not just contribute to these impacts. ash, sulphur dioxide and nitrogen oxides). Current
It is vulnerable to them as well. The increased fre- technology assessments suggest that achieving deeper
quency and intensity of extreme weather events mean cuts in carbon dioxide emissions requires carbon cap-
that industry has little choice but to adapt. Mitigating ture and storage, which is currently implemented on
emissions entails increasing energy efficiency, switch- an industrial scale in only a few oil fields. Carbon
ing fuels and improving environmental management capture and storage works only for large-scale concen-
of energy equipment and processes. If industry contin- trated carbon dioxide streams such as certain chemi-
ues using energy-intensive technologies and deriving cal processes (refining and ammonia, cement, iron and
its energy from carbon-intensive sources, the impacts chemical pulp-making). There will be trade-offs, how-
on climate and the environment are likely to impede ever. Carbon capture and storage will increase energy
economic and industrial development. use, especially electricity, and thus reduce overall
industrial energy efficiency– indirectly limiting the
Industrial energy use is a key lever for net reductions in greenhouse gas.
sustainable industrial development Increasing industrial energy efficiency is thus one
Thus, industrial development must become sustain- of the foundations for global green industrial devel-
able. That requires innovative solutions– n ational opment. By building on proven methods for raising
and global– for minimizing energy consumption, industrial energy efficiency, countries begin damp-
particularly from carbon-intensive sources; using ening their environmental impact without slow-
resources more efficiently; and improving productiv- ing the growth of their industrial base– reducing
ity and competitiveness. In tandem with improving air and water pollution, helping businesses improve
energy efficiency, industry needs to consider switch- their bottom line and optimizing strained energy
ing energy sources, so that every application uses the systems so that they can continue to meet economic
most appropriate energy source, which will reduce and social needs. These environmental, economic and
the environmental impacts of energy use. Options social dividends are a “win-win-win” combination for
include switching to fuels or energy carriers with policy-makers.
lower greenhouse gas intensities (including more use Chapter 4 reviews the economic and social divi-
of renewables); expanding the use of heat recovery and dends from making industry energy more efficient.
recycling, perhaps by exploiting low-grade heat from This chapter examines the environmental dividend,
energy and manufacturing processes that would oth- looking first at reducing the environmental impacts of
erwise be wasted (for example, by raising low-pressure energy use and then at the impacts of materials and
steam to drive motor systems); and choosing the right water use on energy efficiency. It also considers the
energy equipment (for example, replacing compressed need for better environmental management of energy
52
“ efficient energy use has emerged as
an effective and feasible way to reduce
environmental impacts and put industrial
development on a more sustainable trajectory
ment) is needed to fully consider the environmental (IPCC) concluded, in its fourth and most recent
impacts of energy use. assessment, that global climate change is unequivo-
Energy use affects the environment through cal (IPCC 2007).3 Rising air and ocean temperatures,
emissions (to air, water and land), depletion of natu- melting snow and ice and mounting sea levels are
ral resources, impacts on nature and landscape, and just a few of the demonstrated impacts. The warm-
radiation. ing is a result of changes in atmospheric concentra-
tions of greenhouse gases and aerosols, land cover and
Reducing greenhouse gas emissions solar radiation that have altered the energy balance
Greenhouse gas emissions1 from human activities have of climate systems (the enhanced greenhouse effect;
grown enormously since the Industrial Revolution, UNEP 2008).
rising 70 percent over 1970–2004 alone and 24 per- A rise in global mean temperature of more
cent over 1990–2004 (IPCC 2007), with carbon than 2°C above pre-industrial levels would sharply
dioxide contributing 77 percent of the total in 2004 increase risks (IPCC 2007; Smith et al. 2009).
(Figure 3.1; Barker et al. 2007).2 Keeping global warming at less than 2°C entails sta-
Energy supply is the largest direct source of green- bilizing atmospheric greenhouse gas concentrations
house gas emissions (26 percent), followed by indus- at around 450 parts per million of carbon dioxide
try (19 percent), forestry (17 percent), agriculture equivalent (CO2-eq).4 Doing that requires at least
(14 percent), transport (13 percent) and residential halving global emissions from current levels by 2050.
Figure 3.1
Global greenhouse gas emissions, by greenhouse gas and sector, 2004
Carbon dioxide emissions account for the largest share of greenhouse gas emissions, and energy supply is the largest source of direct emissions
Emissions by greenhouse gas Emissions by sector
Energy supply
Methane Transport 26%
14% 13%
Forestry
17%
Total emissions =
49 gigatonnes of carbon dioxide equivalent
Source: Barker et al. 2007.
54
“ Emissions have been rising in
emerging market economies and falling
in more advanced economies
Box 3.1
Trends in carbon dioxide emissions 3
In 2009, for the first time since 1992, there was no States, the EU-15, India, the Russian Federation and
growth in global carbon dioxide emissions from fossil Japan.
Carbon dioxide emissions in the top 25 emitting economies in 1990 and 2009
Carbon dioxide emissions per capita Carbon dioxide emissions per unit of GDP
Developing economies Developing economies
India 1990 1990
2009 2009
Indonesia Developed economies Developed economies
1990 1990
Brazil 2009 2009
Thailand
Mexico
France
China
Ukraine
Italy
Spain
Poland
Iran
EU-15
South Africa
United Kingdom
Japan
Germany
Netherlands
Russian Federation
Korea, Rep.
Saudi Arabia
Canada
United States
Australia
55
“ Extracting energy and processing it into fuel
are major sources of emissions to land and water
on the agenda to avoid an increased risk of irreversi- • Oxides of nitrogen and sulphur, which contribute
ble, catastrophic impacts. Industry will have to adapt to acid rain.
to greater weather variability, more frequent and • Particulate matter or soot, which damages pulmo-
intense extreme weather events, and greater exposure nary and cardiovascular systems.
to coastal storm surges. • Metals, including mercury, arsenic, beryllium,
Developing countries, more exposed to climate cadmium and nickel, which pose grave risk to the
hazards and less resilient, would be hit hardest by environment and human health.
the economic and social impacts of climate change. • Unintended combustion products, including
They are projected to bear some 75–80 percent of dioxins and furans, which are persistent organic
the costs of damages induced by climate change pollutants.
(Box 3.2; UNFCCC 2007a). Warming of 2°C could Additional pollutants are emitted in processing,
permanently reduce annual income per capita an refining, cleaning, transporting and distributing liq-
estimated 4–5 percent in Africa and South Asia. uid, solid and gaseous fuels, including volatile organic
The estimated losses for high-income countries are compounds (contributing to photochemical smog
smaller, dropping the global annual average loss and ozone formation on the ground) and methane
in income per capita to about 1 percent (World and carbon dioxide (greenhouse gases; see Box 3.3).
Bank 2010c). Mining and processing fossil and nuclear fuels are
Box 3.2
Climate change affects regions differently
The impacts of climate change will differ markedly within late, with diminished volume during the main rainy season.
and across regions. Asia, for example, will warm above More rain is falling during extreme weather events (heavy
the global mean except in the southeast. Precipitation is rains, storms, droughts), flooding and eroding fertile lands
likely to decrease in Central Asia but increase elsewhere, and threatening harvests, food security, jobs and income.
with more frequent intense precipitation in South and East Extreme weather events can wipe out whole crops and the
Asia; more frequent, longer and more intense hot spells in infrastructure for harvesting, storage and processing.
East Asia; and melting snow and ice in the Himalayas and In Cameroon, the mean annual temperature has risen
the Tibetan Plateau, greatly reducing flows in major Asian 0.7°C since 1960, with even greater increases in the north.
rivers. The Small Island Developing States are expected There are fewer cold nights, especially at higher altitudes,
to experience less warming than the global average but so mosquitoes thrive – as evidenced by malaria’s recent
increasingly intense tropical cyclones, storm surges, coral rising prevalence, boosting medical costs and reduc-
bleaching and floods. ing productivity and quality of life. As temperatures rise,
Many least developed countries are particularly vul- agricultural productivity and food security are projected
nerable to the impacts of climate change, as evidenced by to decline in already marginal areas. Depending on the
persistent unseasonal weather patterns in Africa. climate scenario, agricultural production could decline
In Ethiopia, climate variability is not new, but its $5–$20 billion annually by 2100. While mean annual pre-
effects have been exacerbated by human activities. The cipitation is projected to remain stable, the share falling
mean annual temperature has increased about 1.3°C during extreme weather events is likely to rise. Already, a
since 1960, and the annual minimum temperature has larger share of rain is falling in the traditionally dry season
risen about 2.0°C since 1951. As a result, rains are arriving (December to March), affecting growing seasons.
56
“ Energy supply and use are also major
sources of emissions of trace metals to
the atmosphere and to water and land
Box 3.3
Discriminating among primary energy sources 3
The environmental benefits from increased industrial below 0.5 tonne of CO2-eq per MWh. However, methane,
energy efficiency go beyond the energy saved to a lessen- the main constituent of natural gas, is among the most
major sources of emissions to land (large volume tail- power plants and power generation fuels shows sub-
ings and processing residues from coal and uranium stantial variations in emissions intensities (Figure 3.2;
mining) and water (wastewater from coal washing, oil WEC 2004).
refining, uranium processing and bioenergy produc- Of growing global concern is the dispersion and
tion). Moreover, power generation leaves behind huge accumulation of small-volume emissions of toxic
quantities of solid waste, such as fly and bottom ash and persistent substances that also pose grave risks
from coal and spent fuel rods from nuclear power. to human health and the environment. Energy sup-
Fossil fuel combustion in industrial equipment ply and use are major sources of emissions of trace
(boilers, furnaces, kilns) and in power generation metals to the atmosphere and, less so, to water and
produces large-volume air pollutants, such as sulphur land. Stationary fossil fuel combustion is the largest
dioxide, nitrous oxides and particulate matter, all with source of emissions of antimony, chromium, mer-
harmful consequences to human health and the envi- cury, selenium, thallium and tin (coal), and nickel and
ronment. Comparing life-cycle-based emission data vanadium (oil; Pacyna and Pacyna 2001). Moreover,
for large-volume air pollutants from different types of depending on fuel mix technology and operation
57
“ Resource depletion is a particular concern
for primary energy from non-renewable
resources, both fossil and nuclear fuels
3 Figure 3.2
Variability in life-cycle emissions of principal air pollutants from electricity generation, 2004
Life-cycle emissions of large-volume pollutants vary greatly across primary energy sources for electricity generation
Carbon dioxide Sulphur dioxide
The environmental dividend from industrial energy efficiency
1,500 6,000
Tonnes per gigawatt hour
1,000 4,000
750 3,000
500 2,000
250 1,000
0 0
Lignite Coal Heavy Natural Solar Hydro, Hydro, Tree Wind Nuclear Lignite Coal Heavy Natural Solar Hydro, Hydro, Tree Wind Nuclear
fuel oil gas photo- reservoir river plantation fuel oil gas photo- reservoir river plantation
(combined voltaic (combined voltaic
cycle) 9,800 cycle)
Nitrous oxides Particulate matter
2,500 1,000
Kilograms per gigawatt hour
2,000
750
1,500
500
1,000
250
500
0 0
Lignite Coal Heavy Natural Solar Hydro, Hydro, Tree Wind Nuclear Lignite Coal Heavy Natural Solar Hydro, Hydro, Tree Wind Nuclear
fuel oil gas photo- reservoir river plantation fuel oil gas photo- reservoir river plantation
(combined voltaic (combined voltaic
cycle) cycle)
and maintenance conditions, combustion processes Resource depletion is a particular concern for pri-
produce such persistent organic pollutants as dioxins mary energy from non-renewable resources, both fossil
and furans, which are associated with a wide range of and nuclear fuels (Ayres 2010). The ratio of reserves to
harmful health effects. production (proved reserves divided by current annual
production),5 though commonly interpreted as the
Slowing down natural resources depletion number of years current production levels can be main-
Sustainable development depends on safeguarding tained from current proved reserves, can be used as a
adequate supplies of natural resources for today and proxy indicator. At the end of 2010, reserves to pro-
tomorrow. Fossil fuels, ores, food, fibres, water and duction ratios were 46 for oil, 59 for natural gas and
other materials extracted or harvested for industry, 118 for coal (BP 2011). With production expected to
agriculture and construction include ecosystem ser- increase to meet soaring global energy demands, the
vices (basic services provided by the natural environ- ratios would decline. Eventually, production rates are
ment that support human life). These services include expected to fall as reserves are depleted. But working in
a stable climate, fresh water and air, assimilation the opposite direction are improvements in energy effi-
of waste and emissions, pollination and protection ciency, greater use of non-fossil energy and improved
against diseases (Hawken, Lovins and Lovins 1999; extraction technology. Discovery of new sources of fos-
MEA 2005). sil fuels would also delay resource depletion.
58
“ New fossil fuel reserves are often
inferior to existing sources, with
higher levels of contaminants
Box 3.4
Coping with the anticipated peak in oil production
With the easily recoverable oil reserves shrinking, the be extensive, especially for developing countries. Higher
energy and costs of extracting and processing oil from oil prices transfer income from oil importers to oil export-
other reserves are rising fast. The energy return on energy ers and slow economic growth. For oil importers, higher
invested for oil discovered in the 1930s and 1940s was prices reduce national income because increased spend-
about 110 (110 units of energy produced for every unit of ing on oil reduces the funds available for other goods and
energy used to produce it). That value plunged to 23 for oil services. Higher oil prices also lead to rising production
produced in the 1970s and to 8 for oil discovered in that costs for goods and services and can contribute to infla-
decade. Fuel equivalent to 12.5 percent of the new oil had tion and unemployment, reduce demand and lower capital
to be used to discover, drill, refine and distribute it. For investment – causing interest rates to rise as tax revenues
deepwater oil and heavy oil, the energy return on energy fall and budget deficits increase. The larger the oil price
investment is about 10. hike and the longer it lasts, the harsher the impact.
The “end of oil” may not be just around the corner, Adapting to declining oil production and higher prices
but peak output may begin falling in as little as 5–15 will be harder for developing countries, which have a lim-
years, entailing an unparalleled risk and financial man- ited ability to switch to alternative fuels. Higher oil prices
agement problems. As the peak approaches, liquid fuel can destabilize trade balances and increase inflation,
prices and price volatility will increase, and without timely especially in countries with underdeveloped financial
mitigation, the economic, social and political costs will institutions.
Source: Cleveland et al. 1984; Ayres 2010; Hirsh, Bezdeg and Wendling 2005.
59
“ Improved materials and water flows
in manufacturing processes are key levers
for raising industrial energy efficiency
progress has been made in restoring ecosystems after the consumed and dissipated fractions exit as a non-
mining and in shutting down obsolete plants and product output or as emissions to land, water or air.
infrastructure. And seldom does the harm stay local. The correlations between process energy con-
Micro-climate and hydrology changes, ecosystem frag- sumption and the quality and volume of material
mentation and degradation, reduced food security and and water use, manufacturing efficiency and product
loss of aesthetic, cultural and heritage values all can specifications differ by industrial enterprise. But rules
extend far beyond immediately affected areas. of thumb apply to positive or negative correlations.
Nuclear and ionizing radiation– primarily from Figure 3.3 shows some common factors contribut-
nuclear power plants with their fuel supply and waste- ing to lower process energy requirements and so to
fuel disposal, but also on a smaller scale from fossil fuel improved industrial energy efficiency. For water, lower
combustion– p ose considerable risks to human health consumption and higher purity are associated with
and ecosystems. The risks of nuclear radiation include lower energy use, as less water has to be processed
cell death, genetic damage, radiation burn, cancers (pumped, heated, evaporated, cooled) and treated
and reproductive system disorders. Many radioactive (such as filtered).
nuclides result from nuclear reactions in power plants. Improved materials and water flows in manufac-
Some nuclides are short-lived, but others remain unsafe turing processes are key levers for raising industrial
for millennia. Additional nuclear radiation occurs energy efficiency. An example is the Colombian coil
through the release into the environment of naturally manufacturing company that changed its manufactur-
occurring radioactive materials from fossil fuel com- ing processes to reduce water use and eliminate waste-
bustion. A related concern is ionizing radiation, which water (Box 3.5). Ceramics is another example, with
creates unstable atoms that harm living organisms. several leverage points. One is the quality of the clay
of energy, materials and water in their production, a • Stability of supply • High quality/fit for purpose
• Low volume
process captured in the concept of embodied energy,
materials and water. Manufacturing process Product output
• Ambient conditions (temperature, pressure, and the like) • Low volume
• High yield • Low weight
Improving materials and water flows • Limited process steps • Large product runs
• Product specifications
As a simplified physical input-output analysis shows, matching expected use
Non-product outputs
energy and materials and water use are interrelated in • Ability to use, recycle
industry. Energy, materials and water carriers enter or recover water, energy
or materials
a plant, and (under laws of conservation of mass) Source: UNIDO.
equal amounts leave the plant as product or as waste,
60
“ By selecting and sourcing materials with
lower embodied energy, industries improve
the energy efficiency of their value chains
Box 3.5
How a Colombian metal working company saved
Thus, even before input resources reach their
point of use, they have already had environmental
3
energy by reducing wastewater and chemicals
impacts related to the energy used to extract, process
Aceros Industriales, a medium-size metal working
and transport them. Embodied energy is thus a proxy
to have ended up as waste or wastewater upstream in the ongoing deposition of heavy metals and other
the supply chain. Two indicators of material flows are toxic materials in the environment will only worsen,
materials intensity per service unit (total materials use while fossil fuel production might soon peak, start-
relative to a functional unit of product service) and ing with oil.
materials intensity (materials use relative to a physi- There are several entry points for reducing indus-
cal unit of use of a material or energy carrier; Ritthoff, trial energy intensity and total energy requirements
Rohn and Liedtke 2002). (see Chapter 2). One is by using more energy-efficient
Since materials and water consumption are prox- equipment, process designs and systems. Another is by
ies for environmental pressures for a range of impacts improving energy management systems. In addition,
associated with materials and water use, embodied optimizing and minimizing materials and water flows
materials and water can be used as indirect proxies of can have spin-off benefits for energy efficiency and
the total environmental impact of the use of materials overall productivity.
and energy. However, doing so ignores the large dif- The spotlight is on industrial energy efficiency in
ferences in environmental impacts across alternative developing countries. In 2008, energy-related green-
materials and different water sources as well as the house gas emissions in developing countries for the
potential for recycling after use. first time exceeded those in developed (Annex I)
Awareness of embodied materials and water has countries (IEA 2010a), a result of a 2 percent decline
spurred interest in dematerialization– g etting more in developed countries and a 6 percent increase in
valuable product out of the same or fewer mate- developing countries.
rial resources (Geiser 2001; ADB and IGES 2008).
Focused initially on reducing the direct and indirect Taking a life-cycle perspective
(embodied) materials weight of products, demateriali- The environmental impacts of industrial energy
zation offers wider benefits through lowering embod- use differ across energy sources (see Box 3.3). Direct
ied energy and greenhouse gas emissions. Approaches impacts arise during energy use in industrial processes,
include redeveloping or redesigning production pro- while indirect impacts result from the production and
cesses and products through light-weighting, reducing supply of the energy used by industry (such as at power
waste in production, leasing and sharing goods and stations in the case of industrial electricity consump-
equipment, introducing take-back systems and recov- tion). Life-cycle assessment extends the traditional
ering end-of-life goods. focus on production sites and manufacturing pro-
cesses to the entire life-cycle of a product to account
Making industry more energy efficient for all environmental, social and economic impacts
Slowing the increase in the harmful impacts of (Box 3.6).
industrial production on the environment requires
boosting industrial energy efficiency. How much Reducing greenhouse gas emissions
of a boost is needed to make industry sustainable The climate effects of greenhouse gas emissions will
(both in total environmental impact and per capita persist for centuries (Archer and Brovkin 2008).
or per unit of economic activity), however, remains Industry and construction globally contribute almost
uncertain. With the stakes so high, it would be wise 37 percent of total greenhouse gas emissions from
to err on the side of caution. The global community fossil fuel use and industrial processes, directly from
62
“ Each process in industrial energy use has
environmental, economic and social impacts that
depend on the type of energy and technology used
Box 3.6
Life-cycle assessment and carbon footprinting 3
Life-cycle assessment quantifies the use of materials and or are sourced from energy suppliers. The fuels to run
energy and the generation of waste and emissions in each these utility systems come from energy suppliers or from
Power/steam
Renewable
On-site primary Plant utility Energy carriers (electricity, Manufactured Direct
energy
energy collection systems steam, compressed air, and the like) processes environmental impacts
Energy emissions and waste Foreground (industry)
Carbon footprinting, a specialized application of life- in collaboration with the World Business Council for Sus-
cycle assessment focusing exclusively on carbon emis- tainable Development, has developed protocols, methods
sions, is gaining recognition as a means of quantifying direct and sector-specific calculators to estimate enterprise-level
and indirect greenhouse gas emissions. It can be applied carbon emissions (www.ghgprotocol.org). Complementing
to companies, products (including energy supply options) the effort is the International Organization for Standardiza-
and consumption patterns. The World Resources Institute, tion’s product-level carbon footprint standard (ISO 14067).
63
“ In 2004, emissions of all greenhouse gases
from the industrial sector accounted for nearly
25 percent of global greenhouse gas emissions
emissions in 2004
industrial sector accounted for an estimated 12 giga- Non–carbon dioxide greenhouse gases
tonnes (Gt) CO2-eq, nearly 25 percent of global green- 3%
Box 3.7
Integrated clean technology solutions in India 3
Ankleshwar Industrial Estate in Gujarat State, one of a day – and produce around 2,000 tonnes a day of
India’s chemical clusters, houses more than 500 small and diluted, spent sulphuric acid. This acid, neutralized
(IEA 2009c) estimated industry’s direct contribu- marine and aviation bunkers. By economic sector,
tion to global carbon dioxide emissions through fos- electricity and heat generation is the largest emit-
sil fuel use and process emissions at 7.2 Gt in 2006, ter, contributing 41 percent of global emissions (40
up from 6.8 in 2004 (Bernstein et al. 2007 based on percent for OECD countries and 45 percent for
IPCC data). According to the same IEA study, indus- non-OECD countries; Figure 3.6). Transport is
try also caused indirect emissions of 3.4 Gt of carbon the second largest contributor globally (22 percent)
dioxide in 2006 through electricity supply, lower than and for OECD countries (27 percent), while indus-
the more comprehensive IPCC estimate of 4.8 Gt try and construction is the second largest in non-
in 2004. In 2006, iron and steel, cement and chemi- OECD countries (26 percent). Globally, industry
cals caused nearly three-quarters of industry’s direct and construction is the third largest contributor (20
carbon dioxide emissions (Figure 3.5). The group of percent). However, when emissions from electricity
OECD countries and China each contributed 34 and heat generation are allocated to end users, the
percent to the direct carbon dioxide emissions from emission contributions of industry and construction
industry. rise to 37 percent globally (27 percent for OECD
The IEA estimated carbon dioxide emissions countries and 47 percent for non-OECD countries;
from fossil fuel consumption at 29.4 Gt in 2008 IEA 2010a). In developing countries, industry and
(IEA 2010a). OECD countries contributed 12.6 construction thus contribute nearly half of carbon
Gt (43 percent) and non-OECD countries 15.7 Gt dioxide emissions from direct fuel combustion and
(53 percent); the remainder came from international imports of electricity and heat.
65
“ The largest carbon dioxide emitters are iron
and steel and chemicals by sector, and electricity
and heat generation by economic activity
3 Figure 3.5
Share of direct industrial carbon dioxide emissions from fossil fuel use and industrial processes, by
sector and region or country, 2006
Three sectors generate more than 70 percent of industrial carbon dioxide emissions, and China and OECD countries are now on par in industrial emissions
The environmental dividend from industrial energy efficiency
Latin America
India 4%
5%
Africa and
Middle East
7%
Other
23% Other
Iron and steel developing China
30% Asia 34%
7%
Pulp and paper 2%
Economies
Aluminium 2% in transition
9%
Chemicals OECD
17% Pacific OECD
Cement 9% North America
OECD 13%
26%
Europe
12%
Total emissions =
7.2 gigatonnes of carbon dioxide equivalent
Source: IEA 2009c.
Figure 3.6
Contributions to carbon dioxide emissions from fossil fuel combustion, by economic sector, 2008
Electricity and heat generation and industry and construction are major emitters of carbon dioxide from fossil fuel consumption
20 20
10 10
0 0
World OECD Non-OECD World OECD Non-OECD
66
“ Industry can switch to cleaner
production processes that use less material
and water. And savings are possible in
transport and waste management
67
Chapter 4
Improving industrial energy efficiency is essential for Costs can be reduced in the short run by optimiz-
helping supply-constrained developing and emerg- ing production methods, using cheaper inputs and
ing market economies meet rising demand and for improving materials and energy use efficiency and in
decoupling economic growth and environmental deg- the long run by introducing new equipment.
radation. While firms may not be driven exclusively by While all costs need to be minimized, managers
profit motives, the market demands that investments have limited time and so focus on expenses that make
achieve competitive rates of return. up the largest proportion of total costs.1 Thus, manag-
Investment involves risk and therefore the expecta- ers are more likely to invest in industrial energy effi-
tion of returns that will minimally compensate for the ciency when energy constitutes a large share of costs.
probability of loss. The higher the anticipated return, A firm’s energy costs depend on the energy intensity of
the more attractive the investment. Investment can the production process, the prices of different energy
yield other returns as well, not just economic. Greater carriers and the efficiency with which energy is used in
industrial energy efficiency can provide benefits to production and auxiliary operations such as buildings
companies and societies in the form of new employ- and warehouses.
ment, higher income, and better health, working con- Investments in energy-efficient technologies entail
ditions and quality of life. estimating the size and timing of a project’s income
This chapter examines the underlying econom- and outlays and choosing among investment options.
ics of industrial energy-efficiency investments from Estimates need to factor in technical, environmen-
a micro-economic perspective, starting with energy tal, economic and political considerations that vary
costs at the industry and firm levels. It explores the over time and that are uncertain and difficult to
risks associated with such investments, the financi- measure. In many developing countries, investment
er’s take on these risks compared with those of other decisions are constrained by structural deficiencies,
investments, and evidence on the profitability and limited infrastructure, volatile operating conditions
other economic and social benefits of the investment. and shortages of physical, human and institutional
Finally, it explores the technical potential for further resources.
improvements in industrial energy efficiency and
notes that many profitable green investment opportu- How energy costs vary
nities go unrealized. Industrial energy costs vary considerably by level
of industrialization, sector and firm. Energy costs
The importance of energy costs to include the energy used to power production processes
businesses and to generate heat, light and power. In principle,
Business profits depend on the difference between energy costs exclude the outlays for fossil fuels used
sales revenues and input costs. Sales revenues can be as raw materials in the production process, such as
increased in the short run by raising output or price oil and coke feedstock in the petrochemical and steel
and in the long run by installing new and more pro- industries, but many countries do not report these
ductive capacity. The ability to modify output and separately.
boost prices depends on the industry’s structure and Which sectors have the highest proportion of
competitive characteristics. In competitive markets, energy costs in total input costs (Table 4.1)? Topping
firms tend to be price takers. Costs include capital, the list are process sectors such as refined petroleum
labour and intermediate inputs (materials and energy). (fuels, lubricants, chemical feedstock) and nuclear
68
“ Greater industrial energy efficiency can
provide benefits to companies and societies in
the form of new employment, higher income, and
better health, working conditions and quality of life
Table 4.1
Share of energy costs in total industry input costs, by sector, latest available year (percent) 4
Group of large
All Developed Developing developing
fuel, non-metallic minerals (ceramics, cement, glass), with plants normally running continuously, 24 hours
basic metals (aluminium, copper, iron, steel), and a day, 365 days a year. Inputs account for the largest
chemicals and chemical products (fertilizers, plas- proportion of production costs. And output tends to
tics). Refined petroleum and nuclear fuel’s 61.6 per- be homogeneous.
cent share is way ahead of the others, largely because By contrast, average energy cost ratios are lower,
the industry practice is to include raw materials in at 0.7–3.2 percent, for discrete product sectors such
energy costs. Ratios in other process sectors average as office and computing machinery (computers and
3.9–11.8 percent. These sectors share several economic peripherals, communication equipment), machinery
characteristics. They are capital- and skill-intensive and equipment (power and machine tools, general
and pay above-average wages because of the large and special purpose, agriculture and industrial equip-
investments in equipment. Economies of scale and ment), electrical machinery (motors, electrical equip-
capacity use are the main determinants of profitability, ment, and appliances), radio and television (consumer
69
“ Topping the list of sectors with the highest
share of energy costs in total input costs are
process sectors such as refined petroleum, non-
metallic minerals, basic metals and chemicals
output and frequently use automated, multistage pro- countries are quite similar, prices in Qatar are more
duction processes. They are capital- and skill-inten- than double those in Saudi Arabia. The price of gas in
sive, equipment accounts for the largest share of pro- Trinidad and Tobago, a major producer and exporter
duction costs and scale economies are important for of liquefied natural gas, is nearly 7 times that in Saudi
profitability. Arabia– Japan and the Republic of Korea pay more
Between the two are combined sectors, which share than 10 times as much.
the technological and economic characteristics of pro- Or consider electricity. The price of electricity
cess and discrete product sectors. These sectors have supplied to industries in Europe varies greatly: in
average energy cost ratios of 2.0–5.3 percent. They 2005, Italy paid 14 eurocents per kilowatt hour while
include rubber and plastic products (tyres, build- Germany paid 7 (Eurostat n.d.). Although electric-
ing material, consumption plastics), paper, pulp and ity prices have tracked rapidly rising fuel costs, large
printing (cardboard, newspapers and books), wood differences persist across countries, even for firms of
products (plywood, construction goods and furni- similar size (Figure 4.1). In the United States in 2008,
ture), textile and leather (textiles, shoes and clothing) there were differences in the price of electricity of up
and food and tobacco (processed meat and vegetables, to 50 percent in the pulp and paper industry and of
dairy products and beverages). up to 40 percent between the paper and pulp sector
The group of large developing countries (Brazil, and the aluminium industry (Koc and Kaplan 2007;
China, India, the Russian Federation and South IEA 2009c).
Africa) spends the largest share of input costs on energy Moreover, energy prices differ across sectors even
(4.8 percent), more than all developing countries as a within the same country. In Germany in 2000, the
whole (4.3 percent). Developed countries spend the implicit energy price was 2.5 times greater in the
least (2.5 percent). The share of energy costs in total machinery sector than in the food and tobacco sec-
costs averages 65 percent higher in developing coun- tor (Figure 4.2). 2 In Thailand in 2006, the equiva-
tries than in developed countries. Such comparisons lent ratio was 10 times higher. In general, in most
also need to consider technological and production countries, energy-intensive sectors pay less per unit of
differences within a sector. For example, Mexico’s steel energy consumption.
sector is based on direct reduction of iron ore, whereas
the United States increasingly uses electric furnaces What accounts for energy price variation?
to melt scrap (Ayres 2010). Also, developed countries Both economic and policy factors account for these
produce more finished goods than do developing coun- variations in energy prices. The economic factors relate
tries, so the value added is higher. Comparisons also to energy supply and demand. Price, for instance, is
need to consider differences in labour costs. influenced by the share of different energy sources
used. It also depends on the load factor of the power
How energy prices vary generator. Energy tariffs fluctuate with the cost of the
Though not as influential as technological and eco- fuels used in the energy mix and other costs associated
nomic processes in determining the volume of energy with energy production and distribution. The timing
inputs, energy’s share in total costs is also determined of electricity purchase agreements also affects price,
by the price of energy and other inputs. Coal and oil, since energy tariffs for large users are usually governed
the main fuel sources, are traded internationally, and by long-term electricity contracts.
70
“
for the wide variations in energy prices
Both economic and policy factors account
Figure 4.1
Price differentials in natural gas and electricity 4
Big differences in what countries charge for natural gas and electricity
Natural gas, 2007 Electricity, 2005 and 2009
Qatar Poland
Germany Hungary
Belgium
Latvia
United Kingdom
Germany
Japan
0 2 4 6 8 10 0 2 4 6 8 10 12
Index (Saudi Arabia = 1) Eurocents per kilowatt hour
Figure 4.2
Implicit energy prices and energy costs in Germany and Thailand, by sector, 2000 and 2006
900 0.12
200 0.06
600 0.08
100 0.03
300 0.04
0 0.00 0 0.00
er
cts
ls
als
cts
co
ts
nt
er
ls
als
co
ts
nt
)
)
tr y
tr y
er
er
t in
t in
ra
ra
uc
uc
me
me
th
th
ac
ac
et
et
du
du
hin
hin
us
us
ne
ne
r in
r in
ea
ea
od
od
ob
ob
M
M
uip
uip
ro
ro
in d
in d
mi
mi
ac
ac
dp
dp
dl
dl
pr
pr
dt
dt
lp
lp
eq
eq
M
M
an
an
d(
d(
lli c
lli c
od
od
an
an
an
an
ca
ca
rt
rt
ifie
ifie
t il e
t il e
ta
ta
wo
wo
mi
mi
ulp
ulp
po
po
od
od
me
me
ec
ec
he
he
x
x
ns
ns
Fo
Fo
nd
nd
p
p
Te
Te
sp
sp
n-
n-
dc
dc
r,
r,
a
a
da
da
pe
pe
Tr
Tr
n-
n-
No
No
an
an
oo
oo
Pa
Pa
No
No
ls
ls
W
W
ic a
ic a
em
em
Ch
Ch
71
“ Investments in new plants and production
technologies generally result in major savings in
energy consumption and costs as well as gains
in production efficiency and product quality
energy taxes to enhance revenue. In 1987, the Chinese high-complexity and are rarely implemented because
government raised electricity tariffs by two cents per the high transaction costs usually exceed the modest
kilowatt hour (the “two-cent policy”) for all non- energy savings. An exception could be the bundling by
residential uses except for some electricity-intensive an outside partner of many small projects of similar
industries (Hang and Tu 2007; Wang, Qiu and Kuang technology or exceptionally attractive rates of return.
2009). The extra revenue went to finance power plant Quadrant 2 projects are high energy-cost and high-
construction. complexity in energy-intensive companies. The projects
generally require multiple organizational providers
Risks and rewards of investing in and sophisticated contracting and finance guarantees.
industrial energy efficiency Examples include investments in new kiln technolo-
Many industrial energy-efficient improvements are a gies in cement companies and fuel-switching projects
by-product of investments undertaken for other rea- in pulp and paper plants. Unlike new infrastructure
sons and that improve overall productivity. Investments projects and power plants, whose rate of return may
in new plants and production technologies generally be guaranteed by the government or by major private
result in major savings in energy consumption and operators (for example, through build, own, operate
costs as well as gains in production efficiency and prod- and transfer contracts), these large industrial energy-
uct quality. The extent of energy savings from such efficiency projects require separate measuring of pro-
investments may be difficult to gauge, though there is ject benefits in advance. Contracting against these ben-
reason to believe that they can be substantial. efits can raise the cost of capital (Box 4.1).
But how do managers decide whether to invest
in dedicated energy-efficiency projects– investments Figure 4.3
Criteria for making energy-efficiency project
with the primary purpose of improving energy effi- decisions
ciency (and hence for which only energy savings are
relevant)? The company’s energy cost and the complex- 1 2
Organizational and contractual complexity of the project
ity of the project are major determining factors. Internal expertise Subcontracting of
lacking: need to use project execution required
Figure 4.3 classifies investment projects on two external suppliers; because of technical
High
Box 4.1
Weighing a high-complexity–high energy-cost project in South Africa
The Highveld Corporation’s Transalloys manganese alloy savings in energy and maintenance costs continued,
smelter energy-efficiency project in Mpumalanga Prov- the project was not considered financially attractive.
ince, South Africa, illustrates a high-complexity project • Uncertainty in market prices and exchange rates.
in a high energy-intensive company. The project was to Whether the project increases output depends on the
retrofit Transalloys’ five furnaces with new electric arc fur- market price for the silicomanganese alloy, which was
naces, including related control and peripheral systems. sold into global markets at dollar-based prices. This
The project was expected to reduce electricity consump- was an unsettling prospect, given the large upfront
tion per tonne of alloy produced, with savings from lower investment cost.
electricity consumption and lower carbon dioxide emis- • Uncertainty on yields, technical conditions and main-
sions. (Most of South Africa’s electric power comes from tenance costs. Furnaces are central to Transalloy’s
coal-fired plants.) production process, adding uncertainties in retrofitting
A combination of subsidized energy prices, foreign to other equipment, as fit is not always guaranteed.
exchange risk and production-yield uncertainty, together Highveld received additional funding through the
with energy’s centrality in manganese alloy production, Kyoto Protocol’s Clean Development Mechanism (which
made the project a high-intensity, high-complexity – and allows high-income countries to invest in emission reduc-
high-risk – project: tions in developing countries to meet their own emission
• Low electricity prices. Steady increases in subsidized reduction targets), and the project was launched. A pro-
electricity prices created uncertainty over whether ject evaluation conservatively estimated savings of more
prices would continue to rise. Prices were projected to than 500,000 tonnes of carbon dioxide over the lifetime of
remain low, reducing the incentives for saving electric the project (approximately 50,000 tonnes a year over 10
power. years). Valued at the low end of expected carbon dioxide
• High investment cost. Total initial investment cost for prices in the EU market (around €15 per carbon credit),
retrofitting all five furnaces was around $17.5 million. annual carbon revenues would amount to another $0.6–
Annual savings in electricity and operations and mainte- $1.0 million a year, enough to drive the project solidly into
nance costs were projected at $2.4 million. Even if such the black.
73
“ Investment risks may vary with the country,
sector, business and technology and over time
4 Box 4.2
Weighing a low-complexity–high energy-cost
on their initial capital outlays and cost savings. Short
payback periods make projects attractive investments,
project in China
and many firms are reluctant to invest in projects with
The Dongying Shengdong Energy Management Com-
paybacks longer than two or three years. However,
The economic and social dividends from industrial energy efficiency
with new and unfamiliar technologies, which is why Internal company drivers
Importance of energy to the company’s cost structure
government-funded demonstration programmes aim Internal company capabilities to implement energy-efficiency projects
to increase confidence and disseminate information
and awareness of these technologies. Technical risk Source: Kleindorfer 2011.
is usually higher in developing countries (especially
least developed countries) than in developed coun-
tries because there is less technical support for new but still give such investments a low priority when
technologies. sales volumes fall.
External risk is associated with multiple uncertain- The standard approach to energy project valuation
ties about economic trends, government policy, and encompasses energy demand estimates, regulatory and
energy and other prices– a ll factors that individual market scenarios, trends in components contributing
companies cannot influence. Consider a metal work- to capital costs, operating costs and carbon offset rev-
ing company in Colombia, which switched its fur- enues, when applicable (Figure 4.4). The objective is
naces from electric power to natural gas in 2001, when to understand and value financial returns and to com-
gas prices were low (De Simone 2010). This change pare project returns and risks relative to a well defined
later became a source of concern as the price of natural benchmark case (typically the status quo) over several
gas was expected to increase about 30 percent by 2011. years.
Although uncertainty about future energy prices
is often perceived as a barrier to energy-efficiency Does investment in industrial energy
investments, it can also be an incentive. When prices efficiency pay?
do not increase as much as expected (or even decrease), Investments need to be profitable. While some com-
investment earnings fall short. But when energy prices panies might also be driven by environmental and
rise, so do costs savings. social responsibility concerns, they still need to find a
Business risk is related to the uncertainties asso- solid economic rationale for energy-efficiency invest-
ciated with shifting course. Companies tend to be ments. Investing in energy efficiency needs to be at
risk-averse and avoid switching to a new strategy that least as profitable as, if not more profitable than, other
is fraught with uncertainty (Bremmer et al. 2007). options.
When a company is doing well, investments may be
attractive, but bad results can make a company cut Strong evidence from developed countries
back on investments, particularly non-core invest- A vast literature on energy-efficiency measures shows
ments such as energy efficiency. Upper management enormous potential for cost savings, but most of the
might see the potential for substantial cost reductions savings go unrealized, even in developed countries.
75
“ A vast literature on energy-efficiency
measures shows enormous potential for
cost savings, but most of the savings go
unrealized, even in developed countries
grammes had a payback period of one month to two equivalent (boe; the discounted present value of the
years (USDOE 2010). Another early study, reported in savings, based on an assumed 10-year investment life)
Nelson (1989) and Nelson and Rosenberg (1993), on on an average global price of $60 per barrel for crude
industrial energy-efficiency projects in Dow Chemicals oil in 2007. Savings varied from less than $3 per boe
over 1981–1993 showed that 575 audited projects cost- for modifications of steam thermal systems and $6 per
ing less than $200,000 had payback times of less than boe for industrial energy recovery to $15 per boe for
one year and yielded an average return on investment better insulation and windows, $19 per boe for district
of 204 percent and savings of $100 million a year. heating upgrades and $23 per boe for better lighting
Although the number of funded projects increased each systems (the most expensive category).
year, there was no evidence of saturation. Numerous UNIDO conducted an email survey of 357
opportunities were still available with payback times of industrial firms in 25 developing economies, based
less than a year. In other words, the low-hanging fruit on a convenience sample, aimed at obtaining a basic
was picked, but it grew back. Tonn and Peretz (2007) understanding of the rationale behind investing in
provide more recent evidence, reporting that stand- industrial energy efficiency and at illustrating the key
ard awareness- and capacity-building industrial pro- energy-efficiency issues confronted by firms.4 Of these
grammes in the United States promoting energy effi- firms, 261 were followed up by email or telephone to
ciency typically identify up to 30 percent energy savings explore their responses in more depth. Face-to-face
in plants. Such programmes are found to be quite prof- interviews were conducted with representatives of
itable for the firms, for job creation and for tax revenues. 96 firms in China, Colombia, Nigeria, Peru, Tunisia
The European experience confirms the US find- and Viet Nam to probe into the rationale for their
ings. Jochem and Gruber (2007) report that around decisions (UNIDO 2010h). Firms were included in
1,000 large Swiss firms involved in energy-saving learn- the survey if they had invested in at least one project
ing networks were pocketing around €110,000 in whose aim was to reduce energy use or costs; they
net annual profits per company. In Germany’s Baden- were also queried about energy-efficiency projects they
Württemberg region, such networks had combined net had decided not to take on. Investments in energy-
earnings of €450,000 in 2004. A study of energy-effi- efficiency projects totalled $613.7 million, and indi-
ciency investments by 70 industrial firms in six OECD vidual investments ranged from $100 to $73 million.
countries (including in food manufacturing, building Projects were classified by sector (Figure 4.5),
materials, steel manufacturing, paper manufacturing, investment type, functional change and size. Six types
chemicals manufacturing and textile manufacturing of investment were identified:
companies) found an average economic payback of 4.2 • Direct equipment replacement (36 percent) related
years and combined net savings of around $28.5 million to switching energy sources (ovens, engines,
(Worrell et al. 2001). Payback fell to 1.9 years once the boilers).
non-energy benefits of the investment were included. • Waste reuse (14 percent) arising from the produc-
tion process, such as biomass, as a source of energy.
Energy efficiency is also profitable in May require some small-scale equipment purchase.
developing countries • Residual temperature reuse (14 percent) involves
A few studies find that energy efficiency is also prof- using hot or cold air or water from the produc-
itable in developing countries. Taylor et al. (2008) tion process to provide additional plant cooling or
76
“ A study of 455 World Bank–financed
projects in 11 developing countries found
that more than 80 percent recovered their
capital costs in 30 months or less
Figure 4.5
Sectoral composition of UNIDO sample of
Box 4.3
Case study: PT. Pindo Deli Pulp & Paper 4
industrial firms investing in energy efficiency, repairs steam leaks
2010
PT. Pindo Deli Pulp & Paper, an Indonesian company
4 Figure 4.6
Payback period of UNIDO sample of industrial firms investing in energy efficiency
Payback periods averaged 23 months in the UNIDO survey of industrial firms investing in energy-efficiency projects
By sector By type of investment By functional change
The economic and social dividends from industrial energy efficiency
36 36 36
Months
24 24 24
12 12 12
0 0 0
Chemicals Textiles Cement Food and Paper Average Process Technology Average Direct Residual Better Average
beverages reorganization reengineering equipment temperature use of
replacement reuse infrastructure
was 25 percent, but the rate rose with each additional needed to operate for more than five years to justify
year of life, to 37 percent for 4 years, 43 percent for the investment.
5 years and 50 percent for 10 years. These higher rates The picture that emerges from this survey is that
compare favourably with average returns in capital investing in industrial energy efficiency is profitable,
markets, which are typically lower over comparable but how profitable depends on the project and time
timeframes. Countries with high interest rates tend to horizon. More profitable projects commonly require
have higher inflation, wiping out some of the gains of small investments, involve process reorganization and
financial investments. And while some stock markets housekeeping measures, use existing infrastructure
provided attractive returns in some years (2003–2004 better or improve pipes. These would fit in the low-low
and 2009, for example), energy-efficiency investments quadrant 3 projects in Figure 4.3: they are not organi-
were far more profitable over longer periods. zationally, technically or contractually complex, and
Internal rates of return varied considerably across they have a relatively small impact on energy costs and
sectors and type of investment in the sample. Rates of company profits. Projects that involve larger invest-
return were lower in projects in process sectors, such ments and require changing machinery and equip-
as chemicals and cement, than in discrete product sec- ment (mainly in process sectors) are less profitable and
tors, such as equipment manufacturing and automo- require longer periods to mature, though they will
tive. Making better use of infrastructure, sealing pipes probably have a larger impact on corporate profits.
and improving insulation were extremely profitable; These projects would fit in the high-high quadrant 2
direct equipment replacement was less so. Projects and high-low quadrant 4.
involving process reorganization, especially when they Does this mean that all energy-efficiency projects
cost less than $10,000, were highly attractive, with are profitable under normal investment criteria? Clearly
rates of return of up to 125 percent for projects that not. Generally speaking, the more organizationally and
would last 10 years. Even for a more realistic project technologically complex a project becomes, the lower
lifetime of three years, rates of return exceeded 100 its profitability. Many energy-efficient technologies are
percent. Paper, food and beverages, and textile firms likely to remain unprofitable for some time, at least
had many projects of this type. By contrast, techno- until environmental damages are properly priced. But
logical modifications costing more than $100,000 the data do suggest a wide range of profitable oppor-
had far lower rates of return. Many of these projects tunities to improve energy efficiency in all industrial
78
“ For projects with a three-year lifespan
and no resale value, the estimated mean
internal rate of return was 25 percent, but
rose with each additional year of life
Figure 4.7
Internal rates of return of industrial energy-efficiency projects, by expected lifetimes 4
Internal rates of return of energy-efficiency projects rise with expected lifetimes
75 75 75 75
50 50 50 50
25 25 25 25
0 0 0 0
Chemicals (14) Others (13) Textiles (22) Cement/ Equipment Automotive (4) Metal (14) Food and Paper (12) Total (119)
ceramics (15) manufacturing (16) beverages (9)
75 75 75 75
50 50 50 50
25 25 25 25
0 0 0 0
Better use of infrastructure (14) Pipes and insulation Fuel optimization (12) Waste reuse (12) Residual temperature Direct equipment Total (119)
improvements (19) reuse (20) replacement (42)
50 50 50 50
25 25 25 25
0 0 0 0
75 75 75 75
50 50 50 50
25 25 25 25
0 0 0 0
Less than $10,000 (30) $10,000–$100,000 (45) More than $100,000 (44) Total (119)
79
“ While investments in industrial energy
efficiency are aimed primarily at profitability, they
generally yield other economic benefits as well
Box 4.4
Chinese company secures environmental
energy-efficiency investments, including some in the
manufacturing industry, estimated an impact of 8,500
4
co-benefits
net jobs by 2025 over and above the business-as-usual
Dragon Iron & Steel Co., Ltd. is a Chinese state-owned
scenario (ACEEE 2011). A similar study for South
by making possible income-generating activities, thus tices can improve the health and life expectancy of
also lifting many out of poverty. Furthermore, in many factory workers, particularly by reducing upper res-
developing countries, energy shortages, unreliable piratory tract illnesses and asthma attacks. The poor
and poor quality supply and inefficiencies in use have stand to gain the most, because pollution-intensive
high economic costs in materials waste, low capac- industries tend to locate in low-wage areas (Dasgupta,
ity utilization and inefficient investment in standby Lucas and Wheeler 1998).
equipment. Cost-effective improvements in industrial Mills and Rosenfeld (1996) detail a range of
energy efficiency could help control growth in energy health co-benefits from energy-efficient technolo-
use and waste, redeploy expenditure into energy infra- gies. Energy-efficient high-frequency electronic bal-
structure, enable adequate provision of energy services last, which prevents flickering in fluorescent bulbs,
at affordable cost and fund better energy access. causes fewer headaches and less eyestrain among office
workers than does standard magnetic ballast. Several
Improved health outcomes forms of anxiety have been found to diminish after a
There are also health advantages of greater energy effi- shift to high-frequency lighting. Mills and Rosenfeld
ciency, as shown in the impacts of the change to high- add that exposure to daylight also has positive health
efficiency technologies in the brick industry in the impacts since an absence of windows is correlated with
Xuan Quan commune in Hung Yen Province of Viet an increase in transient psychosis and absenteeism by
Nam (Box 4.5) As highlighted in Chapter 3, greater factory workers. Light also affects melatonin levels,
energy efficiency reduces the atmospheric emission of which are related to psychological depression affecting
damaging substances such as sulphur oxides, nitro- about 5 percent of the population.
gen oxides, smoke and airborne suspended particu- High energy-efficient technologies can also
late matter. Emissions from burning fossil fuels for improve the indoor environment, comfort and safety
industry, transportation and power generation are the (Mills and Rosenfeld 1996). Variable-speed drives and
largest sources of urban air pollution, with harmful air blowers and energy-efficient furnaces tend to be
Box 4.5
Increasing productivity and securing environmental and social co-benefits in Viet Nam
Brick-making is one of the most important industries in adapted them to local conditions. Adding coal to the clay
Viet Nam. However, brick kilns tend to be highly inefficient cut the breakage rate almost in half (from 7 percent to
and to use low-quality, high-sulphur coal, making brick 4 percent).
production one of the most environmentally damaging In addition to cost reductions and quality improve-
activities in the construction sector. Brick-making leads ments, the project resulted in several co-benefits:
to high levels of local air pollution and greenhouse gas • Reduced greenhouse gas emissions from more effi-
emissions. cient use of coal in the kilns.
In response to government demands to phase out • Reduced local air pollution from burning less coal.
inefficient kilns, the Xuan Quan commune in Hung Yen • Anticipated drop in respiratory illnesses from lower air
Province, where family-scale brick production is com- pollution.
mon, introduced several Chinese coal- and energy-saving • Higher incomes for family brick-making firms.
(45–50 percent reduction) vertical shaft brick kilns and The project has been replicated in other areas.
82
“ Investing between 2007 and 2030
to achieve current levels of best practice
technology would improve energy efficiency
1.2 percent a year and save $365 billion in
costs by 2030, excluding investment costs
4 Table 4.2
Technical and economic savings potential arising from industrial energy-efficiency improvements
Technical improvement
potential Carbon dioxide
Total savings potential Share of energy costsa
savings potential Share of
The economic and social dividends from industrial energy efficiency
84
“ many options for improving industrial energy
efficiency in developing countries appear to be
highly profitable, even when compared with the
most optimistic returns on financial investments.
Yet few of the opportunities are being seized
85
Section 3 Challenges and opportunities in sustainable industrialization
Chapter 5
If investments in improved industrial energy efficiency “mechanism that inhibits a decision or behaviour that
yield environmental, economic and social benefits, appears to be both energy and economically efficient.”
what is impeding firms from seizing these opportu- Some barriers arise from failures in the technology
nities? Economists, assuming that unobserved costs, and energy services markets, when private markets
risks and inconveniences explain why potential gains do not provide goods or services at a level that maxi-
are not being realized, are generally sceptical about the mizes economic welfare. Most economic theory pos-
existence of large unexploited potential for profitable its that organizations are rational and invest based on
investments in industrial energy efficiency. Physicists cost-benefit analysis (for example, selecting equipment
and engineers, however, often see substantial opportu- that maximizes profits or utility based on initial price,
nities (Jaccard 2009). productivity, reliability, running expenses and other
Aversion to investment seems to stem from a com- costs). But rational agents do not always consider
bination of failures in the markets for energy-efficient broader social benefits and costs (for example, how
goods and services and departures from the rational carbon emissions harm the environment and human
behaviour of orthodox economic theory. These forces health), thus often overlooking industrial energy-
overlap to create barriers to improving energy effi- efficiency technologies that would be socially desirable
ciency, including: (Arrow and Debreu 1954; Bator 1958; Greenwald and
• Lack of awareness of efficiency opportunities. Stiglitz 1987).
• Difficulty borrowing money for energy-efficiency How can we understand the failure to make
investments. seemingly rational economic decisions? One way is
• Inadequate technical know-how. through transaction cost economics, which assumes
• Disconnection between those responsible for that individuals make satisfactory rather than opti-
investing and those operating the equipment. mal decisions and rely heavily on routines and rules
This chapter examines potential barriers to indus- of thumb (Furubotn and Richter 1997; Simon 1959;
trial energy-efficiency investments from both pri- Williamson 1985). Behavioural economics goes fur-
vate and social perspectives based on a review of 160 ther, arguing that human decision-making is not just
recent studies and 96 UNIDO case studies (UNIDO boundedly rational but systematically biased and
2010h). It looks at how barriers to energy efficiency erroneous (Kahneman and Tversky 2000; Piattelli-
arise and how they operate. Summarizing some of the Palmarini 1994). For example, a loss aversion or a sta-
evidence on how the importance of these barriers dif- tus quo bias can discourage individuals from taking
fers across contexts, the chapter concludes that these on highly cost-effective investments (Samuelson and
barriers persist despite having been known for years Zeckhauser 1988; Swalm 1966; Thaler 1991). A large
– because information is lacking, decision-makers nei- body of experimental evidence demonstrates that such
ther make informed decisions nor benefit from their biases are universal, predictable and largely unaffected
choices, energy prices are far below their production by monetary incentives or learning (Kahneman and
and opportunity costs, financing is unavailable and Tversky 2000).
many hidden costs are prevalent. To explore economic, organizational and behav-
ioural barriers to improving energy efficiency, the fol-
Barriers, failures and hidden costs lowing sections consider market failures, limitations
Sorrell, Mallett and Nye (2011, p. 27) define a bar- of human decision-making (bounded rationality) and
rier to industrial energy-efficiency investment as a various hidden costs.
86
“ Many profitable industrial energy-
efficiency investments go unrealized because
the decision-maker is unaware of the costs
and benefits or is unable to get the information
needed to invest with confidence
Market failures
Four types of market failures inhibit improvements in
Box 5.1
Determining energy needs 5
energy efficiency: Bennett Industries, a small Nigerian company, fabri-
cates and assembles light fittings, fixtures and acces-
• Insufficient information.
we planned to use” (Masselink 2010, p. 5). However, he nology to be adopted on a wide scale, local fabricators
also suggested that this practice is rare and that there must have the information and skills to produce the
is nowhere to seek support. Many developing countries equipment according to strict quality standards, and
lack public and private institutions that provide local technicians must have the expertise to maintain
information on energy use, processes and technologies. and repair the technology– a difficult combination in
As a result, companies remain unaware of cost-effective developing countries (Box 5.2).
energy-efficiency opportunities (Schleich 2011). Another impediment is the lack of credible, third-
Limited access to modern technology, engineering party verification of claims made for a product or
skills and related services further constrains develop- service. A recent study on energy-management prac-
ing countries’ capacity to improve industrial energy tices in Indian small and medium-size enterprises
efficiency. For example, management at a Tunisian
textile company was aware of the potential benefits Box 5.2
of energy-efficiency audits and projects but lacked the The Firozabad experience with adopting new
industrial energy-efficiency technology
skills to take them on (Fokeer 2010). Colombian firms
Almost the entire small-scale glass industry in India
complain that they can sometimes get information on
is located in a single enterprise cluster in Firozabad,
energy-efficient US equipment but not on European near Agra. Until the mid-1990s, these firms used tra-
alternatives (De Simone 2010). Wison (Nanjing) ditional, high energy-intensity technologies and oper-
Chemical Co., Ltd., a new company, had few sim- ating practices. The Energy and Resources Institute
ple options left to improve energy efficiency. Further (TERI) in New Delhi, supported by the Swiss Agency for
Development Cooperation, developed and promoted
improvements would require adopting cutting-edge
industrial energy-efficiency technologies for this sec-
energy-efficient technologies and industrial processes, tor, focusing on the coal-fired pot furnace. The project
but these are hard for the company to identify and took on new urgency when the firms were pressured to
adopt (Zeng and Rong 2010). Many of the required switch from coal to natural gas.
In 2001, TERI introduced a gas-based recuperative
technologies must be imported, making technol-
pot furnace that reduced energy use by half over the tra-
ogy adoption even more difficult, costly and time ditional coal-fired pot furnace and 30–35 percent over
consuming. the conventional gas-fired pot furnace developed by
Many equipment producers in developing coun- local entrepreneurs just a few years before (and adopted
tries know little about industrial energy-efficiency by most coal-fired pot furnace firms, which had no
alternative). Next, TERI strengthened the capacities of
opportunities and have limited access to efficient tech-
cluster-level service providers through awareness cam-
nologies. A study of motor systems in China found paigns and hands-on training, so that entrepreneurs
that design engineers were “specialized in certain could sustain the new technology without depending on
specific subjects . . . , tend to use existing or old prod- external agencies. Nearly 60 of the 100-odd operating
ucts and equipment and are not aware of the latest pot furnace firms in Firozabad have switched to the new
recuperative furnace, and the waste-heat recovery tech-
energy-efficient products” (EEPC India 2006 quoted
nology has inspired innovation among entrepreneurs
by Sorrell, Mallett and Nye 2011, p. 53). In such cases, across the cluster. Other pot furnace firms have set up
the information deficits in production and demand locally designed heat-recovery systems to improve the
reinforce each other. energy efficiency of their conventional furnaces.
A study of small and medium-size enterprises Source: Sethi and Ghosh 2008.
in India found that an industrial energy-efficiency
88
“ When an investment reduces energy costs,
it is profitable for the company as a whole but
that might not be clear to individual departments,
so the investment may be overlooked
determined by how much the company reduced its Thus, subsidizing energy by keeping prices artifi-
energy consumption, the contractor had no incentive cially low can inflate energy consumption, something
to accurately document savings opportunities (Punte, users recognize. For example, a Nigerian producer
Repinski and Gabrielsson 2007). of electronic parts said that he makes no effort to
become more energy-efficient because prices are so low
Energy prices and unreliability of supply (Masselink 2009). A subsidy that lowers fuel prices to
Firms’ decisions on how much energy to consume end-users leads to higher demand, encourages waste,
and whether to invest in industrial energy efficiency promotes inefficient resource use and increases energy
are heavily influenced by energy prices. While tempo- consumption (UNEP 2008). Developing coun-
rary energy-price hikes could encourage some energy tries account for the bulk of global energy subsidies
conservation, the savings will be limited by the long (Box 5.4).
lifespans and slow turnover of energy-using equip- Many respondents in an industrial energy-
ment. However, longer term energy price increases are efficiency study in Asia viewed energy subsidies as
more likely to influence industrial energy-efficiency a major barrier to energy-efficiency improvements
investments, as firms have more time to develop new (UNEP 2006c). Energy costs were not a large enough
products and processes (Gillingham, Newell and share of total expenditures for companies to place a
Palmer 2009). high priority on improving energy efficiency. When
Consider utilities. In some developing countries, energy prices are artificially low, energy-efficiency
electric utility companies charge far more than mar- investments are less profitable than they would be at
ginal costs, reaping monopoly profits, because of true cost (Jaccard 2009). Energy theft and payment
imperfect competition. In other countries, regulators
may require utility companies to set prices that pre-
Box 5.4
clude excessive profits– sometimes to the extent that Developing countries are the biggest energy
prices do not cover the cost of energy supply. In both subsidizers
cases, electricity pricing affects whether companies The International Energy Agency estimates that global
invest in industrial energy efficiency. Energy prices subsidies for fossil fuels totalled $312 billion in 2009,
rarely reflect the environmental costs of energy con- with oil products accounting for 40 percent, natural
sumption, particularly the costs associated with green- gas for 27 percent and coal for 2 percent. In economic
value, Iran leads with $66 billion a year in energy sub-
house gas emissions. If these negative environmental
sidies, followed by Saudi Arabia with $35 billion, the
externalities were factored into the price, the num- Russian Federation with $34 billion and India with $21
ber of profitable industrial energy-efficiency projects billion. The next six – China, Egypt, Venezuela, Indone-
would likely soar. sia, the United Arab Emirates and Uzbekistan – have
Energy prices also influence the rate of innova- subsidies of more than $10 billion each a year.
Under-pricing is largest for natural gas. Consum-
tion and diffusion of energy-efficient technologies
ers in non-OECD countries pay less than 50 percent of
(Anderson and Newell 2004; Hassett and Metcalf its true economic value. Iran has an 82 percent subsidy
1995; Jaffe, Stavins and Newell 1995). Higher energy on gasoline; Venezuela has a 96 percent subsidy on
prices are associated with significantly higher rates diesel fuel.
of adoption of industrial energy-efficient equipment Source: IEA 2006b, 2010e.
(Anderson and Newell 2004; Hassett and Metcalf
90
“ Industrial energy-efficiency measures
are frequently ignored because any
savings that could be realized would not
compensate for the enormous losses
caused by power supply deficiencies
es
Co ru
Ar ia
Lit a
ia
ng Ara in
of
Ca ia
Pa a
tan
l
pa
ua
i
b
an
r
od
n
De Re
Pe
pin
nti
p.
ge
ate
Ne
Be
kis
ug
hu
mb
Re
ge
Ni
b
ilip
St
Ur
Ph
al
on
Co ian
ati
ply deficiencies.
liv
Bo
Unreliable power supply impedes the adoption Note: PPP$ is purchasing power parity in international dollars.
Source: World Bank 2010a,b.
of industrial energy-efficiency measures because in
91
“ Missing or incomplete financial
and risk insurance markets create high
barriers to industrial energy-efficiency
investments in developing countries
5 Top-down decision-making
Hierarchical management structures can also impede
Another group of production costs concern the
weaker performance of industrial energy-efficiency
investments in energy efficiency, discouraging staff technologies along dimensions other than energy
from suggesting improvements, even if there are for- consumption. An energy-efficiency production pro-
Barriers to industrial energy efficiency
mal procedures for doing so (Masselink 2009). In an cess might be noisier than the equipment it replaces.
Asian paper company, for instance, when consultants Insulating a cavity wall in an old building could result
identified simple good housekeeping options that in moisture build-up, or installing a variable-speed
would reduce costs and save resources, the staff did drive might require extra maintenance or new skills
not report the suggestions to management because and tools.
they feared negative repercussions (Punte, Repinski
and Gabrielsson 2007). This finding lines up with Search costs
survey results showing that small and medium-size Hidden costs are also associated with obtaining, veri-
firms in India made decisions on industrial energy- fying and assessing information on energy-efficiency
efficiency projects primarily through a top-down opportunities, such as the cost of identifying suppliers
process (Ghosh 2011). Projects were much more and obtaining information on price, quality and terms
likely to be implemented if the firms’ owner favoured of trade. These search costs are strongly influenced
them. by the characteristics of energy service markets and
by the nature of energy efficiency as a good. Search
Hidden costs costs are determined in part by factors outside a firm’s
Economists sometimes argue that when engineers control, such as the existence (or not) of standardized
calculate the gains of implementing industrial energy- labelling schemes and by internal factors, such as com-
efficiency technologies, they fail to account for hidden pany procedures for gathering information and speci-
costs– costs hidden from the analyst but not from fying, purchasing and procuring the new equipment
the organization– a nd so overstate the gains (Sorrell or process. Developing country firms may find it more
2009; Sorrell, Mallett and Nye 2011; Table 5.1). Many costly to improve energy efficiency, because an array of
economists argue that hidden costs explain much of economic and political factors often boost their search
the “efficiency gap” so often noted (Jaccard 2009). In costs (Sorrell, Mallett and Nye 2011).
principle, such costs can be quantified and included as
production, management and transaction costs in the Transaction costs
techno-economic feasibility analysis, though in prac- Overhead costs of energy management are hidden as
tice this is not straightforward. well, including for employing specialists and conduct-
ing energy audits (Sorrell, Mallett and Nye 2011). Low
Hidden production costs labour costs relative to energy costs (unless energy use
Most hidden costs could be lumped in with produc- is heavily subsidized) in developing countries might
tion costs, which should be taken into account when suggest that the energy-management overhead would
appraising investment opportunities (Sorrell, Mallett be less of a barrier than in developed countries. This
and Nye 2011). But many production costs are site- argument would not hold, however, for tasks requir-
specific and difficult to estimate, so they are easily ing higher skill levels, typically the case for complex
overlooked. Examples include design fees for large industrial technologies (Schleich 2011).
plant items and civil engineering costs associated with Other transaction costs that might be a greater
installing a cogeneration unit. When production has barrier in developing countries include the costs for
to be shut down to install new energy-efficient equip- identifying opportunities, investigating options,
ment, costs can include forgone sales income. appraising the investment and obtaining financing
94
“ In enterprise surveys for this report,
the top-ranked barrier to energy-efficiency
investments was accessing capital
Table 5.1
Hidden costs associated with investments in industrial energy efficiency 5
Cost Example
General overhead costs • Specialists (such as an energy manager).
(Sorrell, Mallett and Nye 2011). A study of small glass from acquiring the more efficient device, the firm is
firms in India found that they ruled out debt finance financially worse off (Jaccard 2009). This considera-
for industrial energy-efficiency projects because of tion is especially important in developing countries,
their inability to comply with the numerous formali- where the average age of capital equipment is typi-
ties required for a bank loan (see Box 5.2). cally much higher.
5 Box 5.6
The rebound effect
Some anticipated behaviours may keep energy consump- be greater. For example, lower cost energy services will
tion from falling by as much as would be expected from substitute for capital and labour, offsetting some of the
Barriers to industrial energy efficiency
adopting industrial energy-efficiency improvements. One anticipated reduction in energy consumption. Produc-
is commonly known as the rebound effect. ers may also use cost savings from energy-efficiency
While improving energy efficiency can reduce abso- improvements to expand output, increasing consumption
lute energy consumption, it can also drive a rebound in of energy inputs as well as capital, labour and materials,
demand for energy and energy services, resulting in more which also require more energy. If the energy-efficiency
modest gains in energy efficiency or even in greater energy improvements are sector-wide, they can lead to lower
consumption. An example is the driver who replaces a car product prices, increased consumption of the relevant
with a more fuel-efficient model, only to take advantage of products and further increases in energy consump-
its cheaper running costs to drive further and more often. tion. All these improvements will increase the economy’s
Rebound effects have long been neglected, but their con- productivity – encouraging economic growth, increased
sequences could be profound. consumption of goods and services and increased energy
Since energy-efficiency improvements reduce the consumption.
marginal cost of energy services such as travel, the con- Rebound effects may be mitigated by gradually
sumption of those services may be expected to increase. increasing carbon and energy taxes or imposing increas-
Indeed, improved industrial energy efficiency causes ingly stringent cap and trade schemes. Emission reduc-
behavioural and economic responses – such as more tions will not be achieved by efficiency efforts alone but
intense use of more efficient equipment, re-spending of will require greater emphasis on all the other levers to
money saved, and diffusion of more efficient and therefore attain climate mitigation goals.
attractive technologies – that offset some of the predicted More fundamentally, both analysts and policy-makers
reduction in energy consumption. The energy rebound need to recognize the importance of such effects and of
can be direct, such as in taking advantage of cheaper taking them into account in policy appraisals. In develop-
marginal costs of energy services and then using more ing countries, especially, it can be argued that a marginal
energy overall, or indirect, such as through savings from increase in income will be used for goods and services
improved energy efficiency that lead to increased con- that are more energy intensive than the economy’s aver-
sumption of other goods and services. age. If so, the rebound effect must be taken seriously and
Rebound effects apply equally to the production side additional policy instruments might be needed to com-
of the economy, where the potential for large effects may pensate for it.
Source: Van den Bergh 2010, 2011; Sorrell and Dimitropoulos 2007; Jenkins and Saunders 2011.
and one-third small) were asked to rank barriers in industries in developing countries (Luken and Van
order of importance (UNIDO 2010h). Though not Rompaey 2008).
a representative sample, the responses shed light on
the perceived importance of different barriers in Firm size
different sectors. The top-ranked barrier to energy- Small and medium-size enterprises report more bar-
efficiency investments was accessing capital. Also riers to improving industrial energy efficiency than
high on the list was investment risk– w hether aris- do larger firms (Figure 5.2). Operating closer to the
ing from uncertainty about the duration of the pay- edge and unable to afford a capital loss, smaller firms
back period, technical performance, future energy invest more carefully. Small firms face severe liquid-
prices or some other source– c ombined with limited ity constraints, and their capital base is usually not
company savings. Overall, the findings were consist- strong enough to finance energy-efficiency invest-
ent with those of a study on barriers to the adop- ments (Worrell and Price 2000). In addition, small
tion of environmentally friendly technologies in the firms are less likely than large firms to have informa-
pulp and paper, textiles, leather, and iron and steel tion about investment opportunities or the skills or
96
“ In continuous process sectors, which
typically have high energy intensity, the risk
of interrupting production constitutes a major
barrier to process-related investment
Figure 5.2
Percentage of firms mentioning specific
technological changes and retrofitting) or a large
investment (replacement equipment and processes).
5
barriers to energy efficiency as most
significant, 2010 Large investments are generally assessed more strin-
gently and less favourably than smaller ones. To make
5 Figure 5.3
Ranking barriers to industrial energy efficiency
Perceptions about barriers
Barriers in access to information– such as details on
in the Swedish pulp and paper sector
Technical risks are a big concern in the Swedish pulp and paper sector the firm’s energy performance or opportunities for
improved efficiency– a re considered much less impor-
Barriers to industrial energy efficiency
99
Chapter 6
Box 6.1
Energy conservation laws in India and Japan 6
India’s Energy Conservation Act established the Bureau of • Prepare and submit medium- and long-term plans for
Energy Efficiency to implement the law. Industry mandates achieving energy conservation targets.
Overcoming barriers to industrial energy efficiency through regulation and other government policies
include: • Appoint energy conservation managers.
• Committing to national energy conservation and effi- • Use products with mandatory energy-e fficiency
ciency efforts and programmes. labelling.
• Adhering to energy standards and equipment labels. • Monitor progress through regular factory inspections.
• Appointing energy managers and carrying out man- In 2005, the law was extended to 13,000 large and
datory energy audits in facilities operating above the medium-size industrial firms and energy-intensive trans-
energy consumption threshold. portation businesses and buildings. Energy-efficiency and
India’s Bureau of Energy Efficiency reports that many conservation guidelines were also added for fuel burning,
measures are still difficult to implement, such as gather- heating, cooling and heat conduction, recovery and reuse
ing data from businesses on the performance and energy of waste heat, conversion of heat to power, prevention of
consumption of energy users, on the number of energy energy loss through radiation, and conversion of electric-
audits performed or on the energy savings achieved. ity to power and heat. The law encourages businesses
The Bureau estimates that just applying the manda- to cooperate on large-scale energy conservation invest-
tory energy-efficiency standards and labels for industrial ments at industrial complexes.
machinery and commercial appliances has saved 11,689 The law has resulted in reductions of 2,166 tonnes of
million kilowatt hours a year over five years. carbon dioxide emissions (from 52,673 in 1997 to 50,507 in
Japan’s Energy Conservation Law of 1979 stipulates 2005) and reductions in energy consumption of 832 kilo
that energy-intensive industries must: litres of crude oil equivalent (from 17,844 to 17,012).
• Submit periodic reports on energy use.
Box 6.2
Tunisia’s National Energy Conservation Agency
Tunisia established a National Energy Conservation are due. ANME has designated energy-auditing firms,
Agency (ANME) to support its policy of energy security which prepare applications for industrial energy-efficiency
and independence and to reduce the national energy bill. subsidies and loans.
ANME has made it a priority to sensitize companies to the Industrial energy-efficiency projects are financed
importance of energy efficiency. It also: either entirely by ANME or through a 40–60 split between
• Requires companies with annual energy consump- ANME and banks. There are three types of government
tions of more than 800 tonnes of oil equivalent (toe) to subsidies:
conduct energy-efficiency audits. • For energy audits: 70 percent of the cost, up to 30,000
• Distributes subsidies for industrial energy-efficiency dinars.
projects. • For intangible investment (such as training): 70 percent
• Works with the Société Tunisienne de Gestion de of the cost, up to 70,000 dinars.
l’Energie and the Société Tunisienne d’Electricité • For tangible investment (such as equipment): 20 per-
& Gaz to manage credit funds for industrial energy- cent of the cost, up to 500,000 dinars.
efficiency projects. ANME claims a cumulative energy saving of 676 kil-
• Identifies industrial energy-efficiency incentives. otonnes of oil equivalent (ktoe) solely from industrial
• Runs training courses for energy managers. energy-efficiency projects over 2004–2008. It assesses
ANME tracks companies that consume more than the potential for energy savings for 2008–2011 at
800 toe a year and reminds them when their energy audits 400 ktoe.
101
“ Targets can be powerful instruments for
increasing industrial energy efficiency
Conservation Programme (Procel), coordinated by Action areas need to be defined, including measur-
the national electricity company (Electrobras), and able and realistic targets, legislation on standards
the National Programme for Rationalizing the Use of and labelling, systems of market-based incentives,
Oil and Natural Gas (Conpet), which includes private knowledge and information programmes and a con-
initiatives and draws on the resources of Petrobras, the ducive institutional environment. Effective policy-
state oil company (ECLAC 2010). making requires effective mechanisms for regular
Beyond the central government, developing coun- evaluations to determine whether targets and policies
tries have set up specialized local and regional govern- need to be revised (Mallett, Nye and Sorrell 2011;
ment bodies to provide more targeted measures and to Verbeken 2009).
collaborate with industry, academia and intermedi-
ary institutions, such as energy information centres. Setting national targets
Support institutions have also been set up, including Many countries in Asia, Europe and Latin America
industry associations, energy conservation centres, have recently incorporated quantitative targets in their
national and regional cleaner production centres, national energy laws and programmes (Figure 6.1).
energy research and development (R&D) laboratories, Targets can be powerful instruments for increas-
energy technology and information centres, cluster ing industrial energy efficiency. Targets have been
development institutions, and metrology, standards, expressed in various ways– for example, as a speci-
testing and quality control centres (UNIDO 2011). fied annual rate of energy-efficiency improvement, as
The experiences of countries as diverse as Costa Rica a percentage improvement over time, as energy savings
and the Russian Federation suggest that several capabil- in gigawatt hours or millions of tonnes of oil equiv-
ities are critical to successful implementation of energy- alent or as a reduction in energy intensity to some
efficiency legislation (UNIDO 2011; WEC 2008): target value. Most countries target energy-efficiency
• Estimating the savings and impact of energy- improvements (WEC 2010).2
efficiency projects. Brazil’s National Energy Plan 2030 aims to
• Applying the right mix of policy instruments in reduce electricity use by 4.5–15.5 gigawatt hours
each sector (specificity is critical to success). by accelerating technical progress and industrial
• Developing the institutional and organizational energy-saving initiatives (ECLAC 2010). China’s
knowledge and skills for designing and imple- 11th Five-Year Plan stipulated economy-wide
menting policies consistently. improvements in energy intensity of 20 percent
• Rigorously monitoring and enforcing legislation. over 2006–2010, with targets and monitoring set
One concern, particularly in large developing coun- at provincial and industry levels. When the target
tries, is the weak coordination among energy-efficiency was grossly undershot in the first few years because
agencies, with agencies often working independently of industry reluctance to comply, the government
and towards different goals (UNIDO 2011). required all companies and local and provincial
governments to submit detailed compliance plans
Shaping the industrial energy-efficiency beyond 2007. The Five-Year Plan linked institu-
policy setting tional and individual staff performance assessments
To be successful, industrial energy-efficiency policy to target achievement. And in 2008, energy inten-
must have clearly specified and measurable goals and sity declined 4.2 percent (UNIDO 2011).
102
“ Voluntary energy-efficiency agreements
can increase awareness of industrial energy
efficiency and engage stakeholders
Figure 6.1
Breakdown of energy-efficiency targets incorporated in laws or programmes, by region, 2009 6
Many countries in Asia, Europe and Latin America have established national quantitative energy-efficiency targets
100
Overcoming barriers to industrial energy efficiency through regulation and other government policies
Percent
75
50
25
0
Europe North America/Asia OECD Non-OECD Asia South America Africa Middle East World
Lighting Service Transport Power Industry Residential Final consumption Primary consumption
Setting sectoral targets independent third party and used as a basis for the nego-
Industrial energy-efficiency targets can be set through tiation. Rewards and sanctions, such as auditing, bench-
mandatory measures or voluntary agreements with marking, monitoring, disseminating information and
governments. Voluntary agreements include targets offering financial incentives, can motivate participation.
to meet specific energy-efficiency goals (generally over These agreements can increase awareness of indus-
5–10 years) so that investments can be planned and trial energy efficiency and engage stakeholders. Several
implemented (Worrell and Bernstein 2009; Price, successfully negotiated agreements include elements
Wang and Yun 2010). that could work in other countries and sectors. China
Voluntary agreements have been implemented used negotiated agreements in Denmark, Finland and
in developed countries since the 1990s (Price, Wang the Netherlands as models (Box 6.3).
and Yun 2010).3 Successful implementation is typi- A few developing countries use voluntary energy-
cally rewarded with financial gains or exemption from efficiency agreements, notably Chile, China, India,
mandatory measures. They tend to receive greater sup- Indonesia, Malaysia, Romania, South Africa and
port from industry and are more flexible and faster Thailand. Chile has a wide range of agreements cover-
to implement than mandatory measures. However, ing mining, metals, chemicals and printing (UNIDO
if compliance is low, agreements may be replaced by 2011). Romania is establishing long-term agreements
mandatory alternatives (Price 2005 cited in Worrell in glass, cement and machinery (UNIDO 2011).
and Bernstein 2009; McKinsey & Company 2009). China initiated the Top-1,000 Energy-Consuming
Setting targets under negotiated agreements involves Enterprises programme, a major voluntary agreement
assessing the energy-efficiency potential of each indus- to achieve its Five-Year Plan (2006–2010) targets to
try and identifying economically feasible measures reduce energy consumption per unit of gross domestic
for improvement. This assessment can be made by an product (Box 6.4).
103
“ A natural starting point in setting
targets and formulating policies is to
benchmark the industrial energy efficiency
of each sector and to identify its drivers
6 Box 6.3
Voluntary agreements on long-term energy-
Benchmarking requires comparing the energy per-
formance of a plant, process, system or industry with
efficiency targets in the Netherlands
In 1989, the Dutch Government and industrial sectors that of similar facilities producing similar products or
to national or international best practice energy use.
Overcoming barriers to industrial energy efficiency through regulation and other government policies
Box 6.4
China’s Top-1,000 Energy Consuming Enterprises programme 6
The enterprises participating in China’s Top-1,000 Energy Based on analyses of industrial energy-saving poten-
Consuming Enterprises programme are in nine energy- tial and the location of the enterprises, the Department
Overcoming barriers to industrial energy efficiency through regulation and other government policies
intensive industrial sectors (iron and steel, non-ferrous of Natural Resources and Environmental Protection
metals, chemicals, petroleum and petrochemicals, power assigned the 100 million tonnes of coal equivalent energy
generation, construction materials, coal mining, pulp and savings to individual provinces. In 2006, targets per enter-
paper, and textiles), which together accounted for 33 per- prise were discussed and published. Target-setting was
cent of national energy consumption and 47 percent of generally a top-down process, though there were regular
industrial energy consumption in 2004. information exchanges. A two-tier contract system was
The programme seeks to: established between the central government and provin-
• Reduce greenhouse gas emissions in the top-1,000 cial governments and between provincial governments
energy-consuming enterprises through an increase in and companies.
energy efficiency of 260 million tonnes of carbon diox- The programme, modelled on international experience
ide equivalent (CO2-eq). with voluntary agreements, achieved its targets. But there
• Benchmark against domestic best practice for all were some shortcomings:
major products and international best practice for • Target-s etting was rushed to meet the time con-
some. straints of the 11th Five-Year Plan and thus failed to
• Achieve energy savings of 100 million tonnes of coal adequately engage industry.
equivalent over 2006–2010. • Targets were not sufficiently ambitious; greater detail
The programme involves several national govern- in assessing energy saving potential for specific
ment departments: the Department of Natural Resources industries could have resulted in higher targets for
and Environmental Protection; National Bureau of Sta- energy savings and efficiency.
tistics; Office of National Energy Leading Group; Gen- • Supporting policies were slow to come online, and
eral Administration of Quality Supervision, Inspection regulatory responsibilities were unclear.
and Quarantine; and State-owned Assets Supervision • No systematic information and dissemination method
and Administration Commission. Provincial, district and was formed.
urban energy-saving authorities and local authorities were • Monitoring and evaluation were handicapped by lack
charged with overseeing energy management and report- of transparency, lack of external auditing and the use
ing within enterprises. of aggregate data.
standardized methodologies for energy management action plans, progress monitoring and evaluation
and efficiency and help countries collect better energy (Box 6.5). Energy managers decide which measures are
data and develop benchmarking tools and methodolo- implemented, such as improving monitoring, control
gies. These collaborative efforts must be extended to and operating practices; signalling the need for timely
small and medium-size enterprises, which often have repair and regular maintenance; and estimating costs
the most potential for improvement. for these requirements. Effective energy management
in firms typically includes multi-year planning, plant-
Supporting private initiatives level performance goals and tracking, designated
Many firms in developed countries have pursued their energy managers, energy management systems, energy
own industrial energy-efficiency targets, setting up auditing and capital allocation.
energy management programmes, often with ambi- The US Government’s Energy Star programme
tious targets, and hiring energy managers. These pro- offers industrial firms energy management guide-
grammes are often supported by governments. lines and supporting tools. The guidelines include
The key stages in a corporate energy-efficiency assessment, benchmarking, energy management
programme include benchmarking, auditing, energy planning and progress evaluation. In 2007, around
105
“ The four elements of a regulatory
framework for industrial energy efficiency
are mandatory energy auditing, energy
labelling, minimum efficiency standards and
energy management systems standards
6 Box 6.5
Key stages in target-setting at the firm level
Setting firm-level industrial energy-efficiency targets has targets. The plan, required for compliance with an energy-
long been a central part of the promotion mechanism for management standard, is a working document for improv-
Overcoming barriers to industrial energy efficiency through regulation and other government policies
many governments. Target-setting has several stages: ing internal industrial energy efficiency.
Benchmarking. Benchmarking enables measuring Monitoring progress. Regular review and annual mon-
the energy performance of a plant or sector against best- itoring and reporting of progress towards the target are
practice performance in the sector. essential. Programmes are more likely to be effective if
Auditing. Auditing involves collecting data on all major they are backed up by the threat of greater government
energy-consuming processes and plant equipment; docu- regulation or taxes if the targets are not achieved.
menting technologies used in production, operation and Programme evaluation. Firms evaluate programmes
maintenance practices and management systems; and periodically to investigate how a programme is progress-
identifying energy-efficiency opportunities throughout the ing and why – and at its end, to determine if it has met its
plant. Audits can identify major energy-consuming areas goals. Evaluation guidelines need to be set early. There
and indicate possible energy-saving measures, look at are three types of evaluations: impact, which determines
improving specific systems, target high-energy areas and how well a programme did over a set time or at the end of
cover total energy consumption. the programme; process, which assesses how efficiently
Energy action plan. The energy action plan outlines a a programme was implemented compared with its stated
company’s plan for improving its energy efficiency through objectives; and market effect, which estimates how a pro-
targets and related timelines and measures to reach the gramme will affect the market in the future.
Source: Price, Worrell and Sinton 2003; Price, Wang and Yun 2008; Price et al. 2005; Vine and Sathaye 1997; MOTIVA, IFE and CRES 2000; Schiller 2007.
500 manufacturing firms made the commitment to opportunities for improving industrial energy effi-
follow the Energy Star guidelines.4 ciency; detailed energy audits involving comprehen-
sive surveys of energy use; and investment-grade audits
Creating an industrial energy- that focus on more capital-intensive industrial energy-
efficiency regulatory framework efficiency opportunities (ASHRAE 1997).
The four elements of a regulatory framework espe- Mandatory industrial energy audits are key to
cially important for industrial energy efficiency are improving industrial energy efficiency in some coun-
mandatory energy auditing, energy labelling schemes, tries. They are used more in Asia than in Europe
minimum efficiency standards and energy manage- (WEC 2010). China, the Philippines and Viet Nam
ment systems standards. Standards and product label- require energy audits for large-scale, high energy-
ling are used widely in developing countries– 21 of 37 intensive industries (UNIDO 2011). The knowledge
reviewed countries have them. Mandatory audits are gained through an energy audit helps firms improve
used less frequently; only 13 countries have introduced the efficiency of their industrial processes. However,
them (UNIDO 2011). mandating audits does not always increase the use of
industrial energy-efficiency technologies– f or exam-
Conducting energy audits ple, if the audits are weak and shallow because there
Energy audits help firms determine their energy is no unified standard, if auditing entities do not have
consumption and identify opportunities for energy enough qualified personnel or are not accredited and
saving. The audit typically involves analysing utility if audits have not been piloted or the financial means
and building data; surveying, costing and evaluating for more detailed auditing are lacking (Price, Wang
energy-saving measures; and estimating energy saving and Yun 2010; UNIDO 2011). Some 25–30 Indian
potential (Krarti 2000). Energy audits include bench- industrial small and medium-size firms, despite hav-
marking analyses; walk-through audits to identify ing been thoroughly audited, could not be convinced
106
“ Energy-efficiency labels are one of
the easiest and cheapest policy tools and
can lead to large energy savings
Overcoming barriers to industrial energy efficiency through regulation and other government policies
measures, such as subsidies for audits and training for schemes in India, Thailand and Malaysia are voluntary
auditors and company personnel. Implementation of and do not perform as well as mandatory programmes,
audit recommendations may require the government which give users full comparable information. Ghana’s
to process data and provide feedback. Experience labelling efforts would be more credible with better
shows that governments committed to industrial testing facilities and equipment. A common problem
energy efficiency can introduce mechanisms that with lighting and air-conditioning equipment in many
make energy audits an effective part of their energy developing countries is that nearly all products receive
strategies (as in Tunisia; see Box 6.2). top ratings. South Africa needs to standardize label
information updates to include product and equip-
Using energy-efficiency labels ment technology changes.
Energy-efficiency labels are one of the easiest and Overall, improvements are needed in energy-
cheapest policy tools and can lead to large energy sav- efficiency metrics, product categorization, certifica-
ings. Labels describe the energy performance of equip- tion and labelling regulation. Countries with weak
ment in terms of average energy efficiency for con- border protection face the added task of dealing with
sumption or costs, thus enabling consumers to make unlabelled foreign products and equipment.
an informed purchasing decision. Labels help over-
come information barriers and encourage the adop- Establishing minimum efficiency
tion of more efficient equipment (Wiel and McMahon performance standards
2005). They include endorsement labels, which certify While labels help transform the market for high-
that a product meets preapproved criteria; informa- efficiency equipment, minimum efficiency perfor-
tion labels, which inform consumers of a product’s mance standards aim to reduce the market share of
performance; and comparative labels, which allow the least efficient models (Fleiter, Eichhammer and
consumers to compare the performance of similar Schleich 2011; Nadal 2002). They can be an impor-
products (Wiel and McMahon 2005; CLASP 2009). tant source of gains in energy efficiency, as in the
Labelling often precedes standards by encourag- case of electric motors, which account for 60–70 per-
ing manufacturers to compete based on energy effi- cent of industrial electricity consumption (Fleiter,
ciency and preparing consumers and producers for Eichhammer and Schleich 2011).
new or stricter standards (Nadal 2002). Mandatory Standards are usually imposed by energy authori-
labels can lower the transaction costs associated with ties, often through technical regulations that typi-
assessing energy performance, such as for electric cally prohibit manufacturing, selling and importing
motors (Schleich 2011). If clearly designed and accom- non-conforming equipment and appliances. Setting
panied by information campaigns, mandatory labels standards for equipment such as boilers, motors, light-
can encourage manufacturers to design more energy- ing and space conditioning can boost demand for
efficient machines and processes (CLASP 2009). energy-efficient equipment and eliminate the least
Many countries have adopted labelling schemes, efficient models from the market. Standards can also
frequently in tandem with minimum energy per- reduce other inefficiencies and losses indirectly related
formance standards. For example, the EU Energy to energy, resulting in a cascade effect that drastically
Labelling Directive requires labels on all energy-using cuts energy intensity (de Almeida, Ferreira and Both
products (WEC 2010). Experience with labelling 2005). These standards, used widely in many countries
107
“ While labels help transform the market for
high-efficiency equipment, minimum efficiency
performance standards aim to reduce the
market share of the least efficient models
that mandatory standards emerged from a voluntary to be weighed against the challenges of implement-
agreement. Minimum efficiency performance stand- ing a new standard, such as engineering costs, slower
ards were introduced less as an efficiency measure than deployment of new technologies and long lifespans of
as a mechanism for combating electricity shortages. existing equipment. Standards can be especially diffi-
The first product subject to standards was the squir- cult to impose on specialized process equipment and
rel cage three-phase induction electric motor, which are probably not cost effective for low-volume equip-
used around 32 percent of Brazil’s electricity supply. ment (McKinsey & Company 2009).
Government energy and standards regulatory agencies If regulatory policy forces the early retirement of
and Brazilian manufacturers entered into a voluntary capital goods, firms might be worse off financially if
agreement to sequentially introduce more stringent the profits associated with the more efficient replace-
efficiency targets for both standard and high-efficiency ment equipment do not offset losses from retiring
motor classes. Implementing the standards not only capital goods early (Jaccard 2009). Regulatory policy
saved energy but also benefited Brazilian motor manu- needs to overcome this disincentive to upgrading
facturers, since the standards eliminated competition equipment (Stern 2006). Conversely, firms could try
from less technically and economically efficient for- merely to meet the mandated minimum standards,
eign firms, and made it easier to introduce manda- even as the standards get outdated, thus discouraging
tory standards for induction motors (ECLAC 2010; innovation. To prevent this, standards need regular
Garcia et al. 2007). review and updating to keep up with technological
Although minimum efficiency performance progress (IEA 2007b; Saidur 2010). Standards should
standards are considered cost-effective, they are not encourage industry to continually improve energy
Table 6.1
Use of minimum efficiency performance standards in selected economies
108
“ Much industrial energy efficiency is
achieved by changing how energy is managed
rather than by installing new technologies
Overcoming barriers to industrial energy efficiency through regulation and other government policies
other fees, so their cost effectiveness varies with the
Developing energy management systems firm’s size and energy intensity.
standards Governments can encourage companies to estab-
Much industrial energy efficiency is achieved by lish an energy management system by providing
changing how energy is managed rather than by information on best practices, issuing standards, pro-
installing new technologies. Energy-efficiency com- viding training in compliance and recognizing or cer-
ponents in industrial systems will not achieve the tifying firms that meet the standards. International
projected energy savings if the system is not prop- guidelines on standards are available through the
erly designed and operated (Lovins 2007). Evidence recently established ISO 50001 Energy Management
from national and international programmes shows Systems and are also available through ISO 14 000
that while efficient components might yield minor Environmental Management Systems, which includes
gains, systems optimization can yield much larger suggestions for continuous improvement in energy
gains (20–30 percent), with payback periods of less efficiency. Developed countries with energy manage-
than two years (ECLAC 2010; Garcia et al. 2007).5 ment system standards include Australia, Canada,
Energy management systems, by taking into account Denmark, Germany, Ireland, Republic of Korea,
the entire industrial system, are more effective in opti- the Netherlands, Sweden, the United Kingdom
mizing industrial systems and monitoring system effi- and the United States. Regional standards have
ciency (EEEP 2010).6 also been established, such as the European Energy
Energy management systems include the techni- Management Standard (EN 16001), introduced
cal systems, management programmes and trained in 2009.
staff needed to conduct energy audits, gather energy Energy management systems are less common
data, maintain submetering systems, analyse and com- in developing countries. Countries that use them
pare consumption data to trends and benchmarks, include Belarus, China, Ghana, Malaysia, Romania,
correct for influencing factors, identify faults and so the Russian Federation, South Africa and Thailand.
on (Sorrell et al. 2004). Energy management systems Malaysia requires that installations consuming 3
can help firms develop an energy use baseline, actively million or more kilowatt hours of electricity over six
manage energy costs and document savings for inter- months hire an energy supply manager. Experience
nal and external use (such as greenhouse gas emission with energy management systems in developing coun-
credits). A good energy management system is vital for tries, though sparse, suggests that government meas-
identifying opportunities for sustainable energy sav- ures should focus on the plant level, empower plant
ings (Worrell 2011). personnel at all levels and involve them in decision-
An energy management system is typically part making, encourage individual or team champions of
of a company-wide energy policy, supported by upper energy management programmes and provide some
management and energy management staff (Sorrell financial support (UNIDO 2011).
2009). A successful energy management system starts
with a strong organizational commitment. A study Developing an information policy
of Turkey’s textile sector suggests that implementing Regulatory efforts can also work with public informa-
an energy management system company-wide is the tion, awareness and training programmes. Information
best approach (Ozturk 2005). An approach that has and awareness-raising programmes are repeatedly
109
“ Public awareness and education
campaigns can boost industry capability
and willingness to adopt what has been
considered high-cost and -risk technologies
Developing countries are employing a wide range of and mass media (te Velde 2010). Brazil’s experience
these tools (Table 6.2). suggests the value of training trainer’s programmes
Lack of awareness of energy-efficiency opportuni- because of multiplier effects across firms and the
ties may stem from inadequate metering and insuffi- potential damage inflicted by poorly informed teach-
cient information on energy performance, reinforced ers (UNIDO 2011).
by weak skills and training. Language barriers and An assessment of United Nations Environment
limited Internet access may exacerbate these problems Programme (UNEP) activities to encourage cleaner
in developing countries. Limited knowledge means production technologies in five developing coun-
that quick-fix options are often preferred to those that tries (Guatemala, Nicaragua, Tanzania, Viet Nam
address root causes (te Velde 2010). and Zimbabwe) highlights the importance of rais-
ing awareness and educating key players (Ciccozzi,
Raising knowledge and awareness Checkenya and Rodriguez 2003). It notes the impor-
Public awareness and education campaigns can boost tance of educating the financial sector about the prof-
industry capability and willingness to adopt what has itability of industrial energy-efficiency investments.
been considered high-cost and -risk technologies. To The study acknowledges the need for hard data and
be effective, the campaigns must target management examples of successes to persuade stakeholders to
and technical personnel, other stakeholders (such as adopt energy-efficient technologies.
industry associations and government departments), Engaging key players is critical for successful
the financial sector (on topics such as the profitability awareness and education campaigns (UNIDO 2011).
Chile actively involves the private sector in its cam-
Table 6.2
Information and technology policies applied in
paigns, to encourage participation. Jordan tries espe-
developing countries, 2010 cially to engage top management (Arburas 1989).
Number of
Costa Rica, Honduras, South Africa and Thailand
Policy tool countries focus on local communities and youth, while Egypt
Awareness and education campaigns 15 uses non-governmental organizations and targeted
Training for firm personnel 8 media campaigns. India’s Bureau of Energy Efficiency
Enhancement of local absorptive 10 concentrates on small and medium-size enterprises
capacity
Recognition programmes 5 and clusters because of their more limited access to
Industrial energy-efficiency networks 3 information and technology.
Support for energy-efficiency research 6
and development
Training firm personnel and increasing
Support for deployment of 2
energy‑efficiency technologies absorptive capacity
Technical assistance programmes for 9 Several developing countries have national pro-
industrial energy efficiency
grammes to train managers, technical staff and work-
Energy-efficiency demonstration 6
projects ers in areas such as energy management, energy moni-
International industrial energy‑efficiency 12 toring and process control systems, energy auditing,
programmes
and certification, identification, appraisal and imple-
Note: Includes 37 developing countries in Africa, Asia, Eastern Europe and Latin America.
Source: UNIDO 2011.
mentation of industrial energy-efficiency projects.
The programmes are fairly standard. For instance,
110
“ Recognition programmes that reward
firms implementing energy-savings
solutions can promote positive perceptions
of industrial energy efficiency
Overcoming barriers to industrial energy efficiency through regulation and other government policies
controlling greenhouse gas emissions, promotes
typically rely on low-grade, non-standard technolo- improvements in motor-system efficiency in factories
gies. Historically commune-based and non-specialist, throughout the country.
these enterprises and their staffs are often under- Electric motor systems, used widely in Chinese
qualified to operate and maintain new energy-efficient industry to power fans, pumps, air compressors,
refrigeration compressors, conveyers and other equip-
equipment (Worrell et al. 2001).
ment, account for more than half of China’s electricity
A firm’s absorptive capacity– its ability to use the use. Thus, they offer large opportunities for efficiency
information that comes from interacting with other gains and energy savings (20 percent or more in many
firms, users and knowledge providers (Cohen and applications).
Levinthal 1990; Giuliani and Bell 2005)– determines As a pilot, the programme focused on Jiangsu and
Shanghai Provinces, demonstrating a methodology for
its ability to benefit from the technological knowledge
establishing and training a network of motor-system
available in global and local networks. Absorptive optimization experts and identifying suitable business
capacity is generally low in firms in developing coun- models for scaling up to the national level.
tries, but it can be expanded through training and The programme has built a strong foundation for
information programmes (Box 6.6). Equipment sup- national scale-up. It trained 22 engineers in motor-
system optimization techniques. And within two
pliers provide training for their equipment, sometimes
years of completing training, these local experts had
along with other, generic information. The Japanese trained more than 1,000 factory personnel, conducted
gas supplier, Gasunie, for example, provides technical 38 industrial plant assessments and saved nearly
assistance by supporting process-integration analy- 40 million kilowatt hours of energy.
ses, audits and feasibility studies (Galitsky, Price and Source: UNIDO (www.unido.org/index.php?id=1000786).
option because the awards are performance-based; A project run by the Energy Research Institute
the investment necessary is low; and the potential for at the University of Cape Town, South Africa,
stimulating future energy savings is high. Recognition facilitated networking between firms and organiza-
programmes can inform policy-makers of successful tions with industry expertise in Organisation for
national and regional options, lessons that are fre- Economic Co-operation and Development (OECD)
quently integrated into policy (McKane, Scheihing countries and large South African firms (breweries,
and Williams 2008). pulp and paper companies and mining companies).
Publicizing the successes of recognition pro- The networks helped participating South African
grammes can motivate companies to comply with firms identify more than 5 million rand in energy-
industrial energy-efficiency policies and programmes. efficiency investments, with a payback of less than a
For example, Japan’s Top Runner Programme relies year (Spalding-Fecher 2003).
heavily on the strong cultural influence of saving face.
Even if standards are voluntary, the incentive to com- Promoting new technology and
ply is strong because an enterprise’s failure to do so innovation
will be made public. Countries can also adopt measures to promote indus-
trial energy-efficiency innovation based on their eco-
Building networks nomic structure and growth strategies. Some meas-
Governments can facilitate network building on ures are more suitable for emerging market economies,
industrial energy efficiency among firms, sector spe- which have the potential to develop an indigenous
cialists, academia, industry associations, non-profits technology base, and other measures are more suitable
and other affected groups. Such networks can be for countries relying primarily on technology transfer.
especially important in developing countries, where It probably does not make economic sense for smaller,
industrial energy efficiency is a low priority among less advanced economies to develop their own tech-
senior managers (Ozturk 2005; Worrell and Price nology supply chain. (See Table 6.2 and Annex 14 for
2001). Studies show that projects strongly supported some of the main technology and innovation policy
by leaders are more likely to succeed (Etzkowitz and measures used by developing countries.)
Carvalho de Mello 2004). Innovation encompasses several stages: R&D,
Studies of China’s iron and steel sector suggest practical demonstration, initial commercial applica-
that firms in developed and developing countries tion and diffusion of the new technology or process
need to work together to share the risk of adopting through market forces. New technologies are the
advanced industrial energy-efficiency technologies result of a complex process of scientific advances,
(Worrell 1995). A Global Environment Facility pro- learning by doing, and directed and spillover efforts
ject in India found that more communication was in the private and the public sectors (IPIECA 2006).
needed among private sector players (steel re-rolling Industrial energy-efficiency innovation differs from
mills, domestic equipment manufacturers, trade other types of innovation. Dominant energy users and
and industry associations and others) for uptake of equipment suppliers jointly determine the development
industrial energy-efficiency technologies (Verbeken of new technology. And transitions in major energy
2009). Similarly, stakeholder alliances were found technologies often take decades, requiring massive infra-
to be an asset of UNIDO–UNEP clean-production structure investments, even for superior technologies.
112
“ Industrial energy-efficiency innovation differs
from other types of innovation: energy users
and equipment suppliers jointly determine the
development of new technology, and transitions
in major technologies often take decades
Overcoming barriers to industrial energy efficiency through regulation and other government policies
develop and strengthen national and multinational stration and extension (APERC 2006).
strategic R&D programmes. Governments may focus
on demand pull (achieving improvements through Boosting adoption and diffusion of energy-
efficiency standards and regulations), technology push efficiency technology
(encouraging improvements through R&D funding Encouraging adoption and diffusion of best available
and technology transfer) or, most often, a combination. technologies requires considering domestic market
For supply (technology push), public policy conditions and the technical, managerial and financial
options to foster innovation include: capacities of domestic industries to take up the tech-
• Government-funded research. Publicly funded nologies. Government actions to encourage technol-
research centres, including training; public ogy adoption and diffusion include:
research institutions focused on energy efficiency; • Supporting energy data collection and dissemina-
and jointly funded industry-government research. tion.
• Subsidized private sector research. Private firms • Training scientists and engineers.
can have better information than the govern- • Introducing regulations to remove inefficient pro-
ment about the commercial feasibility of energy- ducers from the market. Standards for industrial
efficiency technologies. Subsidies can take the equipment and system optimization can make
form of tax credits or matching funds for research it easier for firms to trade off capital and energy
projects, complemented by subsidies for training costs, but they can also impose limits on product
scientists and engineers. choice and undesirable costs for adopters.
• Regulations. Regulations, including legislation on • Procuring industrial energy-efficient equipment.
intellectual property rights, can create incentives • Reducing the effective purchase price of new equip-
to invest in generating new knowledge. ment that meets specified criteria. (A drawback is
Several large developing countries have imple- that these subsidies and tax credits can require large
mented some of these measures to generate local public expenditures per unit of impact.)
capacity in industrial energy efficiency. Nigeria’s • Facilitating local production or import of high-
severe shortage of energy prompted the government to efficiency equipment.
establish the University of Lagos National Centre for • Supporting public-private partnerships to promote
Energy Efficiency and Conservation in 2008, which technology centres.
is responsible for R&D in energy-efficiency and -con- • Establishing technical assistance programmes to
servation options and technologies. Following the inform enterprises of the opportunities and poten-
2010 enactment of the Russian Federation’s energy- tial for energy savings, improved access to techni-
efficiency legislation, the country has intensified cal skills and reduced uncertainty about the appro-
efforts to create an R&D capacity in energy effi- priateness of certain technologies.
ciency. The Russian Federation recognizes the role Analysing the costs and benefits of these polices
of a growing number of organizations engaged in is important but challenging, even in developed
research on improving energy efficiency, such as the countries. Technology policy successes are difficult
Centre for Energy Efficiency, the Sustainable Energy to measure because outputs are often intangible,
Development Centre and the Institute of Energy expected benefits of technologies change with condi-
Strategy. Under the 11th Five-Year Plan (2006–2010), tions, and evaluations of these polices make sense only
113
“ Demonstration projects inspire companies
to implement new technologies and create the
confidence to replicate them, facilitate staff
training and stimulate ideas for further innovation
expenditures are cost-effective for society as a whole, dollars are involved. Egypt and Malaysia have used
but successful developments could be copied by coun- demonstration projects extensively in industries
tries or firms that have not shared the upfront costs such as pulp and paper, glass, food, steel, palm oil
(UNIDO 2008b). and textiles to promote energy-efficient technologies
Two highly effective technical assistance pro- (UNIDO 2011).
grammes that eventually became commercial Demonstrating technology applications can show
activities are Argentina’s Energy Study Groups and that new technologies need not be prohibitively expen-
Ghana’s Energy Van Service (ECLAC 2010; Energy sive and can generate substantial benefits, thus encour-
Foundation n.d.). Energy Study Groups, which aging adoption by similar companies. Demonstration
emerged from an agreement between the National projects inspire companies to implement new tech-
Technology University and the Secretariat of Energy nologies and create the confidence to replicate them,
in 1985, consist of a professor with extensive experi- facilitate staff training and stimulate ideas for further
ence in energy issues (the director) and two or three innovation. Thus, effectively promoted, such projects
engineering professionals who visit industrial firms, have a large multiplier effect (Hamed and Mahgary
provide energy assessments and help implement solu- 2004).
tions. The services were free at first, but in 1990 the
groups began to charge a fee. By 2010, more than Taking advantage of international
2,000 companies assisted by the groups had improved cooperation
steam production and distribution systems, ovens and International cooperation can be a major source of
drying systems, electrical motors, air compressors, new energy-efficiency knowledge and technology for
refrigeration facilities, air conditioning and ventila- developing countries. By participating in international
tion equipment, and other equipment and systems. research groups or taking advantage of foreign techni-
Under Ghana’s Energy Van Service, provided by cal assistance and technology transfer in specialized
the Energy Foundation since 2004, a van stocked with energy-efficiency fields, countries have tapped state-of-
energy diagnostic and measuring instruments such the-art advances.
as motor testers, power and combustion efficiency The Russian Federation recently sought public and
gas analysers and ultrasonic leak detectors visits busi- private international cooperation (Soloviev 2009).
nesses regularly to identify and estimate energy-saving It signed agreements with the German and Finnish
opportunities. The services were originally provided at Governments and with Siemens AG, a major German
no charge, but several companies have requested per- power equipment manufacturer. The German Energy
manent on-site services, which are now available for Agency is advising its local counterpart on the design
lease to energy service companies. and implementation of innovative and promising
approaches for energy efficiency, while the Finnish
Promoting demonstration projects authorities provide expertise in technologies for cold
New technologies, especially if capital intensive, climates. Siemens AG is helping develop a programme
frequently require public investment in demonstra- for enhancing energy efficiency in Yekaterinburg.
tion projects. Typically, a first-of-a-kind plant is sev- Experience shows that local partners can reap sub-
eral times as expensive per unit of capacity as add- stantial benefits from international cooperation linked
ing a plant after the technology has been piloted to local policy measures when there has been substantial
114
“ Accurate carbon pricing is a precondition for
creating market incentives to change consumer
behaviour and promote industrial energy efficiency
Overcoming barriers to industrial energy efficiency through regulation and other government policies
rience with international cooperation suggests that than commercial bank loans (Gillingham, Newell and
programmes that support the entire value chain, from Palmer 2006). Tax revenues can also finance informa-
product conception through final sales to consumers, tion and auditing programmes, lower taxes for indus-
yield better energy-efficiency results by enabling sys- tries that meet negotiated energy-efficiency targets and
temic gains than do piecemeal projects (UNIDO 2011). fund research on energy-efficiency technologies. These
funds can be administered through private organiza-
Using market-based policy instruments tions, government agencies or international organi-
Market-based policy instruments capture the spillover zations. An example is Sri Lanka’s Pollution Control
effects of an economic agent’s action by internalizing and Abatement Fund, established by the government
externalities. Instruments include corrective taxes for in 1995 ($5 million) to help industrial firms improve
negative externalities (such as carbon taxes) and sub- energy efficiency and adopt pollution-reducing meas-
sidies for positive ones (such as carbon emission trad- ures (Thiruchelvam, Kumar and Visvanathan 2003).
ing schemes). International schemes of this type were The programmes included technical assistance and
established by the Kyoto Protocol and have since been credit.
replicated regionally and nationally. Energy and carbon taxes are often complemented
by other instruments, such as energy-efficiency subsi-
Introducing carbon pricing dies (see section below on tailoring subsidies), infor-
Industrial firms’ decisions on investing in industrial mation campaigns and labelling. Taxes alone may not
energy efficiency are distorted when market forces fail suffice to address environmental problems, since the
to account for greenhouse gas emissions from carbon- tax rate is an imperfect proxy for the externality and
intensive energy sources (market failure) or when is constrained by concerns about impact on income
carbon-intensive energy is subsidized and thus under- distribution and industrial competitiveness (Kosonen
priced. Accurate carbon pricing is a precondition for and Nicodème 2009). Taxes do not address other
creating market incentives to change consumer behav- common market failures either, such as imperfect
iour and promote industrial energy efficiency.8 information.
Carbon taxes curb demand for carbon-intensive Removing direct and indirect subsidies on carbon-
energy by increasing its price. In principle, the taxes intensive energy (such as lower value added taxes) is a
should create an incentive for technical innovation first step towards pricing that reflects the true cost of
(dynamic efficiency)– a nd also reduce greenhouse energy use. Removing subsidies will increase the price
gas emissions to the point where the marginal cost of of carbon-intensive fuels and strongly influence adop-
additional abatement equals the tax, thus minimiz- tion of industrial energy-efficiency measures because
ing the cost of reducing emissions (static efficiency).9 of the long lifetimes and slow turnover of energy-
Carbon taxes provide more choices in the level and intensive appliances and capital equipment. Energy-
method of cutting greenhouse gas emissions than do producing countries with subsidized fuel prices would
technical regulations and product bans. In addition, also benefit from removing subsidies: carbon-intensive
less administrative work is required to manage taxes energy sources could be sold at much higher prices
than to establish and enforce regulations, thus sav- on international markets, with positive impacts on
ing taxpayer money (Jaffe, Newell and Stavins 2004; government budgets and export earnings, especially
Kosonen and Nicodème 2009). in an environment of rising energy prices. Whenever
115
“ Removing direct and indirect subsidies on
carbon-intensive energy is a first step towards
pricing that reflects the true cost of energy use
China, Egypt, India, Indonesia, Malaysia, policy, aims for cost-effective emission reductions.
Romania and the Russian Federation were among the It sets targets for large greenhouse gas emission
37 developing countries reviewed that have begun sources (including the energy-intensive manufactur-
removing subsidies on carbon-intensive energy and ing industry) and allows trading for emissions below
are moving towards carbon pricing (UNIDO 2011). the targets. It covers more than 10,000 installations
The approach has for the most part been gradual, and in industrial electricity-generating sectors that are
some evidence in Egypt and Indonesia suggests that collectively responsible for nearly half of EU carbon
energy-intensive firms have adjusted to new pricing dioxide emissions. But the system has faced several
structures without major production disruptions. challenges. Notably, compliance has been difficult
Taking guidance from international energy prices with the price of emission allowances so volatile
and using differential pricing to induce energy- (Wara and Victor 2008). Also, as a new scheme, there
efficient behaviour seem to be effective in reduc- are complexities in measurement, reporting and verifi-
ing energy consumption and intensity in China. cation, requiring a large, well trained staff and robust
Enterprises are charged increasingly higher rates legislative procedures. There have also been concerns
for additional units of electricity to phase out inef- about international competitiveness and “carbon
ficient enterprises and reduce emissions (Moskovitz leakage,” but only a few sectors have experienced large
et al. 2007). In 2007, the policy was adjusted to allow cost increases, and most appear to have benefited. The
provincial authorities to retain the revenue collected impact of the scheme on industrial energy efficiency
from the differential pricing, providing stronger is difficult to gauge, since the scheme began just a few
enforcement incentives. years ago and is focused on carbon reduction, not effi-
Designing an effective way to remove energy sub- ciency directly.
sidies is a major policy challenge. Eliminating the
subsidies can have negative effects where, for example, Promoting energy saving certificates
they promote affordable energy for smaller firms.10 A more direct industrial energy-efficiency policy, and
Eliminating or reducing energy subsidies to encourage one meant to complement the EU Emissions Trading
industrial energy efficiency should be combined with System, is the UK Carbon Reduction Commitment,
other measures to help vulnerable firms and house- launched in 2010. This mandatory scheme aims
holds (Ayres and Warr 2009). Strategically redirecting to improve energy efficiency and cut emissions in
subsidies (leveraging the free-rider effect of energy sub- large public and private sector organizations, which
sidies for firms that would have made energy-efficiency together account for some 10 percent of UK emis-
improvements anyway) can release money for new pro- sions. The scheme ranks participants annually on their
grammes to support more successful energy-efficiency energy-efficiency performance. The Energy Savings
investments and reduce budget outlays.11 Scheme of New South Wales, Australia, requires
electricity retailers, licensed suppliers and electricity
Launching emissions trading schemes purchasers to meet energy-savings targets through
Emissions trading schemes are generally a more com- performance or the purchase of certificates (NSW
plex market-based approach to industrial energy effi- Government 2010; see Chapter 5).
ciency and are unlikely to be a key policy initially for India has also taken this performance-based
most developing countries. There is potential, however, approach to industrial energy efficiency. In 2010, the
116
“ Subsidies and tax allowances, by
lowering the costs of investing in industrial
energy efficiency, are designed to mobilize
investment, prepare for new regulations or
promote energy-efficient technologies
Overcoming barriers to industrial energy efficiency through regulation and other government policies
Indian Bureau of Energy-Efficiency released targets for
to strengthen incentives for saving energy. It provides 580 industrial units in eight energy-intensive sectors
opportunities for energy-intensive industries to trade (thermal power stations, steel, fertilizer, cement, alumin-
efficiency achievements above set targets through ium, chloralkali, paper and textiles). Together, these units
Energy Saving Certificates. Energy savings are cer- consume about 200 million toe a year. The overall targets
would lead to sector wide savings of around 5 percent of
tified, and credits are awarded for reaching bench-
current energy use, equivalent to 10 million toe.
marks. The credits can be traded to industries that Target-setting will eventually lead to a market-
fail to meet technical regulations. Launched in April based mechanism allowing businesses that cannot
2011, the scheme is too new to evaluate. The mecha- reach their targets to buy energy certificates from busi-
nism intends to cover about 600 enterprises initially. nesses using less energy than their target.
Firms failing to comply will be assessed a penalty
Baseline energy auditing for these industrial firms has
equal to the price of the shortfall. Penalties will accrue
already begun (Box 6.7). to state treasuries, with each state having a designated
enforcement agency.
Tailoring subsidies and allowing According to the Bureau of Energy Efficiency,
accelerated depreciation operational guidelines have been prepared based on
discussions with the targeted industries, and any con-
Subsidies and tax allowances, by lowering the costs of
cerns have been allayed.
investing in industrial energy efficiency, are designed
Source: Economic Times 2011.
to mobilize investment, prepare for new regulations or
promote energy-efficient technologies by expanding
markets. Subsidies can be paid directly from public
funds to firms investing in energy-efficient technol- tax allowance on qualifying capital expenditures
ogy or related services, such as audits, or they can be incurred over five years. Companies that make capital
provided as tax credits and allowances or reductions in expenditures to reduce their energy consumption are
value added taxes. eligible for a 100 percent investment tax allowance on
Several countries subsidize energy-efficient equip- the qualifying expenditure over five years. The pack-
ment to accelerate uptake. Chile reimburses firms age also features import duty and sales tax exemptions
for the cost of hiring energy auditors, covering up to (APERC 2010a).
70 percent of consulting fees, with a cap of $10,000 Thailand has allocated some $4.5 million to sub-
(ECLAC 2009). China has earmarked roughly $2 bil- sidizing energy-conservation programmes (APERC
lion for subsidies for 5 of their 10 identified key indus- 2010a). A cost-based tax incentive offers a 125 per-
trial energy-efficiency projects (coal industrial boilers cent tax break on investments improving energy effi-
or kilns, waste heat recovery/waste power recovery, ciency. A performance-based incentive allows com-
petrochemical conservation or substitution, electrical panies to deduct 30 percent of the energy savings
machinery energy-saving system and energy system from their taxes up to a ceiling of $60,000. Together,
optimization). these incentives have led to estimated savings of
Malaysia has integrated subsidies into a targeted $10–$30 million a year (Sinsukprasert 2009). A gov-
tax scheme for improving industrial energy efficiency. ernment evaluation found higher payback in energy
Companies that provide energy-efficiency services saved per dollar invested from cost-based solutions
are eligible for a 100 percent corporate income tax than from performance-based ones. Tunisia has had
exemption for 10 years or a 100 percent investment similar success with cost-based subsidy measures when
117
“ Access to finance remains a considerable
barrier in developing countries, despite the flow
of financial aid to energy-efficiency projects
from multilateral financial institutions– a
nd
the financial profitability of many projects
Utility companies are in a unique position to influence requirements; and lack of affordable financing. An
industrial energy efficiency because of their financial, assessment of demand-side management programmes
organizational and technical capacity and their con- in Thailand notes the greater success of programmes
nection to virtually all energy users (UNECE 2010). aimed at households than of programmes encourag-
Many utility companies are motivated to manage ing firms to adopt more energy-efficient equipment,
demand because they face load-capacity limitations, largely because of a lack of investment financing.
blackouts and unreliable supply. Demand-side man-
agement programmes aim to reduce industrial energy Launching financial instruments
consumption through rebates, loans, subsidized Both the public and private sectors have crafted
audits, free installation of equipment and energy financing mechanisms to address investment barriers
awareness programmes (Gillingham, Newell and at each stage of technology development: innovation
Palmer 2006). The changes are implemented through (research and development), demonstration, deploy-
specialized firms. Thus, while demand-side manage- ment and diffusion (Makinson 2006). The gaps are
ment can reduce energy consumption and increase concentrated between the demonstration and the
energy efficiency, regulatory mechanisms and gov- deployment stages (MacLean et al. 2008; Figure 6.2),
ernment support are required to create mandates or so the bulk of public finance and technical coopera-
incentives for utilities and supporting firms (Violette, tion addresses the lack of capital and capacity before
2006; Gillingham, Newell and Palmer 2006; World the technology reaches the diffusion stage.12
Bank 2005).
Demand-side management programmes, popular Ensuring access
in developing countries, are used mainly to ease the Access to finance remains a considerable barrier in
shift from incandescent bulbs to fluorescent lamps and developing countries, despite the flow of financial aid
other forms of energy-efficient lighting. Some develop- to energy-efficiency projects from multilateral finan-
ing countries, including China, Colombia, Indonesia, cial institutions– and the financial profitability of
the Philippines, South Africa and Thailand have gone many projects (Sorrell, Mallett and Nye 2011; Worrell
further and integrated demand-side management 2011; te Velde 2010; Schleich 2011). Soft loans, often
programmes into broader national energy saving poli- as special-purpose energy-efficiency funds, are the
cies (Thiruchelvam, Kumar and Visvanathan 2003; most common form of finance (Box 6.8). Other mech-
UNIDO 2011). anisms include credit lines, revolving funds, publicly
The success of industrial demand-side manage- backed guarantees and project loan facilities. Most
ment depends on the ownership and structure of of these financial instruments are backed by multi-
energy markets and the systems for monitoring and lateral financial institutions; some include technical
verifying energy savings. Experience in South Africa, assistance.
Thailand and Viet Nam reveals several potential Of the 37 developing countries in the UNIDO
obstacles (World Bank 2002, 2004, 2005). Problems policy review, 21 have established an industrial energy-
have included inadequate information about efficiency efficiency financing mechanism (UNIDO 2011).
opportunities for end-users, equipment manufactur- The Chinese Government set up a loan programme
ers and service providers; insufficient incentives for for energy conservation in 1980. The largest energy-
utilities; unfair competition between private sector efficiency investment programme ever undertaken
118
“ Of the 37 developing countries in the UNIDO
policy review, 21 have established an industrial
energy-efficiency financing mechanism
Figure 6.2
Technology innovation path and financing gaps 6
Stage 1 Stage 2 Stage 3 Stage 4 Stage 5
R&D Demonstration Deployment Diffusion Commercial maturity
Overcoming barriers to industrial energy efficiency through regulation and other government policies
Valley of death High perceived risks
Gaps
La
rge
rp
Mezzanine
roj
ec
Angel Venture
ts
investors capital Debt
fin
an
cin
Insurance
gp
Financing
ac
Soft loans
ka
Carbon
ge
Grants Loan facilities
Public-private
Incubators equity funds
Credit lines
Public-private
venture capital funds Guarantees
Box 6.8
Tools for addressing liquidity constraints and risk in developing countries
There are several tools for addressing liquidity constraints energy-efficiency projects. Revolving funds can be pub-
and risk that impede investment in industrial energy- licly funded (fully or partially) and may be established in
efficiency investments in developing countries. cooperation with commercial banks. Energy-efficiency
Credit lines can be offered at concessional rates projects seeking funding do not need to compete against
where market rates are high. Guarantees or other risk- more traditional investments for bank funding. The public
sharing structures between the development finance insti- funds are provided to commercial banks with no interest
tution and local commercial banks can reduce a project’s or well below market rates, enabling the banks to offer
credit risk. below-market rates. In return for receiving public funds,
Soft loans are loans at subsidized interest rates for banks may be asked to assume some or all of the risk of
industries that invest in energy-efficiency technologies and repayment associated with the loans.
equipment. Some soft loans include interest-free grace Publicly backed guarantees are three-party contracts
periods until revenues from the energy savings start to in which a public institution guarantees to compensate a
flow. Most national and multinational development finance lender if the borrower defaults. These instruments mitigate
institutions set up loan programmes to fill the financing the financing risks associated with medium- to long-term
gaps in immature financial markets. Creating debt financ- loans. Related schemes are partial credit and partial risk
ing mechanisms is important for developing new markets, guarantees. Guarantee schemes in both developed and
especially small energy-efficiency ventures. Concessional developing countries have mobilized private resources
financing in the form of interest rate subsidies or fees paid and facilitated access to capital.
to partner banks can be appropriate in markets without Project loan facilities fill the financing gaps in markets
commercial financing of energy-efficiency projects and where commercial institutions are unable or unwilling to
where bank liquidity is a barrier. provide financing. Created by governments and develop-
Closely related to soft loans are revolving funds, which ment financial institutions, these facilities can be effective
use repayment of previous loans to finance new loans for finance mechanisms if carefully designed.
Source: Mostert, Johnson and MacLean 2010; Makinson 2006; MacLean et al. 2008.
119
“ Public finance can leverage and
stimulate commercial finance, but financial
institutions also need to be educated about
industrial energy-efficiency financing
well below the cost of new supply, but it also stimu- about industrial energy-efficiency financing (Ghosh
lated adoption of efficient technologies well beyond 2011; UNIDO 2011). Poor communication and
the small pool of project fund recipients (Levine and advertising prevent Indian enterprises from learning
Liu 1990; Liu et al 1994). Of the apparent 25 percent about the financial facilities available for industrial
drop in industrial energy intensity in the 1980s, about energy-efficiency projects. Bankers in India often
10 percent can be attributed directly to the efficiency regard energy-efficiency technologies as unproven and
investment programme (Sinton and Levine 1994) therefore risky because they lack the knowledge or
and a larger amount to unsubsidized efficiency invest- resources to appraise them. And developing country
ments, efficiency improvements incidental to other banks need to avoid overburdening local firms with
investments and housekeeping measures (Worrell red tape. Loan applications often require so many
et al. 2001). clearances and certifications from multiple institu-
African governments have also begun to intro- tions (land offices, registration authorities, munici-
duce concessional project finance for energy-effi- pal water and waste disposal authorities, electricity
ciency investments (UNIDO 2011). The Egyptian departments, pollution control authorities, district
Government set up the Environmental Compliance industry centres, credit rating agencies and so on) that
Office at the Federation of Egyptian Industries to pro- enterprises are deterred from applying.
vide environmental services to small and medium-size
enterprises, including access to soft loans for indus- Promoting energy service companies
trial energy-efficiency investments (FEI n.d.). Tunisia Energy service companies (ESCOs), which provide
established a National Fund for Energy Conservation energy-management services and creative financing
in 2005. In South Africa, the public electricity utility, tools to industrial firms (Vine 2005), are more a pri-
ESKOM, provides concessionary funding for capital vate initiative than a government policy instrument.
expenditure and implementation costs for industrial They are discussed here because UNIDO’s 2011
energy-efficiency projects. policy review found that 11 developing countries are
Public finance can leverage and stimulate com- promoting and supporting them as industrial energy-
mercial finance, but for industrial energy-efficiency efficiency tools. Through energy performance con-
projects, care is needed to ensure that public finance tracts, ESCOs and firms set the terms for risk-sharing
does not deflect businesses from seeking commer- and co-financing industrial energy-efficiency projects.
cial finance. Commercial finance has to be the main ESCOs design and provide or arrange financing for
source of energy-efficiency financing. To be effective, the project (and receive payment based on energy ser-
public financing mechanisms must address both sup- vices provided by the project), sometimes assume the
ply and demand constraints, ensure that projects are project performance risk (by guaranteeing a minimum
technically viable and financially profitable and leave level of energy savings) or the credit risk, and install
room for local financial institutions to offer accessible and maintain the equipment (MacLean et al. 2008).
and affordable financing (Gielen 2009). The transac- For industrial firms, this approach is an innovative
tion costs of industrial energy-efficiency projects are way to finance large industrial energy-efficiency pro-
high because many are small and technically complex. jects without paying cash up front.
Financing mechanisms should accompany techni- Traditional project financing rules may not apply
cal assistance programmes for financiers and project to energy performance contracts, which can be treated
120
“ many policy instruments in developed
countries are suitable benchmarks for developing
countries, though design may need to change
to meet national and local conditions
Overcoming barriers to industrial energy efficiency through regulation and other government policies
industrial firms do not make capital investments or though design may need to change to meet national
capital commitments to the project. Monthly pay- and local conditions. Developing country policy-
ments to ESCOs are treated as utility expenses and makers seeking to replicate policies from other coun-
recorded as debt. The payments may vary with the sav- tries should consider several factors:
ings, or the savings can be shared between the ESCO • National patterns of industrial specialization
and the firm. Since project financing is considered (dominant industrial sectors and their energy
an off–balance sheet transaction, no assets accrue to intensities).
ESCOs, and the firm owns the equipment. • Characteristics of individual sectors, such as
While there have been great expectations for energy use, international and domestic energy
ESCOs, experience in both OECD and developing performance, main sources of energy losses, poten-
countries shows that the impact of ESCOs in promot- tial for energy-efficiency improvements, domestic
ing and financing industrial energy efficiency has often technological capabilities and technical, manage-
been limited (Vine 2003; Painuly et al. 2003). Despite rial and financial capabilities to implement energy-
exceptional overall growth in the United States, efficiency opportunities.
ESCO’s success has been confined largely to the pub- • Alignment of policy instruments with socioeco-
lic sector and much less to commercial and industrial nomic features (laissez-faire or command-and-
activities (Goldman et al. 2002; Satchwell et al. 2010). control systems) and cultural norms; some coun-
Many developing countries lack the legal and finan- tries may need more strict regulatory regimes with
cial framework to enforce the complex contractual formal sanctions while others can rely on norma-
models required for ESCOs (Sarkar and Singh 2010). tive pressures (WEC 2010).
International ESCOs, while initially eager to operate • Suitability of existing policy frameworks and
in developing countries, acknowledge that many pro- policy-making records (achievement of policy
spective customers require more time and capacity- objectives, including economic effectiveness and
building to adequately understand and accept such budgetary impacts).
models, and customer credit-worthiness and local • Ability of public administration to assess country-
credit are not assured (Sarkar and Singh 2010). specific aspects and to implement policy measures.
monitoring, reporting, verification and evaluation, sial area for policy intervention to ensure sustainable
also need to be factored in. development. It is hard to argue with the success of
International organizations can help to col- measures that resonate in both concept (doing more
lect and disseminate information for domestic and with the same or the same with less) and practice
international policy benchmarking. The UNIDO (increasing industrial energy efficiency to yield tangi-
(2011) industrial energy-efficiency policy database ble benefits for most, if not all, stakeholders).
developed for this report documents 21 industrial Developing countries have an array of policy
energy-efficiency policy mechanisms in 37 develop- options, but selecting the right mix is not easy. Most
ing economies (see Annex 14). The International of the options come with uncertainties or downsides.
Energy Agency’s (IEA) Energy-efficiency Database Rules and regulations can cut greenhouse gas emis-
details some 170 policies and measures introduced sions substantially, but targets can be unrealistic and
locally, regionally and nationally in 32 countries and legislation too inflexible to adapt to rapidly evolving
the European Union (IEA 2008c). The IEA’s World technological change. A governance structure is indis-
Energy Outlook Policy Database includes 530 entries pensable, yet it can also become a source of red tape and
for industrial policies and programmes, drawn from corruption. Information and training are crucial for
other IEA databases (Climate Change Mitigation dealing with market failures and apprising entrepre-
Database, Energy-efficiency Database, Global neurs of hidden costs, yet the costs of providing them
Renewable Energy Policies and Measures Database), and of identifying who to provide them for are often
the European Conference of Ministers of Transport overlooked. Technology and innovation are key driv-
and contacts in industry and government (IEA ers of industrial energy efficiency, but they are beyond
2008a). Lessons from implementing these policies the means and capabilities of all but a few developing
could accelerate industrial energy-efficiency uptake if countries and can take a long time to yield returns.
applied across developed and developing countries. Most developing countries will continue to rely on for-
eign technologies, but even that requires building local
Policy evaluation absorptive capacity. Market-based policies can induce
There are numerous approaches to assessing barriers to desired behaviour cost-effectively, yet they involve
industrial energy efficiency and identifying policies to acute intertemporal trade-offs and can sometimes be
overcome them, including orthodox, transaction cost unpopular. Financial instruments can overcome some
and behavioural economics and organizational theory problems of access to capital and lower perceived risk,
(Montalvo 2008; Sorrell, Mallett and Nye 2011). And but they require a sophisticated financial sector.
there is a range of objectives against which to assess Despite the array of policy options to choose
policy impact, including energy use and greenhouse among, several things seem clear. International policy
gas emissions, social and developmental objectives and benchmarking is necessary, as are local adaptation of
their economic costs. Instruments such as taxes, fees policy measures, solid local policy design and imple-
and penalties can generate revenue, while others such mentation capacity, and continuous evaluation of
as subsidies, grants and information and awareness policy initiatives.
programmes have costs. Studies rigorously evaluating Promising areas for advancing developing country
policy effectiveness in developing countries are still policies are voluntary and negotiated approaches and
lacking. direct private sector involvement in implementation.
122
“ Despite the array of policy options,
several things seem clear: international policy
benchmarking is necessary, as are local
adaptation of policy measures, local policy
design and implementation capacity, and
continuous evaluation of policy initiatives
Overcoming barriers to industrial energy efficiency through regulation and other government policies
has led to successful information and technological inventory of emissions enabling any company to
policies on industrial energy efficiency. “make public commitments to future reductions,
Small and medium-size enterprises and the finan- set goals, and thereby improve its public image”
cial sector warrant special attention. Such firms have (Gillingham, Newell and Palmer 2006).
a vital role in accelerating industrial growth in devel- 4. Energy Star and the US Department of Energy’s
oping countries, yet they are considerably less energy industrial technology programme Save Energy
efficient than their developed country counterparts. Now reduced energy intensity 25 percent over
Tailored policy packages and incentives could help 10 years (McKinsey & Company 2009).
transform small and medium-size enterprises into 5. Studies based on empirical observation of posi-
energy-efficient engines of growth. The domestic tive impacts following adoption of formal energy
financial sector, despite making more funds available management systems include Helgerud and
for investment in industrial energy-efficiency projects, Sandbakk (2009); Motegi and Watson (2005);
has yet to establish the procedures needed to facili- and Thollander and Ottosson (2008).
tate energy-efficiency lending. Governments need to 6. Industrial systems such as steam- and motor-
provide the framework and support to enable these driven systems account for more than 50 percent
changes. Chapter 7 looks at the role of international of final manufacturing energy use. Energy-savings
collective action in encouraging industrial energy potential from cost-effective energy-efficient opti-
efficiency. mization of these systems is estimated at 10–12
exajoules of primary energy (Williams 2008).
Notes 7. Sri Lanka Sustainable Energy Authority (www.
1. To accompany this report, UNIDO compiled a energy.gov.lk/sub_pgs/events_past.html).
database of industrial energy-efficiency policies 8. Higher carbon prices can also result in lower
drawn from official documents and webpages, output of desired products, higher costs for
databases of various international organizations superior energy-efficient equipment and loss of
and the academic literature. The database is avail- competitiveness.
able at http://ieep.unido.org. A list of policies is in 9. Energy savings from such an emissions price policy
Annex 14. can be assessed by examining the price elasticity of
2. The World Energy Council (WEC 2010) reports energy demand using a computable general equilib-
that as of 2009, 70 countries (or two-thirds of sur- rium model. These modelling exercises point out
veyed countries) had adopted national energy pro- that energy-efficiency gains, energy conservation
grammes with national and sectoral quantitative and alternative energy sources can generate deep
targets for energy-efficiency improvements, twice cost-effective emissions cuts (Clarke et al. 2006;
as many as in 2006. In Europe, some 90 percent Weyant, de la Chesnaye and Blanford 2006).
of countries had adopted targets, up from 55 per- 10. The World Bank (2000) has called subsidies for
cent in 2007. Around 60–80 percent of surveyed energy access “a first priority of energy policies
countries prefer to use targets for energy-efficiency aimed at alleviating poverty.” Well targeted sub-
improvements or energy savings. sidies can create a more inclusive electricity net-
3. The rationale behind voluntary agreements can work by helping marginal populations and small
also be ethics-governed behaviour or hedging firms overcome barriers to energy access and may
123
6 help reduce poverty and enhance rural develop-
ment (Urban, Benders and Moll 2007).
12. MacLean et al. (2008) reviewed mechanisms to
promote energy-efficiency investments in the early
11. Often, subsidies are captured by firms and house- stages of technology development. The discussion
holds to help pay for efficiency improvements they here focuses on the public and commercial financ-
Overcoming barriers to industrial energy efficiency through regulation and other government policies
were going to make anyway as part of the natural ing mechanisms that facilitate demand pull rather
rate of efficiency gain. than technology push.
124
Chapter 7
Policy initiatives for industrial energy efficiency, to be dividends but that failures in the markets for energy-
effective nationally, must be complemented by actions efficient goods and services and departures from the
internationally. Systemic challenges such as climate rational behaviour of orthodox economics have limited
change involve global externalities and public goods, further gains. Reducing the risks of climate change (a
so international collective action must go hand in product of perhaps the worst market failure ever) is
hand with domestic action. And as industrial activity the purest example of a public good– greenhouse gas
shifts towards developing countries, they must become emissions from any one country affect the atmosphere
part of international industrial energy-efficiency ini- in the same way as those from any other (Stern 2006).
tiatives and coordination to ensure that emerging Markets also fail to supply information to evaluate
industrialization processes are sustainable. energy-saving opportunities. And with international
In the absence of a global government, binding and trade in equipment and technology proceeding apace,
voluntary country agreements have been the interna- learning about those opportunities also becomes a
tional collective response to environmental challenges. global challenge. Gathering trustworthy interna-
The international governance framework for industrial tional information can be costly and time consuming
energy efficiency consists of soft legislation and non- – especially for developing countries and their small
binding rules, norms and action plans to coordinate and medium-size industrial enterprises– a nd linking
strategies, policies and programmes. International action to energy legislation can be difficult.
agreements on specific actions and global coordina- Global market failures call for worldwide coopera-
tion of domestic policies should benefit countries in tion. International collective action is the only viable
two ways– providing domestic initiatives with the solution for establishing governance mechanisms for
stability that comes with international legitimacy, and some global common resources and addressing the
enabling countries to learn from each other’s successes failures. Even when collective action results in only
and failures in designing institutions and implement- soft commitments, it can establish important princi-
ing practices (Sugiyama and Ohshita 2006). ples, incentives and norms– and increase monitoring
This chapter briefly addresses mechanisms of and information flows (UNEP 2011).
international collective action that support industrial Countries’ motivation to participate in interna-
energy efficiency design and implementation in devel- tional collective action, especially for climate change,
oping countries. After discussing the rationale for combines mutual self-interest and responsible, ethical
international collective action, it examines four areas behaviour (Stern 2006). Collective action decisions
for intervention: should be reciprocal, as parties expect equal treatment
• Setting international performance targets and and can retaliate with equal force. But custom also
standards. often plays a role through understandings and agree-
• Facilitating technological and structural change. ments that are not formally binding. Respect for inter-
• Contributing to international technology transfers. national obligations is increasingly based on views of
• Procuring international financing. conscientious and collaborative behaviour that is in
line with domestic public opinion support.
The rationale for international Research on international collective action shows
collective action that it can succeed where there is:
This report contends that industrial energy efficiency • Sufficient mutual self-interest (Sandler 2004;
has yielded economic, social and environmental Stern 2006).
125
“ Countries will see direct and indirect economic
benefits from participating in international
collective initiatives for industrial energy efficiency
opportunities and thus the potential for international practices manufacturing production
• Energy savings and • Rapid economic growth
agreements. conservation rates
• Increased profitability • Continuous technology-
Countries will see direct and indirect economic and international upgrading and
competitiveness employment generation
benefits from participating in international collective
initiatives for industrial energy efficiency (Figure 7.1). Short term Medium and long term
In the short run, international cooperation could
Source: Adapted from Stern (2006, p 461).
save more energy, and in the long run it could reduce
126
“ International collective action for industrial
energy efficiency should be mobilized in two
closely related areas: establishing targets
and standards and monitoring and assessing
indicators and progress towards goals
Box 7.1
UNIDO and the Montreal Protocol
Setting measurable targets
A well established approach to achieving performance
7
The Montreal Protocol on Substances that Deplete objectives, setting measurable targets can determine
the Ozone Layer is an international treaty, opened for
priorities and direction, allow comparisons and bench-
joules (such as Canada, Chile, New Zealand and Peru; producers, especially those that lack the technical or
APERC 2010b). And some members, such as the financial capacity to comply. As major impediments
Russian Federation, made pledges contingent on emis- to their economic development, the barriers could
sion cuts by other countries or on financial support. discourage these producers from engaging in inter-
APEC has probably the most ambitious energy- national collective action. Multilateral dialogue and
efficiency goal among regional economic communities, negotiations, whenever possible, can ensure environ-
but other communities also have set goals. In July 2010, mental protection while safeguarding market access
the Association of Southeast Asian Nations set a goal (UNEP 2011).
of reducing energy intensity in the region 8 percent by One important venue for addressing these concerns
2015, using 2005 as the base year (ASEAN 2010). The is the International Organization for Standardization
Economic Community of West African States recom- (ISO). A network of national standards institutes
mends that its members’ domestic energy-efficiency from 160 countries, the ISO is the largest developer
programmes define energy-efficiency standards as a first and publisher of international standards. To reach
step towards regional and international harmoniza- a consensus and ensure that its standards are widely
tion (ECOWAS 2003). In 2008, the Southern African adhered to, the ISO offers public access to drafts of
Development Community released its Protocol on standards and uses voting and appeals systems. All
Energy (SADC 2008), which introduced guidelines for ISO standards are voluntary agreements, meaning
national energy-efficiency efforts and encouraged mem- that compliance depends on broad agreement.
bers to define achievable and quantifiable reduction tar- For energy efficiency, the ISO focuses on har-
gets in commercial and industrial energy intensity. monizing terminology and calculation methods for
energy efficiency, energy management standards, bio-
Designing standards fuels standards, retrofitting and refurbishing stand-
Closely related to energy-efficiency goals and targets ards, and standardized energy-efficiency activities for
are international standards. Standards, if properly buildings. For instance, the ISO 50001 energy man-
designed, can help in meeting targets. agement standard establishes a framework for indus-
Many countries have used standards successfully as trial plants, commercial facilities and entire organiza-
part of regulatory efforts to make their industries more tions to manage energy more efficiently. These types of
energy efficient. For goods and services heavily traded standards help define, implement and monitor energy-
internationally, coordinating the design and appli- efficiency policies at macro and micro levels. They also
cation of standards with related norms is cost effec- bring innovative energy-efficiency technologies to the
tive. Stern (2006) points out that such international market faster. And they are objective metrics for regu-
standards– by defining a set of similar conditions lations and policy incentives to encourage greater use
within larger markets– encourage innovation and of innovative technologies.
competition among firms. They increase transparency
for consumers and producers as comparable informa- Monitoring and assessing progress
tion is provided across borders. They reduce design and Effective targets require monitoring progress. This is
production costs related to differentiated compliance. also true for standards, which risk becoming obsolete
And they help remove trade barriers by harmonizing if they fail to keep up with technological progress and
test protocols or increasing their compatibility. more general energy-efficiency trends. A challenge in
128
“ to keep increases in industrial energy
consumption to the minimum required to satisfy
development needs, future efficiency efforts must
be ambitious: they must double today’s pace
2008, 98 are reducing energy intensity below those sumption implications of international and sectoral
rates or are even increasing energy intensity. Indeed, in shifts in investment patterns. That would allow devel-
35 countries energy intensity grew at an average cumu- oping countries to plan for their future energy demand
lative rate of 3.1 percent over the period. There is con- and pay closer attention to the environmental implica-
siderable scope for raising industrial energy efficiency tions of their economies’ structural changes. This will
in these countries, which stand to benefit from such be most important for low- and middle-income coun-
efforts. Only 33 countries are above the historical level tries, which need to address industrial energy efficiency
but below the desired rate. upfront in their industrialization processes.
Countries that have already reached the target
should seek a 50 percent reduction in energy intensity International cooperation for innovation in
beyond their 1990–2008 rate. During that period, industrial energy efficiency
these countries reduced their industrial energy inten- International collective action helps address the inad-
sity an average of 6.5 percent a year. It will be difficult equate breadth and depth of knowledge, which are
to sustain such a rapid pace for an extended period, acute for new technologies. Breadth is the range of
so a more modest, though still substantial, effort may knowledge required for innovation. A broad knowl-
be warranted. Ultimately, binding industrial energy- edge base involves familiarity with several knowl-
intensity targets must be set nationally, and regional edge domains, allowing exploration of more areas
and international actors can introduce the goals and and solutions (Zhang, Baden-Fuller and Mangenatin
international standards. 2007). Because industrial energy-efficiency innova-
Many actors, such as IEA and the Latin American tion involves contributions from multiple suppliers
Energy Organization, collect industrial energy- and large users, breadth is particularly important (see
efficiency country data and monitor progress. And Chapter 2). Depth is analytical sophistication in a
though their expertise is important, an international specific subject (Wang and von Tunzelmann 2000).
monitoring and coordination function is needed to Deep knowledge involves profound understanding
reap the potential complementarities of disparate of causalities, complexities and relations. Breadth and
actors, limit duplication and eliminate oversight and depth, always matters of degree, are thus pooled in
data gaps. Such a function could be mandated to one different proportions– but the harder the task, the
agency or several that could be responsible for inform- more both are needed and the less they are available
ing countries and industries on their progress towards locally. Put simply, larger and more complex innova-
industrial energy-efficiency goals. tions require a larger and wider, gradually more inter-
national and interacting, research community.
Facilitating technological and International cooperation on research and devel-
structural change opment (R&D) can support sharing knowledge,
As Chapters 1 and 2 showed, energy-intensity reduc- coordinating R&D priorities and pooling risk (Stern
tions arise from technical and structural change 2006). Sharing knowledge helps link understanding
within and across industries– changes that result of the issues with the individuals and teams involved
from technological improvements and domestic and in research, thus accelerating innovation– for exam-
international movements of capital. The major driver ple, by adopting a multilateral treaty that offers access
of technological improvement is innovation, and while to basic science and technology for industrial energy
130
“ International collective action can
help ensure that the global restructuring
of industry considers energy efficiency
Wal-Mart uses energy-sustainability indicators countries lag in their capacity to obtain, develop and
when selecting its products and service providers. It deploy innovative climate change and energy-efficient
has announced that by collaborating with suppliers it technologies (UNIDO 2010b). Adopting industrial
would make its most energy-intensive products 25 per- energy-efficiency technologies is sometimes hampered
cent more energy efficient in three years. It also has by countries’ lack of access to international best avail-
declared that it will reduce its supply chain’s greenhouse able technologies, because of lack of information or
gas emissions by 20 million tonnes of carbon dioxide too small an investment.
equivalent. Outside the United States, Wal-Mart’s goals For a host country, technology transfers in indus-
for improving the energy efficiency of its international trial energy efficiency require acquiring international
supply chain through manufacturing extension part- licences, investing in modern equipment, facilitating
nerships have been less ambitious. In 2008, it declared local spillovers and promoting learning among indus-
the goal of helping its top 200 Chinese suppliers become trial firms. Source countries can increase technical and
20 percent more energy efficient by 2012. And starting financial assistance to improve developing countries’
January 2009, it required Chinese suppliers to con- ability to acquire and absorb foreign technologies.
form to Chinese environmental laws, previously often Source countries can also disseminate technological
ignored. In addition, Wal-Mart’s audits of its Chinese knowledge and standards, help solve problems and
suppliers began to focus more on environmental cri- establish grants for conducting industrial energy-
teria, including greenhouse gas emissions. Wal-Mart efficiency analyses in developed and developing coun-
is introducing similar requirements for its suppliers in tries. International collective action could provide a
other countries in 2011 (Wal-Mart 2008, 2010). forum for negotiating rules for international technol-
International collective action can organize and ogy transfers between source and host countries.
replicate these experiences across countries and indus- The key mechanisms for industrial energy-
tries, raising awareness of their potential. It can address efficiency technology transfers include international
possible concerns of local firms and governments. It agreements, multilateral and bilateral agreements
can expand and adapt programmes to different sec- providing official development assistance, and infor-
tors and countries. It can replicate programmes in mation exchange partnerships. Transfers through
countries where lead multinationals are absent, iden- these mechanisms focus on sharing knowledge and
tifying actors to fill these roles. It can build capacity– coordination; R&D, capacity-building and awareness
preparing teaching materials, organizing training and programmes; hardware, such as machinery and equip-
facilitating the necessary expertise. And it can involve ment; and aid financing.
other multinational corporations in improving indus-
trial energy efficiency through their value chains while International environmental treaties
ensuring that they follow corporate social responsibil- International environmental treaties generally have a
ity principles transparently. complex, multidisciplinary and integrated set of solu-
tions involving the environment, society, the economy,
Contributing to international technology and finance– t ogether with goals and tar-
technology transfers gets and a plan and process to achieve them. Given the
Technology transfers are critical for enhanced indus- role of energy efficiency in addressing the challenges
trial energy efficiency and in the global response to of climate change, industrial energy efficiency–related
132
“ The Clean Development Mechanism has been
useful for technology transfers to developing
countries, allowing them to leverage investment
for acquiring advanced environmentally friendly
and energy-efficient industrial technologies
7 Box 7.2
The Global Environment Facility’s technology transfer projects in selected countries
The Global Environment Facility (GEF) has developed an take stock of lessons from these activities to advance the
energy-efficiency programme for Tunisia’s industrial sector, sustainable development of heat and hot water services
International collective action for industrial energy efficiency
fostering a sustainable industrial energy-efficiency market. in Armenia. A tangible outcome of the project has been
The programme has approved an average of 60 projects legislation dealing with preferential cogeneration feed-in
a year, has saved nearly 40,000 tonnes of oil equivalent in tariffs, increasing private sector interest in power and heat
energy since 2005 and has established six fully operational supply projects.
energy service companies. And it has exceeded its targets: In Central America, the GEF has introduced a pro-
the resultant $150 million investment in energy efficiency gramme on electrical energy efficiency in the industrial
is six times the initial goal ($25 million), reducing carbon and commercial sectors. The goals include removing
dioxide emissions by 130,000 tonnes a year. barriers to implementing energy-efficiency measures by
In Armenia, the GEF has launched a district heating establishing a regulatory base for market transformation,
project to reduce greenhouse gas emissions from heat developing capacities to implement energy efficiency in
and hot water supplies. The project aims to strengthen small and medium-size enterprises, strengthening the
the collective organization and management of heat and technical knowledge of stakeholders and disseminating
hot water in buildings, restructure and build the capacity lessons and other information. The project has helped
of district companies to improve their energy efficiency, trigger energy-efficiency markets in the region by endors-
support new decentralized service providers to promote ing energy-efficiency standards and labels and promoting
the use of alternative energy-efficiency technologies, and energy-efficient equipment imports.
Box 7.3
National Cleaner Production Centres
Following the United Nations Conference on Environment materials reduction, and environmentally sound and safe
and Development at Rio in 1992, UNIDO and the United management of chemicals and their waste. There now
Nations Environment Programme (UNEP) launched the are Cleaner Production Centres or similar programmes in
National Cleaner Production Centres. The centres were set nearly 50 countries.
up to deliver services to business, government and other In 2007, an independent evaluation team found that
stakeholders and to assist them with adopting cleaner the programme had been highly effective and sustainable,
production methods, practices, policies and technologies. putting cleaner production on business and government
UNIDO and UNEP incorporated the lessons from the cen- agendas, training professional cleaner production audi-
tres in their joint Resource Efficient and Cleaner Produc- tors, implementing low- and intermediate-cost technology
tion programme, which supports decoupling economic options in assisted companies and transferring technology
development from further environmental degradation and and changing policy in several countries. The programme
resource depletion. The programme aims to improve the has improved businesses’ resource productivity and envi-
resource productivity and environmental performance of ronmental performance. And it has the potential to reduce
businesses and other organizations in developing coun- energy and pollution intensity per unit of output in devel-
tries. The centres promote and facilitate industrial energy oping country industries – reducing ecological footprints
efficiency in tandem with pollution prevention, water and and improving productivity and competitiveness.
leveraging public funds for technology transfer to in the industrial sectors of Asian developing coun-
developing countries and economies in transition. tries, targeting energy-efficient technologies and
• Japan’s Ministry of Economy, Trade and Industry clean coal technologies.
Green Aid Plan, which promotes the introduction The technology transfers under multilateral
and dissemination of cleaner energy technologies and bilateral agreements have helped reduce energy
134
“ international independent information
networks share information, exchange experts,
build capacity, provide technical assistance
and give advice and solve problems related
to specific technologies and processes
databases and advise governments and firms on ciency and large energy-efficiency improvements
possibilities for industrial energy efficiency. with a fairly small investment of public funds.
• Coordinating regulation, targets, standards, 2. The forum includes Australia, Brazil, Canada,
R&D, technology transfers and value chain opera- China, the European Union, France, Germany,
tions internationally. India, Italy, the Republic of Korea, Mexico, the
• Devising innovative mechanisms to address the Russian Federation, the United Kingdom and the
challenges of industrial energy-efficiency finance United States.
nationally and internationally. 3. The World Bank Group International Finance
Corporation’s Cleantech Investment Programme
Notes provides venture capital and private equity finance
1. Ohshita (2006) argues that knowledge net- for innovative energy-efficiency company projects
works are not only technical but also increasingly in developing countries.
138
Part B
Trends in
manufacturing
and
manufactured
exports, and
benchmarking
industrial
performance
139
Chapter 8
Trends in manufacturing –
before and after the global
financial and economic crisis
Global manufacturing production is shifting gradu- finance, insurance and real estate. In contrast, the
ally from developed countries to developing coun- manufacturing sector in developing countries has
tries, as firms move to benefit from cheaper labour, been buoyant, with a remarkable 5.6 percent annual
quality infrastructure, lower social costs and large growth rate in MVA over 1990–2010, slightly higher
markets in countries like China and India. These than the 4.8 percent GDP growth rate.
changes reflect greater integration of national econo- In 1990, developing countries were producing
mies through trade liberalization, wider availability about 20 percent of world GDP (Figure 8.2). By
of financial resources and increased flows of foreign 2010, this share had risen to 30 percent. This “rise
direct investment. World manufacturing value added of the rest” may be the defining economic trend of
(MVA) peaked at $7,390 billion in 2010 (18.2 per- this century (Amsden 2001). Global manufacturing
cent of global GDP) after a sharp drop in 2009 during has been shifting from developed to developing econ-
the global economic and financial crisis (Figure 8.1).1 omies even faster, with economies such as China,
MVA’s share in GDP declined from 17.7 percent in India and Taiwan Province of China building strong
1990 to 16.6 percent in 2010 in developed countries manufacturing sectors. In 1990, developed coun-
and rose from 18.4 percent to 21.5 percent in develop- tries accounted for 79.3 percent of global MVA (see
ing countries. Table 8.1). Their share fell 0.4 percent annually to
Globalization of production opens doors for 76.1 percent in 2000 and then 1.2 percent annually
developing countries, but it also comes with threats. to 71.6 percent in 2005. Since 2005, the decline in
It has made developing countries more vulnerable to their share has accelerated to 2.1 percent annually,
global shocks, such as the 2008 financial crisis that
spread from the United States and resulted in steep Figure 8.1
Manufacturing value added, 1990–2010
declines in global employment, demand and trade.
Manufacturing value added is shifting from developed to developing
Global manufacturing production fell 4.1 percent countries
in 2009, reacting to reduced consumer spending and
business investment and primarily affecting devel- 8,000
Manufacturing value added (2000 US$ billions)
ing countries.
Developed countries
8 Table 8.1
Level and share of world manufacturing value added, by region and income group, 1990, 2000 and 2010
falling to 64.4 percent in 2010. The financial crisis Accounting for more than half of developing coun-
exacerbated the MVA decline in developed coun- try MVA, East Asia and the Pacific remains the largest
tries, which lost 3.7 percent of MVA share to devel- manufacturing region by far, with an MVA of $1,540
oping countries in 2009– the biggest one-year loss in billion in 2010.2 Almost 75 percent of the region’s pro-
almost two decades– but MVA continued to grow in duction originates in China. Next are Latin America
developing countries. and the Caribbean ($423 billion) and the Middle
There are sharp variations in manufacturing per- East and North Africa ($229 billion). Sub-Saharan
formance among developing economies and regions. Africa’s MVA remains the smallest, at $54 billion in
China, India and Taiwan Province of China lead the 2010, accounting for less than 1 percent of develop-
list, recording the largest surge in their global MVA ing country MVA. All developing regions saw their
shares. China increased its share from 6.7 percent in global MVA share increase over 2000–2010, except
2000 to 15.4 percent in 2010, becoming the second Latin America and the Caribbean, where it declined,
largest manufacturer after the United States. India, and sub-Saharan Africa, where it stagnated. The least
with an economy focused more on services, has also developed countries, led by Bangladesh, Cambodia
fared well– m oving from 14th place to 9th– w ith a and Myanmar, have consistently gained share in global
global MVA share of 1.8 percent in 2010. MVA since 1995.
142
“ Most of the largest developing economy
manufacturers saw their share in developing
economy MVA fall between 2000 and 2010
Figure 8.2
Developing economies’ share in world
from 73.2 percent in 1990. The increase is attributable
mainly to China, which has emerged as a factory to
8
manufacturing value added and GDP, 1990–2010
Developing economies’ share in world manufacturing value added rose the world– more than tripling its share of develop-
ing countries’ MVA over 1990–2010, to 43.3 percent
Trends in manufacturing – before and after the global financial and economic crisis
from 20 percent in 1990 to 30 percent in 2010
(Figure 8.3). China also enjoyed faster average growth
40
Percent
0
1990 1995 2000 2005 2010
Manufacturing value added by
Source: UNIDO 2010g.
technological category
Both developed and developing economies increased
their share of medium- and high-technology products
Largest developing economy manufacturers over 1995–2009, with the global share of these products
Manufacturing in developing economies is highly rising from 41.3 percent to 55.8 percent (Table 8.2).3
concentrated, with the 15 leading economies account- Regionally, East Asia and the Pacific had 46 per-
ing for 83 percent of total production in 2010, up cent of its manufacturing production in medium- and
Figure 8.3
Share of large manufacturers in developing economy manufacturing value added, 1990, 2000 and 2010
China’s share of developing economy value added has nearly tripled since 1990
China
13.0%
China
Russian 27.9%
Federation
Others 11.1% Others Others China
53.4% 47.1% 38.1% 43.3%
Brazil
9.4% Brazil
7.0%
Mexico Mexico
7.8% 7.8%
India India
4.8% Mexico 5.0%
Taiwan Province Taiwan Province 4.0% Taiwan
of China Province Brazil
of China
5.2% of China 4.9%
5.5%
4.8%
Source: UNIDO 2010g.
143
“ Both developed and developing economies
increased their share of medium- and
high‑technology products over 1995–2009,
with the global share of these products
rising from 41.3 percent to 55.8 percent
ing, consistently at 75 percent over 1995–2009. When bution and marketing– a nd invest heavily in educa-
South Africa is excluded, the share of low-technology tion, research and development, and infrastructure to
and medium-low technology activities rises to about catch up with developed countries.
85 percent. The share of medium- and high-technology
With globalization, developing economies– activities in manufacturing in least developed coun-
particularly in East Asia– h ave become more inte- tries fell from 19.6 percent in 1995 to 16.7 percent
grated into global value chains and production net- in 2009. Although these countries are at the initial
works, with accelerated technology transfer and better stage of industrialization, they need to maintain and
market access. Having started with low-end, low value- develop manufacturing capacity in more technologi-
added products, economies such as China, Malaysia cally advanced products, which are more conducive to
Table 8.2
Technology composition of manufacturing value added, by region and income group, 1995–2009
(percent)
144
“ radio, television and communication
equipment’s share in manufacturing rose
to 20.7 percent in 2009 as a result of the
surge in demand for electronic goods
Trends in manufacturing – before and after the global financial and economic crisis
Value added by industry sector rose to 20.7 percent in 2009 as a result of the surge
In 1995, the dominant manufacturing sectors world- in demand for electronic goods (computers, mobile
wide were food and beverages (11.8 percent share), phones and other electronic devices).
Table 8.3
Industry sector share of manufacturing value added for developing and developed countries,
selected years, 1995–2009 (percent)
145
“ The positive growth in developing
countries over 2008–2009 masks sharp
disparities. The economic and financial crisis
affected each developing region differently
metals (10.1 percent). The increase in the share of radio, (7.1 percent) and Brazil (3.2 percent) in leather, leather
television and communication equipment (up from 4.7 products and footwear.
percent in 1995) reflects a shift towards more sophisti- In contrast, developed countries account for
cated products. Even so, developing countries account 70 percent or more of manufacturing activities in
for a substantial part of worldwide manufacturing of medium- and high-technology products– such as
medium-low technology products in labour-intensive machinery and equipment; motor vehicles, trailers
sectors such as textiles (74.7 percent), wearing apparel and semitrailers; and medical, precision and optical
and fur (71.6 percent) and leather, leather products and instruments. Developed countries therefore appear
footwear (77.2 percent; Table 8.4), with China leading to retain most high value-added or technologically
Table 8.4
Developing and developed countries’ share of global manufacturing value added by industry sector,
selected years, 1995–2009 (percent)
146
“ developing countries account for a
substantial part of worldwide manufacturing
of medium-low technology products in labour-
intensive sectors such as textiles, wearing
apparel and leather products and footwear
Trends in manufacturing – before and after the global financial and economic crisis
The five fastest growing sectors over 2005–2009 2008–2009 masks sharp disparities. The economic
were office, accounting and computing machinery; and financial crisis affected each developing region
radio, television and communication equipment; differently, through a region-specific mix of channels
electrical machinery and apparatus; other trans- such as trade, remittances, financial flows, foreign
port equipment; and basic metals (Table 8.5). All direct investment and development assistance.
are medium- and high-technology activities except Europe was the most affected, with MVA drop-
for basic metals, whose growth is likely explained by ping 7.1 percent, despite growth in five countries,
demand from emerging economies such as China and including Bosnia and Herzegovina (5.4 percent)
India. In 2009, the leading producers in those sec- and Croatia (3.5 percent). The Russian Federation’s
tors were the United States, China, Japan, Germany economy contracted sharply (12 percent) as the crisis
and the Republic of Korea. China was the first or sec- depressed oil prices and reversed capital flows.
ond leading manufacturer in the world in 21 of 22 Latin America and the Caribbean’s MVA fell
industrial sectors (International Standard Industrial 6 percent from 2008 to 2009, the largest decline
Classification Revision 3). Other developing econ- after Europe’s. MVA contracted at different rates in
omy leaders in global manufacturing include Taiwan Argentina (1 percent), Brazil (3.7 percent) and Mexico
Province of China, Brazil and India. (more than 10 percent) because of lower export
Among developing economies, China has become demand and capital flight. Mexico’s close commercial
the uncontested leader in all 22 industrial sectors, links with the United States, the centre of the crisis,
accounting for more than 50 percent of developing also contributed to the dramatic drop.
economies’ total MVA in 15 of them. When China is In East Asia and the Pacific, MVA grew 7.7 percent
excluded, Brazil, Taiwan Province of China, India and during the global downturn. Over 2008–2009, some
Thailand lead in at least one of the five fastest growing of the highest growth rates were recorded in Cambodia
sectors. In most of these sectors MVA remains concen- (12.8 percent), China (10.2 percent) and Viet Nam (9.3
trated, with the leading economy’s share at least twice percent). By contrast, MVA fell in Malaysia (5.6 per-
that of the following economy. For example, in office, cent) and Thailand (1.5 percent) following several years
accounting and computing machinery, Thailand’s of growth. The region’s ratio of exports to GDP was
share is more than six times that of Brazil, in second around 50 percent in 2008, the highest among devel-
place. Brazil, Taiwan Province of China and Mexico oping regions. As a result, East Asian countries were
are among the five leading manufacturers in four of affected by the crisis primarily through the collapse of
the five fastest growing industrial sectors. world trade, which led to a scaling down of manufac-
turing and mass layoffs in labour-intensive sectors such
The impact of the 2008–2009 as garments and electronics. Several countries, such
economic and financial crisis on as China, Indonesia and Malaysia, adopted stimulus
manufacturing packages combining tax cuts and government spend-
Global MVA grew an average 3.1 percent a year over ing on housing, infrastructure, transportation and
2000–2008, reaching $7,350 billion (Table 8.6). But industry. These fiscal measures totalled 4.8 percent of
in 2009, the global recession led to a 4.6 percent drop, GDP in China. East Asia and the Pacific is now lead-
to $7,020 billion. The crisis affected developed coun- ing the global recovery, with rapid growth foreseen for
tries more, with MVA falling 8.1 percent from 2008 the coming years (IMF 2010).
147
“ The five fastest growing sectors over 2005–
2009 were office, accounting and computing
machinery; radio, television and communication
equipment; electrical machinery and apparatus;
other transport equipment; and basic metals
8 Table 8.5
Leading producers in the five fastest growing industry sectors, 2000 and 2009 (percent)
Industry sector rate Economy 2000 Economy 2009 Economy 2000 Economy 2009
Office, accounting United 53 United 53 Thailand 21 Thailand 60
and computing States States
machinery
(ISIC 30) Japan 15 China 11 Mexico 21 Brazil 9
United 6 Japan 9 Brazil 17 Mexico 8
9.8 Kingdom
China 4 Germany 7 Malaysia 13 Philippines 5
Germany 4 Republic 6 Philippines 8 Saudi Arabia 4
of Korea
Radio, United 61 United 62 Taiwan 45 Taiwan 64
television and States States Province of Province of
communication China China
equipment
(ISIC 32) Japan 15 China 12 Malaysia 14 Malaysia 7
China 5 Japan 10 Brazil 7 Turkey 6
9.4
Taiwan 3 Republic 5 Mexico 7 Philippines 5
Province of Korea
of China
Republic 3 Taiwan 4 Philippines 6 Thailand 4
of Korea Province of
China
Electrical Japan 23 China 33 Brazil 19 India 44
machinery
and apparatus United 21 Japan 20 India 17 Brazil 15
(ISIC 31) States
Germany 13 Germany 10 Mexico 15 Mexico 7
7.9
China 8 United 10 Taiwan 12 Taiwan 5
States Province of Province of
China China
Italy 4 India 5 Turkey 5 Iran, Islamic 4
Rep.
Other transport United 31 United 22 Brazil 44 Brazil 63
equipment States States
(ISIC 35)
Japan 9 China 15 India 19 India 18
United 8 Brazil 14 Taiwan 8 Taiwan 3
7.3 Kingdom Province of Province of
China China
Brazil 6 Japan 7 Mexico 7 Viet Nam 3
France 5 Republic 6 United Arab 3 Mexico 2
of Korea Emirates
Basic metals Japan 23 China 48 India 15 India 25
(ISIC 27)
United 14 Japan 14 Mexico 14 Brazil 12
States
China 12 United 5 Taiwan 13 Mexico 9
States Province of
5.7 China
Germany 6 Germany 4 Brazil 12 Taiwan 8
Province of
China
Republic 4 India 3 Turkey 7 Turkey 7
of Korea
a. Excluding China.
Note: Value added in 2000 US dollars. ISIC is International Standard Industrial Classification.
Source: UNIDO 2010f.
148
“ Global manufacturing value added grew
an average 3.1 percent a year over 2000–2008,
reaching $7,350 billion, but economic growth in
developing countries slowed to 2.9 percent in 2009
Table 8.6
Manufacturing value added levels and growth, by region and income group, 2005–2010 (US$ billions 8
unless otherwise indicated)
Average annual
Trends in manufacturing – before and after the global financial and economic crisis
growth rate
(percent)
Group 2005 2006 2007 2008 2009 2010 2001–2005 2006–2010
World 6,570 6,900 7,260 7,350 7,020 7,390 2.7 2.4
Developed countries 4,710 4,880 5,040 5,010 4,600 4,760 1.4 0.2
Developing countries 1,870 2,020 2,220 2,340 2,410 2,630 6.2 7.1
Region
East Asia and the Pacific 966 1,060 1,200 1,290 1,390 1,540 8.6 9.8
Excluding China 320 342 365 370 375 406 4.8 4.9
Europe 148 156 171 176 164 169 5.9 2.8
Excluding Russian Federation 81 91 101 105 101 105 6.3 5.3
Latin America and the Caribbean 373 392 411 423 397 423 1.9 2.5
Excluding Brazil 262 279 293 302 281 294 1.5 2.3
Middle East and North Africa 183 198 210 217 216 229 4.4 4.6
Excluding Turkey 116 125 134 140 143 150 4.4 5.2
South and Central Asia 149 166 179 185 194 210 7.4 7.0
Excluding India 58 64 69 72 75 79 8.6 6.2
Sub-Saharan Africa 47 49 51 53 52 54 3.2 3.0
Excluding South Africa 20 21 22 23 24 26 3.6 4.6
Income
High income 214 232 251 251 253 270 4.1 4.8
Upper middle income 628 661 700 718 677 717 3.1 2.7
Lower middle income 985 1,080 1,220 1,330 1,430 1,590 9.1 10.0
Low income 39 42 46 49 52 56 6.7 7.7
Least developed countries 24 26 28 30 32 34 6.6 7.1
Source: UNIDO 2010g.
South and Central Asia withstood the global reces- since 2003. Saudi Arabia’s (4.8 percent) and Qatar’s
sion with an average MVA growth rate of 4.8 percent (6.7 percent) also grew over 2008–2009. And though
– thanks mainly to India, which benefited from strong oil revenues declined, these oil exporters used their
domestic demand and a relatively closed capital account, substantial reserves for large investment programmes.
which buffered it from the financial aspects of the crisis. Similarly, MVA rose in Egypt (5.9 percent), Tunisia
Over 2008–2009, MVA grew in Bangladesh (7.6 per- (4.5 percent) and Morocco (3.1 percent), despite the
cent), India (5.4 percent) and Pakistan (2.5 percent). It downturn, thanks to strong domestic demand.
declined in Turkmenistan (1.8 percent) and Kyrgyzstan In sub-Saharan Africa, Congo (12.5 percent),
(1 percent), likely because of their close links with the Uganda (9.1 percent) and Mozambique (8.8 percent)
Russian Federation, which was strongly affected. had the highest growth rate, though a few countries
In the Middle East and North Africa, MVA recorded large drops, including Liberia, Madagascar
declined 0.5 percent over 2008–2009. MVA in Turkey, and Swaziland. Sub-Saharan Africa, the least industri-
the largest manufacturer in the region, declined 5.5 per- alized region, had an MVA of 10.6 percent of GDP
cent, in contrast to its average 7.1 percent annual gain in 2010, down from 12.7 percent in 1990. Excluding
149
“ Despite the crisis, manufacturing value
added in the least developed countries
grew 6.3 percent over 2008–2009
developing countries
trial base is eroding, a process likely accelerated by the 75
Percent
depletion of much needed resources for investments
in productive capacity and infrastructure as a result
of the financial crisis. Sub-Saharan Africa is also likely
to be severely affected through other channels, such as 65
lower remittances, exports revenues and commodities
prices.
Despite the crisis, MVA in the least devel-
oped countries grew 6.3 percent over 2008–2009.
55
Three countries in Asia– T imor-Leste (13.8 per-
cent), Afghanistan (13.6 percent) and Cambodia
(12.3 percent) – h ad double-digit growth. In
Bangladesh, the largest manufacturer among the least
45
developed countries, with an MVA share of more than 1980 1985 1990 1995 2000 2005 2008
40 percent of the group total, MVA grew 7.6 percent Source: UNIDO 2010f.
in 2009. Several countries in sub-Saharan Africa, such
as Ethiopia, Togo and Zambia, also enjoyed MVA
growth. However, this growth could conceal long- international competitive pressures (for example, from
term adverse effects of the crisis on industrialization, China in low-technology labour-intensive sectors such
due to their fledgling manufacturing sectors, increased as textiles) and vulnerability to external shocks.
Figure 8.5
Share of manufacturing employment in developing countries, by region, 1998–2008
There are sharp regional differences in the evolution of manufacturing employment in developing countries
75
Percent
50
25
Europe Latin America and the Caribbean
Middle East and North Africa
Sub-Saharan Africa
South and Central Asia
0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
150
“ Global manufacturing employment has been
shifting from developed to developing countries
Table 8.7
Share of manufacturing employment for developing and developed countries, by industry sector, 8
selected periods over 1993–2008 (percent)
Trends in manufacturing – before and after the global financial and economic crisis
Industrial Classification 1993–2000 2001–2008 1993–2000 2001–2008 1993–2000 2001–2008
Food and beverages 11.8 12.1 12.1 12.0 11.0 12.5
Tobacco products 0.8 0.7 1.1 1.0 0.2 0.1
Textiles 8.6 7.4 10.7 9.4 4.5 3.2
Wearing apparel and fur 6.0 6.4 7.1 8.2 3.9 2.4
Leather, leather products and footwear 0.9 5 0.8 3.2 1.2 0.9
Wood products (excluding furniture) 2.5 2.7 2.3 2.5 2.9 3.1
Paper and paper products 2.4 2.6 2.2 2.5 2.8 2.7
Printing and publishing 3.3 3.0 1.8 1.8 6.0 5.6
Coke, refined petroleum products,
nuclear fuel 1.0 0.9 1.2 1.0 0.5 0.5
Chemicals and chemical products 7.3 7.0 8.2 7.2 5.6 5.7
Rubber and plastics products 4.3 4.7 3.8 4.2 5.3 5.8
Non-metallic mineral products 7.3 5.8 8.9 6.6 4.1 4.1
Basic metals 5.8 5.5 6.9 6.4 3.9 3.6
Fabricated metal products 5.9 6.8 4.1 5.1 9.2 10.7
Machinery and equipment 10.7 9.1 10.6 8.2 10.9 10.8
Office, accounting and computing machinery 0.5 0.9 0.2 1.0 1.0 0.8
Electrical machinery and apparatus 5.8 4.6 5.9 4.6 5.7 4.8
Radio, television and
communication equipment 1.7 3.6 0.5 3.4 3.8 4.0
Medical, precision and optical instruments 2.0 2.1 1.4 1.5 3.2 3.5
Motor vehicles, trailers, semi-trailers 6.5 5.0 6.1 3.9 7.3 7.4
Other transport equipment 1.1 2.3 0.4 2.0 2.4 3.0
Furniture; manufacturing
not elsewhere classified 4.0 4.5 3.6 4.4 4.6 4.8
a
Recycling 0.1 0.2 0.0 0.2 0.1 0.2
Total 100 100 100 100 100 100
a. Less than 0.1.
Source: UNIDO 2010f.
World manufacturing activity declined in most sec- industries such as textiles, leather and footwear, and
tors. Declines were high in basic metals; motor vehicles, electronics suffered from depressed global demand. By
trailers and semitrailers; machinery and equipment; contrast, income-inelastic consumer non-durable indus-
fabricated metal products; and electrical machinery and tries, such as food and beverages, continued to grow.
apparatus. Consumer durable sectors– particularly the
automotive sector– were hit hard by shrinking demand Structure of global manufacturing
as consumers postponed major purchases because of employment
the bleak economic outlook. Basic and fabricated metal Global manufacturing employment has been shifting
industries suffered because of the slowdown in metal- from developed to developing countries (Figure 8.4).4
intensive industries such as construction and motor This trend is expected to intensify as more manufac-
vehicles, while export-oriented and labour-intensive turing relocates to developing countries.
151
“ In developing countries, the largest
manufacturing employers were food
and beverages; textiles; machinery and
equipment; wearing apparel and fur; and
chemicals and chemical products
up again, and the region now accounts for nearly two- 1. Data for 2010 were obtained using “nowcasting”
thirds of manufacturing employment in developing (see Boudt, Todorov and Upadhyaya 2009).
countries. Europe’s share has been declining since 2. For the regional classification of countries, see
2000, following the ruble crisis, which substantially Annex 13.
lowered manufacturing employment in the Russian 3. Manufactured products can be classified by tech-
Federation. Latin America and the Caribbean’s share nological complexity as low-technology, medium-
has also declined, while the share remained stable in low-technology and medium- and high-technology
South and Central Asia, the Middle East and North (see Annex 7 for details). Low- and medium-low-
Africa and sub-Saharan Africa– at generally less than technology products are sometimes called simple
10 percent. products, while medium- and high-technology
By industry, the top five manufacturing employers products are also complex products. There is a high
in developed countries over 2001–2008 (employing level of aggregation in classifying activities using
47.2 percent of the developed country total) were food physical complexity, which may result in combin-
and beverages; machinery and equipment; fabricated ing products from the same industrial category
metal products; motor vehicles, trailers and semitrail- but with different technological content (see Lall,
ers; and rubber and plastics products (Table 8.7). In Weiss and Zhang 2006 for a discussion).
developing countries, the largest manufacturing 4. In this section, 2007 data on the number of
employers (45.0 percent of the developing country employees was estimated using a second-order
total) were food and beverages; textiles; machinery autoregressive model.
152
Chapter 9
Trade expansion has been central to economic glo- contributed to the growth (UNCTAD 2008).
balization. Exports have grown 5.9 percent annually Exports of primary products grew even faster over
since 2004, reaching close to $15,000 billion in 2008, the same period, likely fuelled by strong demand from
before dropping in 2009 (Table 9.1). Manufactures fast-growing developing countries.
make up the bulk of world trade, consistently Developed countries’ manufactured exports grew
accounting for more than 80 percent of exports since 11.0 percent over 2005–2008, reaching $7,542 billion
1990. before dropping to $5,792 billion in 2009 because
While developed countries have traditionally of the crisis (Table 9.2; see also Table 9.4 later in the
dominated world manufactures trade, developing chapter). In developing countries, manufactured
countries’ share has risen steadily – as has their expo- exports grew 17.3 percent over the same period, to a
sure to trade shocks (Montalbano 2011).1 Although peak of $4,554 billion in 2008, and dropped to $3,699
initially sheltered from the direct effects of the 2008– billion in 2009.
2009 financial and economic crisis, the trade channel With growth rates higher than those of devel-
has worked mainly by reducing developing country oped countries, developing countries’ share in world
exports to developed countries hit hard by the cri- manufactured exports rose from 20.4 percent in
sis. Developing countries were later affected through 1992 to 29.4 percent in 2000 and 39 percent in 2009
other channels, including remittances, foreign direct (Figure 9.1). And the trend will likely continue, as
investment and development assistance. developing countries increase their manufacturing
This chapter analyses trends in world manufac- production capacity and more manufacturing activi-
tured exports since 1990, the changing roles of devel- ties relocate to these countries to reduce production
oping countries and the effects of the recent financial costs.
and economic crisis on their manufactured exports. World manufactured exports are dominated by
medium- and high-technology products such as tel-
Trends in world manufactured exports ecommunications equipment, passenger vehicles,
In 2008, world manufactured exports peaked at office machines and medicines. Since 1992, the share
$12,095 billion (see Table 9.1), growing faster than of medium- and high-technology products in world
both manufacturing value added and GDP during manufactured exports has remained above 60 per-
2005–2009. Trade liberalization, falling transporta- cent, with a peak of 64.3 percent in 2000 (Figure
tion costs and increased globalization of production 9.2).2 The share has declined since 2000, due mainly
Table 9.1
World exports, by product category, 2004–2009 (US$ billions unless otherwise indicated)
Average annual
growth, 2004–2009
Product category 2004 2005 2006 2007 2008 2009 (percent)
Manufactures 7,382 8,252 9,448 10,845 12,095 9,490 5.2
Primary 1,180 1,449 1,837 1,984 2,653 1,843 9.3
Other 107 114 149 167 217 207 14.1
Total trade 8,669 9,815 11,434 12,997 14,966 11,540 5.9
Source: UN 2011.
153
“ In developing countries, manufactured
exports grew 17.3 percent over 2005–2008,
to a peak of $4,554 billion in 2008, and
dropped to $3,699 billion in 2009
9 Table 9.2
World manufactured exports, by region and income group, selected years, 1995–2009 (US$ billions)
– is not available because about half the least developed countries have yet to report 2009 data.
Source: UN 2011.
to the 2.4 percent annual drop in the share of high- Of the 20 most dynamic manufactured products4
technology exports over 2001–2008. The share of (products with the highest annual average growth
resource-based exports grew 2.9 percent annually over rates) over 2005–2009, 12 were resource-based or
the period, while the share of low-technology products low-technology products (Table 9.3).5 Exports of the
remained fairly stable. top three products (precious metals, iron ores and
In 2009, developing countries accounted for office machines) grew more than 25 percent a year
35 percent of world exports of medium- and high- on average. The dynamism of resource-based prod-
technology products.3 Although developed countries ucts, such as iron, steel, copper and other metallic and
still account for more than 60 percent of medium- and non-metallic minerals, can be explained by the high
high-technology exports, developing countries have demand from countries such as China and India to
made inroads, raising the technological complexity of feed metal-intensive construction and motor vehicle
their exports and gaining market share (Figure 9.3). In industries. This trend opens doors for low- and mid-
2009, 54.8 percent of developing country exports were dle-income resource-rich countries that might be able
medium- and high-technology products, up from 48.6 to exploit the upward pressure on these commodi-
percent in 1995. ties’ prices. Developing countries’ share in dynamic
154
“
manufactured exports rose from 20.4 percent
developing countries’ share in world
Figure 9.1
Developed and developing countries’ share of
Figure 9.2
Technology composition of manufactured 9
world manufactured exports, 1992–2009 exports, 1992–2009
Developing countries’ share in world manufactured exports rose from Since 1992, the share of medium- and high-technology products in
100 100
Percent
Percent
High-technology
Developed countries
Developing countries
75 75
Medium-technology
50 50
Low-technology
25 25
Resource-based
0 0
1992 1995 2000 2005 2009 1992 1995 2000 2005 2010
Figure 9.3
Change in world market share of manufactured exports by technological level, 2004–2009
Although developed countries still account for more than 60 percent of medium- and high-technology exports, developing countries have made inroads
7
Average change in the world market share of medium- and
high-technology manufactured exports (percent)
Developing countries
3 (US$1,290 billion)
0
–3 –2 –1 0 1 2 3 4
–1
Developed countries
–3 (US$818 billion)
–5
Average change in the world market share of resource-based and low-technology manufactured exports (percent)
Note: Bubble size indicates the change in the value of manufactured exports (in parentheses) between 2004 and 2009.
Source: UN 2011.
155
“ Exports of the top three products (precious
metal ores, iron ores and office machines) grew
more than 20 percent a year on average
9 Table 9.3
Top 20 dynamic manufactured exports, 2005–2009
Average annual
SITC growth, 2005–2009 2009 value
Manufactured exports trade
product exports averaged 47.3 percent over 2005– At 13th place in 1992, China has steadily risen in
2009, up from 41.7 percent over 2000–2004. By total rank – becoming the global leader in manufactured
export value, one resource-based product (petroleum exports in 2008, with exports of $1,370 billion and a
products, $986 billion) tops the list in 2009, followed world market share of 11.3 percent. It is also the top
by one medium-technology product (ships, $283 bil- exporter to the European Union, the United States
lion) and one high-technology product (medicines, and Japan. Increasingly, China is exporting medium-
$246 billion). and high-technology manufactured products; their
share rose from 28.4 percent in 1992 to 45.5 percent
Developing countries’ role in world in 2000 and 59.8 percent in 2009. And as the second
manufactured exports largest importer in the world (with a share of 8.7 per-
Although developing countries’ overall share of world cent in 2009) – behind the United States (13.1 per-
manufactured exports is rising, some countries have cent) and ahead of Germany (7.4 percent) – China is
a greater influence than others. China, especially, is helping fuel global demand.
changing the world manufactured exports landscape. East Asia and the Pacific, led by China, accounts
Its exports grew an average of 14.6 percent a year over for the largest regional share of manufactured
1992–2001 and 27.9 percent over 2002–2008, after it exports from developing countries, hovering around
joined the World Trade Organization. 60 percent since 1998 (Figure 9.4). Europe’s share
156
“ East Asia and the Pacific, led by China,
accounts for the largest regional share of
manufactured exports from developing countries,
hovering around 60 percent since 1998
Figure 9.4
Share of developing country manufactured exports, by region, 1998–2009 9
East Asia and the Pacific, led by China, has the largest regional share of manufactured exports from developing countries
75
50
25
0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
East Asia and the Pacific Developing Europe Latin America and the Caribbean Middle East and North Africa South and Central Asia Sub-Saharan Africa
Source: UN 2011.
of manufactured exports has been on the rise, while medium- and high-technology products rose 1.6 per-
that of Latin America and the Caribbean has fallen, cent per year.
from 16.6 percent in 1999 to 11.2 percent in 2009.
Shares of developing country manufactured exports Trends in manufactures trade
for the Middle East and North Africa, South and between developing countries
Central Asia and sub-Saharan Africa have yet to reach Trade between developed countries still accounts for
10 percent. the largest share of world manufactured exports, but
The dynamism and sophistication of a region’s the share fell 8.5 percentage points over 2004–2009,
exports show in the evolution of its world market to 40.3 percent. By contrast, manufactured exports
shares by technological level (Figure 9.5). East Asia from developing to developed countries rose 8.8 per-
and the Pacific, Developing Europe, the Middle cent a year on average over 2004–2009, and those
East and North Africa, and South and Central Asia from developed to developing countries rose 10.0
increased their market shares of world resource-based percent a year (Figure 9.6). Exports between develop-
and low-technology products over 2004–2009; their ing countries grew even faster over the period, at 14.9
shares of medium- and high-technology products percent a year, reaching $2,247 billion in 2008 before
rose even more. Latin America and the Caribbean’s dropping to $1,871 billion in 2009. They accounted
share of resource-based and low-technology products for 51.8 percent of developing countries’ manufac-
increased slightly (2 percent a year on average), but its tured exports in 2009, up from 39.9 percent in 2000.
share of medium- and high-technology products stag- The share is likely to increase further as production
nated. Sub-Saharan Africa’s share in the world market fragmentation eases, as trade continues to develop and
for resource-based and low-technology products fell as large countries such as Brazil, China and India grow
2.8 percent annually over 2004–2009, but its share of and reinforce their trade ties with other developing
157
“ manufactured exports from developing to
developed countries rose 8.8 percent a year on
average over 2004–2009, and those from developed
to developing countries rose 10 percent a year
9 Figure 9.5
Change in regional share of world manufactured exports by technological level, 2004–2009
Export dynamism and sophistication show in the evolution of regions’ shares of world manufactured exports by technology level
18
Manufactured exports trade
12
Middle East and North Africa
10 (US$117 billion)
6 Developing Europe
East Asia and the Pacific (US$149 billion)
4 (US$840 billion)
Sub-Saharan Africa
2 (US$10 billion)
0
–4 –3 –2 –1 0 1 2 3 4 5
–2 Latin America and
the Caribbean
(US$96 billion)
–4
Average change in the world market share of resource-based and low-technology manufactured exports (percent)
Note: Bubble size indicates the change in the value of manufactured exports (in parentheses) between 2004 and 2009.
Source: UN 2011.
Figure 9.6
Trade patterns between developed and developing countries, 2004–2009
Exports between developing countries grew 14.9 percent a year over 2004–2009
20
Average growth rate of manufactured exports (percent)
15
10
0
–6 –4 –2 0 2 4 6 8 10
Note: Bubble size indicates the value of manufactures exports in 2009 (in parentheses).
Source: UN 2011.
158
“ In all regions, developed countries
remain the top trade partners, but their
share is declining. Countries in the same
region are the second largest trade partner
group in all but South and Central Asia
Percent
larger than those that would be generated by open- 1997
2003
2009
ing up developed countries’ markets (Fugazza and
Vanzetti 2008). 75
Figure 9.7
Manufactured exports markets, by region, 2005 and 2009
In all regions, developed countries remain the top trade partners, but their share is declining
East Asia and the Pacific Europe Latin America and the Caribbean
100 100 100
Share of exports (percent)
75 75 75
50 50 50
25 25 25
0 0 0
2005 2009 2005 2009 2005 2009
Middle East and North Africa South and Central Asia Sub-Saharan Africa
100 100 100
Share of exports (percent)
75 75 75
50 50 50
25 25 25
0 0 0
2005 2009 2005 2009 2005 2009
Developed East Asia and the Pacific Developing Europe Latin America and the Caribbean Middle East and North Africa South and Central Asia Sub-Saharan Africa
Source: UN 2011.
159
“ Benefiting from dynamic intraregional
trade, East Asia and the Pacific accounted for
almost 70 percent of manufactured exports
between developing countries over 2000–2009
region’s total, and in South and Central Asia, where machinery was about 62 percent in 2008, their share
India exported 82.5 of the region’s manufactures in world manufacturing value added of those products
in 2009. was only 18 percent, suggesting that low value-added
Benefiting from dynamic intraregional trade, East activities are outsourced to developing countries.
Asia and the Pacific accounted for almost 70 percent
of manufactured exports between developing coun- The impact of the economic and
tries over 2000–2009 (Figure 9.9). The region has spe- financial crisis
cialized in products with high value to weight ratios World manufactured exports grew 13.2 percent
(such as semiconductors and textiles), which are more annually over 2005–2008, reaching $12,095 billion
prone to fragmentation (Lall, Albaladejo and Zhang (Table 9.4), with the growth rate in developing coun-
2004); their parts and components are therefore easier tries (17.3 percent) far greater than that in developed
to produce in other countries before final assembly. countries (11.0 percent). For manufactured exports,
Trade in parts and components is proportionately the fastest growing developing regions were Europe,
much larger in East Asia and the Pacific than else- led by the Russian Federation, and the Middle East
where, with China the premier centre of final assem- and North Africa, led by Turkey. The largest develop-
bly (Athukorala 2010). Sharing production has also ing countries did especially well (Figure 9.10). Over
allowed some latecomers such as Cambodia and Lao 2005–2008, manufactured exports grew 27.6 per-
PDR to integrate into production networks and reach cent a year in the Russian Federation, 24.6 percent in
China, 24.3 percent in India, 20.2 percent in Turkey,
Figure 9.9 19.3 percent in Brazil and 16.4 percent in South
Manufactured exports between developing
countries, 1990–2009 Africa.
East Asia and the Pacific accounted for almost 70 percent of Weakly integrated in world financial markets,
manufactured exports between developing countries developing countries were somewhat sheltered from
2,500 the financial effects of the 2008–2009 crisis, but
US$ billions
Table 9.4
World manufactured export levels and growth, by region and income group, 2004–2009 (US$ billions 9
unless otherwise indicated)
– is not available; about half the least developed countries have yet to report 2009 data.
Source: UN 2011.
Union and 14.5 percent to the United States. Declines dropped more than 20 percent in Brazil, the Russian
were even sharper for Europe, Latin America and the Federation, South Africa and Turkey. However, these
Caribbean, and the Middle East and North Africa. countries are quickly bouncing back, with China’s
Sub-Saharan Africa was hit hardest, with a 35.7 per- 2010 exports rebounding to their 2008 peaks.
cent plunge in combined exports to the European The least developed countries were less affected by
Union and the United States. Combined with fall- the drop in EU and US imports.6 After expanding 10.3
ing commodity prices, the decline in manufactured percent annually since 2004 to $9 billion in 2008, US
export revenues has constrained the ability to import imports from these countries shrank 12.9 percent in
vital production inputs and to mitigate the effects of 2009, less than the developing country average decline
the crisis. The largest developing countries also suf- of 18.1 percent. Bangladesh, the largest country in the
fered from the turmoil, but to varying degrees. Indian group, saw their imports by the European Union and
exports declined the least by far (4.9 percent), fol- the United States fall just 1.7 percent. Others, includ-
lowed by China (16.0 percent). Manufactured exports ing Benin, the Democratic Republic of the Congo and
161
“ Over 2005–2008, manufactured exports
grew 27.6 percent a year in the Russian
Federation, 24.6 percent in China, 24.3 percent
in India, 20.2 percent in Turkey, 19.3 percent
in Brazil and 16.4 percent in South Africa
9 Figure 9.10
Growth of manufactured exports in selected
2009, primary products trade dropped 30.5 percent.
The accompanying collapse in export revenues is likely
large developing countries, 1996–2010
The largest developing countries in each region did especially well in to hurt the least developed countries in the long run,
perhaps jeopardizing years of development progress
Manufactured exports trade
1,000
Notes
1. The share of exports in GDP in developing coun-
750 tries rose from 20.4 percent in 1995 to 33.9 per-
India
cent in 2008.
Turkey 2. Manufactured exports can be classified by techno-
500
logical complexity as natural resource–based, low-
Russian Federation
technology and medium- and high-technology
Brazil
250 (see Annex 8 for details).
South Africa
3. These figures may conceal the fact that complex
100
activities such as design and marketing are still
0
1996 2000 2005 2010 performed in developed countries, while assembly
Source: UN 2011.
and production activities are carried out in devel-
oping countries.
4. By concentrating exports on “dynamic” activities,
Sudan, suffered sharp declines. EU imports from the a country could limit the risk of export market
least developed countries dropped 7 percent (to $14.6 saturation from an increased number of com-
billion), again less than the 22 percent overall decline petitors and exploit the potential for long-term
for developing countries. productivity growth associated with an export-
Overall, large developing countries, whose imports oriented industrialization strategy (Mayer et al.
from least developed countries grew an average of 46.5 2003).
percent a year over 2004–2008, offer important trade 5. Geometric means are used to compute the average
opportunities. However, the crisis forced large devel- growth rates. The rates are lower than for 2004–
oping countries to cut imports from least developed 2008 because the consequences of the crisis were
countries 26.9 percent in 2009. Despite the higher felt mainly in 2009.
than average imports by major importing countries, 6. Because of data constraints, analysis of the effects
the least developed countries are more vulnerable to of the financial crisis on the least developed coun-
economic shocks because they rely heavily on primary tries looks only at imports from countries or
product exports (Malik and Temple 2009). While groups of countries, such as the United States and
world manufactures trade dropped 21.5 percent in the European Union.
162
Chapter 10
Benchmarking industrial
performance
UNIDO developed the Competitive Industrial analysis. For instance, Bhattacharya, Ghosh and Jansen
Performance (CIP) index to benchmark national (2001, p. 217) conclude that “increases in world market
industrial performance. Selecting appropriate indica- shares of China are statistically correlated with declines
tors is challenging, and it builds on the notion that in world market shares for some Asian countries since
national competitiveness is an economy’s ability to 1994, but not before 1994.” Kaplinsky, McCormick
create welfare (Aiginger 2006).1 This selection can be and Morris (2010) also use world market shares analy-
based on domestic production or international trade sis (together with global prices for African exports) to
(Hughes 1993; Gough 1996). The CIP index assesses assess the trade impact of China on sub-Saharan Africa.
industrial performance using indicators of an econ- The previous CIP index did not consider econo-
omy’s ability to produce and export manufactured mies’ industrial and trade strengths in global mar-
goods competitively (UNIDO 2003). kets.3 The index was influenced only by national
factors. Indeed, dynamics leading to international
The new Competitive Industrial complementarity and competition were overlooked
Performance index (Kaplinsky, McCormick and Morris 2010). The two
This report expands the CIP index from six indica- new indicators in the index now partially capture
tors to eight. The two new indicators are the share of these elements. Though imperfect measures, shares
an economy’s manufacturing value added (MVA) in in world manufactures trade and in world MVA are
world MVA (to measure impact on world manufactur- widely used in the literature.
ing production) and the share of an economy’s manu-
factured exports in world manufactured exports (to Dimensions, indicators and
measure an economy’s impact on international trade).2 calculation of the Competitive
The previous CIP index assumed that an econ- Industrial Performance index
omy’s industrial performance depended entirely on The CIP index has six main dimensions:
endogenous factors – its own industrial capabilities • Industrial capacity. MVA per capita is the primary
to produce and export manufactures competitively. indicator of an economy’s industrialization adjusted
However, new studies find that in a global economy, for population. It shows an economy’s capacity to
exogenous factors, like third-country competition, add value in manufacturing. MVA is sometimes
strongly affect the international industrial scene. shielded from international competition by inward
The large Asian economies, particularly China policies and trade barriers. MVA analysis can
and India, are commonly cited to show that external distort results for economies with a long history of
competitive pressures may be affecting other devel- protectionism and import substitution. But adding
oping countries’ export performance. Studies have export orientation to the analysis places industrial
focused mainly on China’s impact on South and East competitiveness in a global context.
Asia (Bhattacharya, Ghosh and Jansen 2001; Lall and • Manufactured export capacity. In a global economy,
Albaladejo 2004), Latin America (Lall and Weiss 2005; the capacity to export is a key to economic growth
Blázquez-Lidoy, Rodríguez and Santiso 2006; Devlin, and competitiveness. Manufactured exports per
Estevadeordal and Rodriguez-Clare 2006; Gallagher, capita, a basic indicator of trade competitiveness,
Moreno Brid and Porzecanski 2008) and sub-Saharan shows an economy’s capacity to meet global
Africa (Kaplinsky, McCormick and Morris 2006, 2010). demand for manufactures in an increasingly
To assess the impact, these studies use world market share competitive environment. Manufactured exports
163
“ The previous CIP index assumed that industrial
performance depended entirely on endogenous
factors – industrial capabilities to produce and
export manufactures competitively – however, new
studies find that in a global economy, exogenous
factors, like third-country competition, strongly
affect the international industrial scene
multinational corporations. MVA also adds to The share of medium- and high-technology
trade analysis by showing the value that domestic products in manufactured exports captures the
companies add to exports. technological complexity of exports, along with
• Impact on world MVA. The impact of an economy the ability to make more advanced products and
on world MVA is measured by its share in world move into more dynamic areas of exports.
MVA, which indicates an economy’s relative All indicators are normalized as follows:
performance and impact in manufacturing.
Xij – Min(Xij )
• Impact on world manufactures trade. An economy’s Iij =
Max(Xij ) – Min(Xij )
impact on world manufactured exports is measured
by its share in world manufactured exports, which where Iij is the index value i for economy j, Xij is the
shows an economy’s competitive position relative indicator value i for economy j, Min is the smallest
to others in international markets. Gains in world value in the sample and Max is the largest. The top
market share reflect more competitiveness; losses economy in the sample gets the value 1, while the worst
signal deterioration. performer gets the value 0. The CIP index is calculated
• Industrialization intensity. An economy’s indus as the arithmetic mean of the normalized values of the
trialization intensity is measured by the arithmetic indicators. All six dimensions of the index have equal
average of the share of MVA in GDP and the share of weight. Each combined indicator in industrialization
medium- and high-technology activities in MVA. The intensity and export quality also gets equal weight .
share of MVA in GDP captures manufacturing’s The CIP index relies on a limited number of quan-
weight in the economy. The share of medium- and titative indicators. The indicators are computed from
high-technology activities in MVA shows the MVA and population data from UNIDO’s statisti-
technological complexity of manufacturing. This cal database and trade data from the United Nations
variable gives a positive weight to medium- and Commodity Trade Statistics Database (Comtrade).
high-technology activities since a more complex Most indicators are easy to compute, but the share
structure denotes industrial maturity, flexibility of medium- and high-technology activities in MVA
and the ability to move into faster growing is not, because recent MVA data are not available at
activities. However, the measure captures shifts the International Standard Industrial Classification
across activities but not upgrades within them, (ISIC) two-digit level of aggregation. Censuses and
so it misses an important aspect of technological surveys are the primary sources of UNIDO’s indus-
improvement. As an aggregate measure, it does trial statistics. The sources generate statistics with
not capture fine technological differences within a typical lag of two or three years. The most recent
the categories (some low-technology activities can available data are used for this indicator, under the
include some high-technology activities – and vice assumption that economic structure changes slowly.
versa). These deficiencies reflect the nature of the See Annexes 9–13 for more information.
data, but the broad findings appear to be sound. The CIP index focuses on industrial performance,
• Export quality. Export quality is measured by not industrial potential.4 Performance involves a
the simple arithmetic average of the share of country’s actual wealth creation. Potential refers to
manufactured exports in total exports and the factors that may ease or impede it, such as the quan-
share of medium- and high-technology products in tity and quality of input factors (labour, capital and
164
“ the four overall leaders in the Competitive
Industrial Performance index in 2005 and 2009
were Singapore, the United States, Japan and
Germany, with China ranking fifth in 2009
Table 10.1
Rankings on the Competitive Industrial Performance index, 2005 and 2009
(continued)
165
“ Among the top 20 economies in 2009,
three improved their rankings the most over
2005 – Czech Republic, Austria and Slovakia
– thanks largely to growth in MVA per capita
and manufactured exports per capita
Source: UNIDO.
166
“ Several economies slipped in their Competitive
Industrial Performance index ranking, including
the Russian Federation, Brazil and South Africa
Table 10.2
Change in rank on the Competitive Industrial Performance index between 2005 and 2009 10
Change Change Change
Economy in rank Economy in rank Economy in rank
167
“ East Asia and the Pacific is the most
industrialized region, with manufacturing
value added at 31 percent of GDP in 2009
East Asia and the Pacific Latin America and the Caribbean
East Asia and the Pacific is the most industrialized Latin America and the Caribbean had the high-
region, with MVA at 31 percent of GDP in 2009. est regional MVA per capita in 2008, at $779, but it
Gains in MVA per capita have been impressive: from dropped to second place in 2009 because of the global
$476 in 2004 to $678 in 2008 and $724 in 2009, economic and financial crisis. Manufacturing’s contri-
despite the global economic crisis. Led by China, the bution to GDP dropped from 16.6 percent in 2000 to
region accounted for 20 percent of world MVA in 14.8 percent in 2009. The region’s 14 percent annual
2009. Export performance is especially remarkable, growth in manufactured exports over 2005–2008 was
with manufactured exports up 18 percent over 2005– slower than that of Europe (22.8 percent) and East
2008 and constituting more than 90 percent of the Asia and the Pacific (16.8 percent).
region’s exports. Mexico, Costa Rica and Brazil were the top three
The region’s only change in rank was Thailand’s performers in the region in 2005 and 2009, ranking
rise from sixth to fifth in the region in 2009, ahead of 30th, 41st and 44th globally on the 2009 CIP index
Malaysia, placing it 25th in the world (Table 10.3). Its (see Table 10.3). Mexican exports are developing rap-
exports per capita grew 52 percent over 2005–2008, idly, with a strong contribution from the automotive
168
“ Israel was the top performer in the Middle
East and North Africa, followed by Turkey; India
remains the most industrialized economy in South
and Central Asia; and Swaziland was the most
industrialized economy in sub-S aharan Africa
10 Table 10.3
Rank of developing economies on the Competitive Industrial Performance index, by region,
2005 and 2009
Region and economy 2005 2009 Region and economy 2005 2009
Benchmarking industrial performance
170
“
such as Germany, Japan and the United States,
are also the best industrial performers
Economies with low energy intensity,
Region and economy 2005 2009 Region and economy 2005 2009
Source: UNIDO.
change. Increased competitive pressure, high and Economies with low energy intensity, such as
unstable energy prices and tightening environmental Germany, Japan and the United States, are also the
regulations also make energy intensity a key issue for best industrial performers. Energy costs as well as
industrial competitiveness. energy-conserving technologies may explain energy
To explore the relationship between industrial efficiency in these economies. Japan, the best indus-
performance and energy intensity, the CIP index was trial performer in 2005, leads in energy-saving tech-
regressed on manufacturing energy intensity for 104 nologies in steel, cement and refineries, thus soften-
economies in 2008.5 The results suggest that energy ing the impact on production of low energy-resource
intensity is inversely correlated with industrial perfor- endowments and price volatility of imported energy
mance (Figure 10.1).6 sources. Japan plans to increase energy efficiency
Figure 10.1
Linking the Competitive Industrial Performance index with manufacturing energy intensity, 2008
1.00
Competitive Industrial Performance index
Developing economies
Developed economies
Predicted
0.75
Japan
United States
Singapore Germany
China
Korea, Rep.
0.50
Sweden
Taiwan Province of China
United Kingdom
Mexico
171
“ There are large variations in industrial
performance and energy intensity, with economies
such as China and Singapore having relatively
high industrial performance and low energy
intensity, and others such as Ghana, Mongolia
and Nigeria having relatively low industrial
performance and high energy intensity
China and Singapore having relatively high industrial products (such as iron, cement and steel) to cope
performance and low energy intensity, and others such with rapid infrastructure growth – in housing and
as Ghana, Mongolia and Nigeria having relatively low in metal-intensive industries such as motor vehicles.
industrial performance and high energy intensity. However, these economies are also improving their
Developing economies generally fall into one of three energy efficiency.
groups, with India (CIP index of 0.20 and energy An interesting question is whether the causal
intensity of 1.12) as a “threshold” in Figure 10.1. relationship runs from industrial performance to
Indeed, the vertical (1.12) and horizontal (0.2) lines energy efficiency, the other way around or in both
through India’s coordinates in the figure divide the directions. Most developed economies cluster at the
graph area into four zones; there are no economies in top for industrial performance and the bottom for
the upper right quadrant of the graph. energy intensity, indicating greater energy-efficiency
Economies such as Gabon and Nigeria, with maturity than developing economies. The average
energy intensity higher than India’s, typically have energy intensity of developed economies in the sam-
lower industrial performance. Their relatively low ple is 0.26 tonne of oil equivalent per $1,000 MVA,
levels of industrialization leave considerable room less than a quarter the average for developing econ-
for energy-efficiency improvements as they develop omies (1.17 tonnes of oil equivalent). By economy,
their industrial sector. In addition, economies in the Ireland and Switzerland have the lowest energy
bottom right quadrant of the graph such as Iran and intensity, at 0.07 tonne of oil equivalent per $1,000
Qatar are oil-producing economies that subsidize MVA; Iceland, the highest (0.94 tonne of oil equiva-
oil. Since energy price is a key determinant of energy lent). As noted in Chapter 2, total industrial energy
intensity, subsidies may provide strong disincentives intensity tends to be high at early stages of indus-
for energy savings. trialization but decreases at later stages of industri-
Several economies with energy intensity lower alization due to technological improvements in the
than India’s have higher industrial performance, use of energy, structural changes away from energy-
including Indonesia, Mexico and Turkey (upper intensive sectors, production shifts towards more
left quadrant in Figure 10.1). In this second group, skill-intensive industries and increasing use of high-
economies such as Singapore and Taiwan Province quality fuels. This view suggests that a higher indus-
of China have energy intensity and industrial per- trialization stage and performance precedes lower
formance comparable to those of developed econo- energy intensity. But this may be explained by the
mies. Finally, a third group, which includes Algeria, fact that most developed economies industrialized
Panama and Sri Lanka, has low energy intensity and without the current environmental concerns and
low industrial performance (bottom left quadrant), constraints, before moving from “brown” to “green”
suggesting that other factors may also play a role in industries.
explaining industrial performance (although not The current situation is different. Economies
investigated here). might have to choose deliberate policies to lower
Large developing economies such as Brazil, China energy intensity in order to promote industrial per-
and India rank in the top half in industrial perfor- formance. At the firm level, lower energy intensity,
mance (6th, 40th and 43rd, respectively) and energy resulting from reduced use of a costly input (energy),
intensity.7 The Russian Federation is in the bottom might save money and increase productivity, and
172
“ some actions to decrease energy
intensity will typically lead to better industrial
performance relative, in particular, to
technology and system improvements
173
Annexes
175
Annex 1
The data span 1990–2008 and cover as many econo- cross-database comparisons. Three problem areas were
mies as possible, subject to data availability, for indus- identified:
try as a whole and are disaggregated by manufacturing • Manufacturing sector coke, refined petroleum
sector (International Standard Industry Classification products and nuclear fuel (ISIC code 23) was not
[ISIC] 15–37). The economies were classified by listed under the industry sector classification of
UNIDO region and income. IEA data. It was listed under “transformation and
Real-value manufacturing value added data were energy.” The difference between the two is that the
obtained from UNIDO’s International Yearbook of energy sector reports energy used as fuel to power
Industrial Statistics 2010 and presented in 2000 US the manufacturing process, while the transforma-
dollars. INDSTAT 2 ISIC Revision 3 was the primary tion sector reports fossil fuels used as raw mate-
source of value added data. The Index of Industrial rial input to a manufacturing process. According
Production was also obtained from Revision 3 and was to the definition of energy intensity used in this
used to convert the nominal value-added data into real report (the unit of energy consumed [as fuel] per
values in 2000 US dollars for any year X, as follows: unit of value added produced), only energy sector
IIPyrX and final consumption need to be included. Fossil
VAyrX = VA2000 ×
IIP2000 fuel use as raw material input and feedstock use in
where VA2000 and IIP 2000 are the 2000 (base year) the petrochemical sector were thus not included in
value added and Index of Industrial Production. For the energy consumption figures.
any other year, the value added and Index of Industrial • Blast furnace in the energy sector has been allo-
Production are referred to by VAyrX and IIPyrX . cated to the iron and steel sector. Coke ovens
Industrial energy consumption data for both from the energy sector were allocated half and
aggregated and disaggregated levels came from the half to iron and steel (ISIC code 27) and to coke,
IEA databases of extended energy balances for OECD refined petroleum products and nuclear fuel (ISIC
and non-OECD countries (IEA 2010c). code 23).
While UNIDO’s manufacturing value added • The IEA data treat recycling as part of the manu-
data are reported according to ISIC Revision 3, IEA’s facturing sector and include energy consumption
energy data are reported according to a classification by the recycling sector under “non-specified.”
closer to Revision 2. Annex 3 matches sector data However, no value added data were available for
for energy and manufacturing value added to enable the recycling sector in INDSTAT 2.
176
Annex 2
Decomposition data
and methodology
The INDSTAT 2 ISIC Revision 3 dataset for 2010 Next, the Fisher Ideal Index technique was
is used for value added (UNIDO 2010f) and the applied, based on the Laspeyres and Paasche Indices.
International Energy Agency (IEA) Extended World The Laspeyres Index is expressed as follows:
Energy Balances for 2009 is used for energy consump- ∑S I ∑ S I
Lstr = i i,t i,0 and Leff = i i,0 i,t
tion (IEA 2010c). Of the initial 64 economies 62 were ∑iSi,0Ii,0 ∑i Si,0Ii,0
investigated by Cantore and Fokeer (2010). To be where Lstr is the Laspeyres structural effect, Leff is the
selected, economies had to: Laspeyres energy efficiency, S is the share of sector i in
• Be covered by IEA and INDSTAT data. total value added in time t and I is energy intensity of sec-
• Have at least five years of data available in the IEA tor I in time t. The Paasche Index is expressed as follows:
and INDSTAT datasets. ∑S I ∑ S I
Pstr = i i,t i,t and Peff = i i,t i,t
• Have data for at least 5 of 11 IEA sectors. As the ∑iSi,0Ii,t ∑iSi,t Ii,0
analysis includes structural composition, countries where Pstr is the Paasche structural effect and Peff is the
for which this component is relevant were chosen. Paasche energy-efficiency component.
The data were then cleaned by eliminating from The overall Fisher Ideal Index is calculated as follows:
the dataset sectors of economies with inconsistencies FII = (Lstr × Pstr)1/2 × (Leff × Peff )1/2
(for example, a sector with 0 for value added and a where the Fisher structural effect, STR, is (Lstr × Pstr)1/2,
positive value for energy consumption) and outliers. and the Fisher technical energy-efficiency effect, TEC,
Sectors with temporally inconsistent data were also is (Leff × Peff )1/2.
excluded (for example, 0 value for the periods 0 . . . t–1 To express the total change in energy intensity as
and a positive value at time t). the sum of the structural effect and the Fisher energy-
The first step was to calculate energy intensity for efficiency effect (instead of a product), log mean
each economy as a ratio of energy consumption (in Divisia Index was applied as follows:
tonnes of oil equivalent, toe) to value added. Energy
intensity is expressed as toe per $1,000 manufacturing
value added (in 2000 international dollars).
177
Annex 3
Table A3.1
Correspondence between energy data and manufacturing value added data by sector
178
Annex 4
Table A4.1
All economies, by income group
Developing economies
Developed Upper Lower
economies High income middle income middle income Low income
Australia* Bahrain Algeria Albania Bangladesh
Austria* Brunei Darussalam Argentina* Angola Benin
Belgium* Croatia* Belarus Armenia* Cambodia
Canada* Cyprus* Bosnia and Herzegovina Azerbaijan* Congo, Dem. Rep. of
Czech Republic* Estonia* Botswana Bolivia, Plurinational Ethiopia
State of
Denmark* Hong Kong SAR China Brazil* Cameroon Eritrea
Finland* Israel* Bulgaria* China* Ghana
France* Kuwait Chile* Congo Haiti
Germany* Malta Colombia* Côte d’Ivoire* Kenya
Greece* Oman Costa Rica* Ecuador Korea, Dem. People’s
Rep. of
Hungary* Qatar Cuba Egypt Kyrgyzstan*
Iceland Saudi Arabia Dominican Rep. El Salvador Mozambique
Ireland* Singapore Gabon* Georgia Myanmar
Italy* Slovenia* Jamaica Guatemala Nepal
Japan* Taiwan Province of Kazakhstan* Honduras Senegal
China*
Korea, Rep. of* Trinidad and Tobago Lebanon India* Tajikistan
Luxembourg United Arab Emirates Latvia* Indonesia* Tanzania, United Rep. of
Netherlands* Libyan Arab Jamahiriya Iran, Islamic Rep. of Togo
New Zealand* Lithuania* Jordan Uzbekistan
Norway* Macedonia, Former Moldova, Rep. of* Viet Nam
Yugoslav Rep. of*
Portugal* Malaysia Mongolia Yemen
Slovakia* Mexico* Morocco* Zambia
Spain* Namibia Nicaragua Zimbabwe
Sweden* Panama Nigeria
Switzerland* Peru Pakistan
United Kingdom* Poland* Paraguay
United States* Romania* Philippines*
Russian Federation* Sri Lanka
Serbia Sudan
South Africa* Syrian Arab Rep.
Turkey* Thailand*
Uruguay Tunisia*
Venezuela, Bol. Rep. of* Turkmenistan
Ukraine*
* Meets the criteria for decomposition analysis.
Source: UNIDO.
179
A4 Table A4.2
Developing economies, by region
180
Annex 5
Table A5.1
Industrial energy intensity by economy, 1990, 2000 and 2008 (tonnes of oil equivalent per US$1,000
of manufacturing value added)
(continued)
181
A5 Table A5.1 (continued)
Industrial energy intensity by economy, 1990, 2000 and 2008 (tonnes of oil equivalent per $1,000 of
manufacturing value added)
182
Annex 6
Figure A6.1
Small and large economy bias, manufacturing value added, 2005
150
Ranking by manufacturing value added per capita
Ethiopia
Uganda
Bangladesh Azerbaijan
100 India Cambodia
Algeria Sri Lanka Cameroon Bolivia
Botswana
Albania Gabon
Indonesia Morocco
Ecuador
Iran, Islamic Rep. Bulgaria Barbados
China Russian Federation Colombia
El Salvador
50 Brazil Chile Costa Rica Cyprus
Argentina
Australia Slovenia
Czech Republic
United Kingdom France
Austria Luxembourg
United States Germany
Switzerland Ireland
0 Japan
0 Singapore 50 100 150
Ranking by share in global manufacturing value added
Source: UNIDO.
183
A6 Figure A6.2
Small and large economy bias, manufactured exports, 2005
150
Ranking by exports per capita
How Competitive Industrial Performance index rankings change when new indicators are added
Ethiopia
Uganda
Cameroon
Bangladesh
India
100
Bolivia
Iran, Islamic Rep. Cambodia
Azerbaijan Albania
Indonesia Colombia Algeria
Sri Lanka
Brazil
China Argentina Morocco
El Salvador
Gabon
Russian Federation
Chile Costa Rica Barbados
50
Australia Bulgaria Cyprus
United States
Botswana
Japan
United Kingdom
Czech Republic
France Slovenia
Austria
Germany
Switzerland Ireland Luxembourg
0 Singapore
0 50 100 150
Ranking by share in world exports
Source: UNIDO.
Table A6.1
Impact of changes in the Competitive Industrial Performance index methodology on the rankings, 2005
184
Table A6.1 (continued)
Impact of changes in the Competitive Industrial Performance index methodology on the rankings, 2005 A6
Economy Old Revised Difference Economy Old Revised Difference
Honduras 92 92 0 Moldova, Rep. of 86 87 –1
How Competitive Industrial Performance index rankings change when new indicators are added
Cambodia 93 93 0 St. Lucia 88 89 –1
Fiji 94 94 0 Rwanda 89 90 –1
Sudan 95 95 0 Nepal 90 91 –1
Peru 96 96 0 Madagascar 99 100 –1
Kenya 97 97 0 Yemen 115 116 –1
Gambia, The 98 98 0 Singapore 1 3 –2
Kyrgyzstan 101 101 0 Taiwan Province of China 10 12 –2
Syrian Arab Rep. 102 102 0 Netherlands 14 16 –2
Cameroon 103 103 0 Philippines 30 32 –2
Paraguay 104 104 0 Estonia 33 35 –2
Uganda 105 105 0 Costa Rica 37 39 –2
Azerbaijan 106 106 0 Lithuania 39 41 –2
Eritrea 107 107 0 Romania 45 47 –2
Ecuador 108 108 0 New Zealand 46 48 –2
Ghana 109 109 0 Jordan 49 51 –2
Malawi 110 110 0 Bulgaria 51 53 –2
Bolivia, Plurinational Georgia 56 58 –2
State of 111 111 0
Bahamas 58 60 –2
Mongolia 112 112 0
Latvia 59 61 –2
Panama 113 113 0
Qatar 62 64 –2
Tanzania, United Rep. of 114 114 0
Bangladesh 73 75 –2
Gabon 117 117 0
Jamaica 74 76 –2
Ethiopia 118 118 0
Palestinian Territories 81 83 –2
Hong Kong SAR China 13 14 –1
Ireland 2 5 –3
Denmark 22 23 –1
Switzerland 4 7 –3
Czech Republic 23 24 –1
Malaysia 17 20 –3
Cyprus 43 44 –1
Malta 28 31 –3
South Africa 44 45 –1
Iceland 40 43 –3
Barbados 54 55 –1
El Salvador 47 50 –3
Mauritius 55 56 –1
Egypt 70 73 –3
Swaziland 61 62 –1
Hungary 21 25 –4
Lebanon 64 65 –1
Israel 26 30 –4
Macedonia, Former
Yugoslav Rep. of 65 66 –1 Sweden 5 10 –5
Pakistan 66 67 –1 Finland 6 11 –5
Colombia 68 69 –1 Austria 12 18 –6
Zimbabwe 83 84 –1 Slovakia 15 21 –6
Niger 84 85 –1 Luxembourg 16 22 –6
Slovenia 19 26 –7
Source: UNIDO.
185
Annex 7
Technological classification of
manufacturing value added data
To compute the share of medium- and high-tech- For this classification, medium- and high-
nology activities in manufacturing value added, technology activities were combined. The sector shares
the OECD International Standard Industrial of value added were then calculated in relation to the
Classification (ISIC) was used (Table A7.1). total for manufacturing subsectors.
For Niger and Zimbabwe, the classification in
Table A7.2 was used because data were available only
in ISIC Revision 2.
186
Annex 8
Technological classification
of international trade data
Table A8.1
Technology classification of exports, SITC Revision 3
187
Annex 9
2005
Indicator and economy Year used Indicator and economy Year used
Share of medium- and high-technology activities in Switzerland 2003
manufacturing value added
Syrian Arab Rep. 1995
Algeria 1996
Taiwan Province of China 1996
Argentina 2002
Thailand 2002
Bahamas 1998
Uganda 2000
Bangladesh 1998
Venezuela, Bol. Rep. of 1998
Barbados 1997
Viet Nam 2000
Bolivia, Plurinational State of 2001
Zimbabwe 1995
Botswana 1997
Exports per capita
Cambodia 2000
Cambodia 2004
Cameroon 2002
Eritrea 2003
Côte d’Ivoire 1997
Kuwait 2004
El Salvador 1998
Nepal 2003
Fiji 2004
Nigeria 2003
Gabon 1995
Share of manufactured exports in total exports
Gambia, The 1995
Cambodia 2004
Ghana 2003
Eritrea 2003
Honduras 1996
Kuwait 2004
Jamaica 1996
Nepal 2003
Kuwait 2001
Nigeria 2003
Lebanon 1998
Share of medium- and high-technology activities in
Malawi 2001 manufactured exports
Nepal 2002 Cambodia 2004
Niger 2002 Eritrea 2003
Nigeria 1996 Kuwait 2004
Pakistan 2001 Nepal 2003
Panama 2001 Nigeria 2003
Paraguay 2002 Share in world manufactured exports
Rwanda 1999 Cambodia 2004
Senegal 2002 Eritrea 2003
Sri Lanka 2001 Kuwait 2004
St. Lucia 1997 Nepal 2003
Sudan 2001 Nigeria 2003
Swaziland 1995
188
Table A9.1 (continued)
Data years used for computing the Competitive Industrial Performance index A9
2009
189
A9 Table A9.1 (continued)
Data years used for computing the Competitive Industrial Performance index
Indicator and economy Year used Indicator and economy Year used
Morocco 2008 United States 2007
Data clarifications for the Competitive Industrial Performance index, by indicator
190
Table A9.1 (continued)
Data years used for computing the Competitive Industrial Performance index A9
Indicator and economy Year used Indicator and economy Year used
Georgia 2008 Cameroon 2006
191
Annex 10
Share of world
Manufacturing value Share of manufacturing manufacturing
added per capita value added in GDP value added
(2000 US$) (percent) (percent)
Economy 2005 2009 2005 2009 2005 2009
Albania 202 295 13.29 16.27 0.01 0.01
Algeria 133 135 6.25 6.13 0.07 0.07
Argentina 1,393 1,622 17.20 16.44 0.82 0.93
Australia 2,389 2,608 10.33 10.45 0.74 0.79
Austria 4,584 5,077 18.25 19.74 0.58 0.61
Azerbaijan 50 69 4.19 2.95 0.01 0.01
Bahamas 1,097 972 6.76 5.75 0.01 0.00
Bangladesh 63 82 15.70 17.28 0.15 0.19
Barbados 338 290 3.64 3.12 0.00 0.00
Belgium 3,912 3,814 16.31 15.30 0.62 0.57
Bolivia, Plurinational State of 140 161 13.22 13.52 0.02 0.02
Botswana 152 167 3.46 3.86 0.00 0.00
Brazil 594 594 15.00 13.71 1.69 1.66
Bulgaria 331 373 15.73 15.10 0.04 0.04
Cambodia 80 111 19.62 22.69 0.02 0.02
Cameroon 139 146 20.56 20.54 0.04 0.04
Canada 3,939 3,236 15.46 12.72 1.93 1.54
Chile 989 982 17.30 16.21 0.25 0.24
China 492 754 34.11 35.70 9.82 14.45
Colombia 370 408 16.83 14.24 0.25 0.28
Costa Rica 998 1,006 22.16 19.95 0.07 0.07
Cyprus 1,002 998 7.67 7.21 0.01 0.01
Czech Republic 1,780 2,246 26.55 30.13 0.28 0.33
Côte d’Ivoire 107 98 19.17 17.35 0.03 0.03
Denmark 3,963 3,705 12.54 12.01 0.33 0.29
Ecuador 211 248 13.26 14.33 0.04 0.05
Egypt 291 353 17.71 18.09 0.32 0.39
El Salvador 510 509 23.16 22.63 0.05 0.05
Eritrea 12 9 7.24 6.33 0.00 0.00
Estonia 1,105 1,073 17.77 17.49 0.02 0.02
Ethiopia 6 8 4.95 4.39 0.01 0.01
Fiji 266 274 11.59 12.94 0.00 0.00
Finland 6,463 6,839 24.55 25.95 0.52 0.52
192
A10
(continued)
193
A10 Table A10.1 (continued)
Indicators of industrial performance by economy, 2005 and 2009
Components of the Competitive Industrial Performance index by economy
Share of world
Manufacturing value Share of manufacturing manufacturing
added per capita value added in GDP value added
(2000 US$) (percent) (percent)
Economy 2005 2009 2005 2009 2005 2009
France 3,291 2,989 13.94 12.60 3.05 2.65
Gabon 188 187 4.40 4.31 0.00 0.00
Gambia, The 15 16 4.71 4.47 0.00 0.00
Georgia 123 185 12.62 15.30 0.01 0.01
Germany 5,090 5,250 21.44 21.72 6.40 6.17
Ghana 25 27 8.79 8.35 0.01 0.01
Greece 1,385 1,610 9.96 10.65 0.23 0.26
Honduras 184 277 17.66 19.81 0.02 0.03
Hong Kong SAR China 938 724 3.19 2.27 0.10 0.08
Hungary 1,287 1,266 21.92 21.55 0.20 0.18
Iceland 3,627 4,134 10.06 11.44 0.02 0.02
India 80 99 14.13 13.74 1.38 1.69
Indonesia 258 295 28.07 27.08 0.89 1.00
Iran, Islamic Rep. of 306 363 16.01 16.74 0.32 0.38
Ireland 7,774 6,560 25.95 22.98 0.49 0.42
Israel 2,899 3,143 14.55 13.97 0.30 0.32
Italy 3,221 2,894 16.63 15.29 2.87 2.43
Jamaica 382 292 11.71 8.10 0.02 0.01
Japan 8,608 7,929 22.12 20.71 16.75 14.45
Jordan 344 401 16.76 16.86 0.03 0.04
Kenya 43 46 10.05 10.19 0.02 0.03
Korea, Rep. of 3,854 4,562 28.86 29.43 2.81 3.16
Kuwait 1,516 2,208 7.85 10.35 0.06 0.09
Kyrgyzstan 46 50 14.64 13.30 0.00 0.00
Latvia 601 541 11.92 10.87 0.02 0.02
Lebanon 643 627 12.58 9.87 0.04 0.04
Lithuania 939 993 19.34 19.40 0.05 0.05
Luxembourg 4,686 4,500 9.09 8.37 0.03 0.03
Macao SAR China 775 1,064 3.52 2.90 0.01 0.01
Macedonia, Former
Yugoslav Rep. of 305 345 16.13 15.98 0.01 0.01
Madagascar 26 27 11.21 11.08 0.01 0.01
Malawi 15 17 10.60 9.70 0.00 0.00
Malaysia 1,412 1,390 32.39 27.92 0.55 0.54
Malta 1,492 1,387 14.83 13.16 0.01 0.01
Mauritius 773 787 17.52 16.10 0.01 0.01
194
A10
Share of Share of
medium- and medium- and
high-technology Share of high-technology
14.11 12.71 891 835 88.96 85.89 0.02 0.02 20.18 18.08
3.03 3.28 28 40 68.07 77.13 0.01 0.01 8.85 9.98
9.24 9.24 9 13 25.33 16.38 0.00 0.00 18.74 18.85
47.38 46.12 4,702 4,849 86.35 85.11 1.46 1.40 72.30 64.48
35.34 47.00 5,541 5,101 92.65 92.77 0.03 0.02 74.92 76.92
3.32 2.98 1,514 1,265 94.12 91.75 0.02 0.02 21.22 8.66
(continued)
195
A10 Table A10.1 (continued)
Indicators of industrial performance by economy, 2005 and 2009
Components of the Competitive Industrial Performance index by economy
Share of world
Manufacturing value Share of manufacturing manufacturing
added per capita value added in GDP value added
(2000 US$) (percent) (percent)
Economy 2005 2009 2005 2009 2005 2009
Mexico 1,022 911 16.78 15.17 1.62 1.42
Moldova, Rep. of 71 66 15.13 12.57 0.00 0.00
Mongolia 26 37 4.58 5.24 0.00 0.00
Morocco 225 241 14.51 13.34 0.10 0.11
Nepal 18 19 7.68 7.18 0.01 0.01
Netherlands 3,295 3,329 13.19 12.71 0.82 0.78
New Zealand 2,242 1,769 14.71 11.94 0.14 0.11
Niger 11 10 6.62 5.60 0.00 0.00
Nigeria 18 23 4.11 4.48 0.04 0.05
Norway 3,781 4,117 9.34 9.82 0.27 0.28
Oman 699 670 7.04 7.53 0.03 0.03
Pakistan 103 123 17.21 18.81 0.25 0.30
Palestinian Territories 111 104 11.10 12.00 0.01 0.01
Panama 315 336 7.12 5.94 0.02 0.02
Paraguay 193 183 14.22 12.76 0.02 0.02
Peru 355 446 14.81 14.99 0.15 0.18
Philippines 247 258 22.09 21.07 0.32 0.34
Poland 960 1,351 18.39 21.25 0.56 0.73
Portugal 1,621 1,546 14.59 13.97 0.26 0.24
Qatar 1,958 2,628 5.98 5.35 0.02 0.03
Romania 297 353 13.16 13.20 0.10 0.11
Russian Federation 461 444 18.96 15.80 1.01 0.89
Rwanda 25 17 9.98 5.62 0.00 0.00
Senegal 60 54 11.95 10.41 0.01 0.01
Singapore 6,785 6,996 26.04 23.76 0.45 0.45
Slovakia 1,961 2,987 41.44 36.38 0.16 0.23
Slovenia 2,717 3,005 23.75 23.41 0.08 0.09
South Africa 550 572 16.39 15.59 0.40 0.40
Spain 2,346 2,178 14.95 13.66 1.55 1.39
Sri Lanka 146 176 14.07 13.68 0.04 0.05
St. Lucia 221 199 4.65 4.19 0.00 0.00
Sudan 32 34 6.92 5.90 0.02 0.02
Swaziland 335 460 24.11 28.83 0.01 0.01
Sweden 6,392 6,110 21.25 19.93 0.88 0.80
Switzerland 6,780 7,384 19.39 19.60 0.77 0.79
Syrian Arab Rep. 148 194 11.77 14.26 0.04 0.06
196
A10
Share of Share of
medium- and medium- and
high-technology Share of high-technology
(continued)
197
A10 Table A10.1 (continued)
Indicators of industrial performance by economy, 2005 and 2009
Components of the Competitive Industrial Performance index by economy
Share of world
Manufacturing value Share of manufacturing manufacturing
added per capita value added in GDP value added
(2000 US$) (percent) (percent)
Economy 2005 2009 2005 2009 2005 2009
Taiwan Province of China 4,192 5,101 25.28 26.19 1.45 1.68
Tanzania, United Rep. of 24 28 7.30 7.32 0.01 0.02
Thailand 895 1,004 35.91 37.35 0.86 0.93
Trinidad and Tobago 684 898 7.34 8.47 0.01 0.02
Tunisia 412 476 17.21 17.19 0.06 0.07
Turkey 917 950 27.11 20.31 1.02 1.04
Uganda 25 25 9.21 6.91 0.01 0.01
United Kingdom 3,683 3,330 13.63 12.06 3.38 2.91
United States 5,604 5,334 15.28 14.83 25.56 23.70
Uruguay 1,162 1,296 17.86 14.46 0.06 0.06
Venezuela, Bol. Rep. of 864 915 17.37 16.22 0.35 0.37
Viet Nam 118 171 22.42 26.15 0.15 0.22
Yemen 29 29 5.33 5.17 0.01 0.01
Zimbabwe 41 33 9.49 9.61 0.01 0.01
198
A10
Share of Share of
medium- and medium- and
high-technology Share of high-technology
199
Annex 11
200
Table A11.2
Share of manufacturing value added in GDP, 2005–2009 (percent) A11
Group 2005 2006 2007 2008 2009
World 18.2 18.3 18.5 18.4 18.0
Indicators of the Competitive Industrial Performance index by region and income group
Developed countries 17.3 17.4 17.5 17.3 16.5
Developing countries 21.3 21.0 21.4 21.5 21.8
Region
East Asia and the Pacific 29.8 29.3 30.1 30.5 31.4
Excluding China 23.6 22.9 23.0 22.6 23.5
Europe 18.3 17.9 18.3 17.8 17.5
Excluding the Russian Federation 17.5 18.5 19.4 19.2 19.2
Latin America and the Caribbean 16.1 15.9 15.7 15.5 14.8
Excluding Brazil 16.7 16.5 16.3 16.2 15.4
Middle East and North Africa 16.5 15.2 15.2 15.1 14.8
Excluding Turkey 12.2 12.3 12.3 12.3 12.2
South and Central Asia 14.7 15.1 15.1 14.7 14.8
Excluding India 16.0 16.6 16.8 16.9 17.0
Sub-Saharan Africa 12.3 12.0 11.9 11.7 11.4
Excluding South Africa 8.6 8.3 8.2 8.1 8.1
Income
High income non-OECD 16.6 16.2 16.4 16.0 16.8
Upper middle income 17.6 16.9 16.9 16.6 16.0
Lower middle income 26.5 26.5 27.2 27.5 27.9
Low income 13.9 14.1 14.5 14.6 15.0
Least developed countries 11.3 11.3 11.4 11.3 11.4
Source: UNIDO 2010g.
201
A11 Table A11.3
Share of manufacturing value added in world manufacturing value added, 2005–2009 (percent)
202
Table A11.4
Share of medium- and high-technology production in manufacturing value added, 2005–2009 (percent) A11
Group 2005 2006 2007 2008 2009
World 53.1 54.4 55.4 56.3 55.8
Indicators of the Competitive Industrial Performance index by region and income group
Developed countries 59.0 61.0 62.3 63.7 63.6
Developing countries 39.8 40.3 41.6 42.5 43.0
Region
East Asia and the Pacific 43.3 43.6 45.2 45.8 46.0
Excluding China 43.0 42.9 48.7 50.4 50.5
Europe 36.1 36.4 37.3 37.7 36.5
Excluding the Russian Federation 33.1 33.7 34.8 36.1 35.9
Latin America and the Caribbean 33.0 33.5 34.0 34.8 33.3
Excluding Brazil 28.3 29.1 28.9 28.5 27.1
Middle East and North Africa 32.5 31.9 32.4 33.6 35.6
Excluding Turkey 29.6 29.2 29.4 30.5 33.0
South and Central Asia 43.4 43.6 44.2 45.0 47.3
Excluding India 27.5 27.2 27.7 28.3 29.0
Sub-Saharan Africa 25.5 25.8 25.9 26.3 24.2
Excluding South Africa 14.4 14.1 14.3 14.9 14.9
Income
High income non-OECD 46.1 47.0 54.5 55.6 55.8
Upper middle income 35.0 35.4 35.9 36.6 35.3
Lower middle income 41.6 41.9 42.7 43.5 44.5
Low income 20.7 20.2 20.3 20.6 20.7
Least developed countries 18.2 17.3 17.0 17.0 16.7
Source: UNIDO 2010f.
203
A11 Table A11.5
Manufactured exports per capita, 2005–2009 (current US$)
204
Table A11.6
Share of manufactured exports in total exports, 2005–2009 (percent) A11
Group 2005 2006 2007 2008 2009
World 86.0 84.7 85.5 83.2 84.2
Indicators of the Competitive Industrial Performance index by region and income group
Developed countries 89.3 88.8 88.7 87.4 87.5
Developing countries 79.9 78.0 80.2 76.8 79.2
Region
East Asia and the Pacific 92.6 92.3 92.7 91.8 92.1
Excluding China 90.9 90.1 89.9 88.1 88.2
Europe 62.5 66.4 62.1 61.4 63.3
Excluding the Russian Federation 89.2 88.6 89.1 88.7 88.4
Latin America and the Caribbean 66.8 62.8 67.7 61.9 61.9
Excluding Brazil 65.0 60.1 66.7 59.9 61.1
Middle East and North Africa 59.7 54.8 58.4 51.5 57.1
Excluding Turkey 47.1 43.9 46.9 40.7 47.1
South and Central Asia 64.5 66.2 86.6 86.0 86.7
Excluding India 38.7 41.3 86.4 78.4 77.7
Sub-Saharan Africa 61.7 37.9 41.2 39.6 41.0
Excluding South Africa 52.2 23.7 24.1 21.5 23.7
Income
High income non-OECD 92.0 87.6 88.2 85.7 87.3
Upper middle income 67.2 66.4 67.3 63.7 65.5
Lower middle income 85.5 83.1 87.5 84.2 86.6
Low income 53.7 52.7 57.6 53.9 56.0
Least developed countries 61.0 62.8 60.4 33.6 24.6
Source: UN 2011.
205
A11 Table A11.7
Share in world manufactured exports, 2005–2009 (percent)
206
Table A11.8
Share of medium- and high-technology production in manufactured exports, 2005–2009 (percent) A11
Group 2005 2006 2007 2008 2009
World 63.2 62.9 62.3 60.8 61.6
Indicators of the Competitive Industrial Performance index by region and income group
Developed countries 67.1 66.8 66.1 64.7 65.1
Developing countries 55.2 55.4 55.2 54.0 55.8
Region
East Asia and the Pacific 62.7 62.7 62.1 60.4 62.3
Excluding China 66.2 66.6 65.5 62.7 64.8
Europe 39.8 40.4 42.3 43.0 45.3
Excluding the Russian Federation 47.0 48.7 50.7 52.1 54.4
Latin America and the Caribbean 53.6 55.6 54.3 52.7 51.9
Excluding Brazil 55.3 58.6 57.1 54.8 55.5
Middle East and North Africa 34.7 33.4 33.4 35.6 39.8
Excluding Turkey 30.0 27.5 26.6 31.5 38.2
South and Central Asia 19.3 19.7 20.9 25.2 26.7
Excluding India 11.0 10.9 9.4 10.7 11.1
Sub-Saharan Africa 36.7 35.5 39.2 42.6 37.5
Excluding South Africa 18.2 18.5 19.4 25.8 20.8
Income
High income non-OECD 66.5 66.4 65.2 63.6 67.1
Upper middle income 50.4 51.3 50.4 48.3 49.9
Lower middle income 52.1 52.3 53.4 53.2 54.3
Low income 16.2 18.0 19.2 23.4 25.0
Least developed countries 7.3 5.8 8.5 14.6 21.7
Source: UN 2011.
207
Annex 12
Table A12.1
Total exports, 2005–2009 (US$ billions)
208
Table A12.2
Primary exports, 2005–2009 (US$ billions) A12
Group 2005 2006 2007 2008 2009
World 1,449 1,837 1,984 2,653 1,843
209
A12 Table A12.3
Resource-based manufactured exports, 2005–2009 (US$ billions)
210
Table A12.4
Low-technology manufactured exports, 2005–2009 (US$ billions) A12
Group 2005 2006 2007 2008 2009
World 1,501 1,700 1,981 2,184 1,720
211
A12 Table A12.5
Medium-technology manufactured exports, 2005–2009 (US$ billions)
212
Table A12.6
High-technology manufactured exports, 2005–2009 (US$ billions) A12
Group 2005 2006 2007 2008 2009
World 1,931 2,236 2,424 2,565 2,239
213
Annex 13
Table A13.1
Countries and economies by region, and largest developing economy in each region
Developing Europe
Albania Denmark Iceland Malta San Marino
Andorra Estonia Ireland Moldova, Rep. of Serbia
Austria Faeroe Islands Isle of Man Monaco Slovakia
Belarus Finland Italy Netherlands Slovenia
Belgium France Latvia Norway Spain
Bosnia and Germany Liechtenstein Poland Sweden
Herzegovina
Bulgaria Gibraltar Lithuania Portugal Switzerland
Channel Islands Greece Luxembourg Romania Ukraine
Croatia Holy See Macedonia, Former Russian Federation United Kingdom
Yugoslav Rep. of
Czech Republic Hungary
214
Table A13.1 (continued)
Countries and economies by region, and largest developing economy in each region A13
Middle East and North Africa
Algeria Egypt Kuwait Palestinian Territories Tunisia
North America
Bermuda Canada Greenland St. Pierre and United States
Miquelon
Sub-Saharan Africa
Angola Congo, Dem. Rep. of Guinea Mozambique Sierra Leone
Benin Congo Guinea-Bissau Namibia Somalia
Botswana Côte d’Ivoire Kenya Niger South Africa
Burkina Faso Djibouti Lesotho Nigeria Swaziland
Burundi Equatorial Guinea Liberia Reunion Tanzania,
United Rep. of
Cameroon Eritrea Madagascar Rwanda Togo
Cape Verde Ethiopia Malawi St. Helena Uganda
Central African Rep. Gabon Mali São Tomé and Zambia
Príncipe
Chad Gambia, The Mauritania Senegal Zimbabwe
Comoros Ghana Mauritius Seychelles
Note: Bold type denotes the largest developing country in each region.
Source: UNIDO, based on UN Statistics classification.
215
A13 Table A13.2
Countries and economies by income group and least developed countries
High-income OECD
Australia Finland Ireland Netherlands Spain
Country and economy groups
High-income non-OECD
Andorra Cayman Islands Greenland Malta San Marino
Antigua and Barbuda Channel Islands Guam Monaco Saudi Arabia
Aruba Croatia Hong Kong Netherlands Antilles Singapore
SAR China
Bahamas Cyprus Isle of Man New Caledonia Slovenia
Bahrain Equatorial Guinea Israel Northern Mariana Taiwan Province
Islands of China
Barbados Estonia Kuwait Oman Trinidad and Tobago
Bermuda Faeroe Islands Liechtenstein Puerto Rico United Arab Emirates
Brunei Darussalam French Polynesia Macao SAR China Qatar US Virgin Islands
216
Table A13.2 (continued)
Countries and economies by income group and least developed countries A13
Lower middle income
Albania Côte d’Ivoire Iran, Islamic Rep. of Nicaragua Sudan
Low income
Afghanistan Congo, Dem. Rep. of Korea, Dem. People’s Myanmar Togo
Rep. of
Bangladesh Eritrea Kyrgyzstan Nepal Tanzania, United
Rep. of
Benin Ethiopia Lao People’s Dem. Niger Uganda
Rep.
Burkina Faso Gambia, The Liberia Rwanda Uzbekistan
Burundi Ghana Madagascar Senegal Viet Nam
Cambodia Guinea Malawi Sierra Leone Yemen
Central African Rep. Guinea-Bissau Mali Somalia Zambia
Chad Haiti Mauritania Tajikistan Zimbabwe
Comoros Kenya Mozambique
217
Annex 14
Mandatory energy-
agency for energy
codes, standards,
energy efficiency
Network building
efficiency targets
energy subsidies
product labelling
Training for firm
Development of
agreements on
and education
Elimination of
Demand-side
management
management
programmes
programmes
Government
Recognition
Awareness
assistance
personnel
efficiency
campaign
Voluntary
Technical
systems
Energy
Country
Argentina ✔ ✔ ✔ ✔
Bolivia ✔ ✔ ✔
Brazil ✔ ✔ ✔ ✔ ✔
Chile ✔ ✔ ✔ ✔
China ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Colombia ✔ ✔ ✔ ✔
Costa Rica ✔ ✔
Dominican
Rep. ✔
Ecuador ✔
Egypt ✔ ✔ ✔ ✔ ✔ ✔ ✔
Ethiopia
Ghana ✔ ✔ ✔ ✔ ✔
Guatemala ✔
Honduras ✔ ✔ ✔
India ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Indonesia ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Liberia ✔
Malaysia ✔ ✔ ✔ ✔ ✔ ✔ ✔
Mexico ✔ ✔ ✔ ✔ ✔
Moldova ✔ ✔
Mozambique
Nigeria ✔ ✔
Peru ✔ ✔ ✔
Philippines ✔ ✔ ✔ ✔ ✔ ✔ ✔
Romania ✔ ✔ ✔ ✔ ✔
Russian
Federation ✔ ✔ ✔ ✔ ✔ ✔
Senegal
South Africa ✔ ✔ ✔ ✔ ✔ ✔
Tanzania
Thailand ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Tunisia ✔ ✔ ✔ ✔
Turkey ✔ ✔ ✔ ✔ ✔ ✔
Uganda
Ukraine ✔
Venezuela ✔ ✔ ✔ ✔
Viet Nam ✔ ✔ ✔ ✔ ✔ ✔ ✔
Zambia
15 8 10 29 9 3 21 7 13 10 12 5
Source: Official documentation and websites. See http://ieep.unido.org.
218
8
✔
✔
✔
✔
✔
✔
✔
✔
Subsidies
Energy-efficiency
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
18
funds and low-
interest loans
Energy services
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
11
companies
International
Financial and investment policies
financing for
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
21
industrial energy
efficiency
Industrial
energy-efficiency
6
✔
✔
✔
✔
✔
✔
research and
development
Demonstration
6
✔
✔
✔
✔
✔
✔
campaigns
Facilitating
deployment of
2
✔
✔
industrial energy
technologies
Technology policies
Enhancing local
✔
✔
✔
✔
✔
✔
✔
✔
✔
10
absorptive
capacity
International
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
12
cooperation
219
A14
References
ACEEE (American Council for an Energy-Efficient ———, 2009. Peer Review on Energy Efficiency in Vietnam:
Economy), 2009. Barriers to Energy Efficiency Invest- Final Report. Tokyo. Available at <www.ieej.or.jp/
ments and Energy Management in the U.S. Indus- aperc/PREE/PREE_Vietnam.pdf>.
trial Sector. Available at <http://aceee.org/fact-sheet/ ———, 2010a. Compendium of Energy Efficiency Policies of
barriers-energy-efficiency-investments-and-energy- APEC Economies. Tokyo. Available at <www.ieej.or.jp/
managemen>. aperc/CEEP/CEEP-all.pdf>.
———, 2011. Missouri’s Energy Efficiency Potential: Oppor- ———, 2010b. Pathways to Energy Sustainability: Meas-
tunities for Economic Growth and Energy Sustainability. uring APEC Progress in Promoting Economic Growth,
Report Number E 114, August, Washington, DC. Energy Security, and Environmental Protection. Execu-
ADB (Asian Development Bank), and IGES (Institute tive Summary. Tokyo.
for Global Environmental Strategies), 2008. Toward Arburas, R., 1989. Energy Conservation Policies in Jordan,
Resource-Efficient Economies in Asia and the Pacific: 1985–1988. Energy Policy, 17(6), pp. 591–598.
Reduce, Reuse and Recycle. Manila. Archer, D., and Brovkin, V., 2008. The Millennial Atmos-
AHAG (Ad-Hoc Advisory Group on ICT Energy Effi- pheric Lifetime of Anthropogenic CO2 . Climatic
ciency), 2008. ICT for Energy Efficiency. Brussels: Euro- Change, 90(3), pp. 283–297.
pean Commission, Directorate-General for Informa- Ardestani, M., and Shafie-Pour, M., 2009. Environmentally
tion Society and Media. Compatible Energy Resource Production – Consump-
AGECC (The Secretary-General’s Advisory Group on tion Pattern (Case Study: Iran). Environment, Develop-
Energy and Climate Change), 2010. Energy for a Sus- ment and Sustainability, 11(2), pp. 277–291.
tainable Future: Summary Report and Recommenda- Arquit Niederberger, A., and Spalding-Fecher, R., 2006.
tions. New York: United Nations. Demand-Side Energy Efficiency Promotion under the
Aiginger, K., 2006. Competitiveness: From a Dangerous Clean Development Mechanism: Lessons Learned and
Obsession to a Welfare Creating Ability with Positive Future Prospects. Energy for Sustainable Development,
Externalities. Journal of Industry, Competition and 10(4), pp. 45–58.
Trade, 6(2), pp. 161–177. Arrow, K.J., and Debreu, G., 1954. Existence of an Equilib-
Amsden, A.H., 2001. The Rise of “the Rest:” Challenges to the rium for a Competitive Economy. Econometrica, 22(3),
West from Late-Industrializing Economies. New York: pp. 265–290.
Oxford University Press. ASEAN (Association of Southeast Asian Nations), 2010.
Anderson, S., and Newell, R., 2004. Information Programs ASEAN Plan of Action for Energy Cooperation 2010–
for Technology Adoption: The Case of Energy-Efficiency 2015. Available at <www.asean.org/22675.pdf>.
Audits. Resource and Energy Economics, 26(1), pp. 27–50. ASHRAE (American Society of Heating, Refrigerat-
Ang, B.W., and Zhang, F.Q., 2000. A Survey of Index ing and Air-Conditioning Engineers), 1997. RP-351:
Decomposition Analysis in Energy and Environmental Energy Audit Input Procedures and Forms. Atlanta,
Studies. Energy, 25(12), pp. 1149–1176. GA.
ANME (Tunisian National Agency for Energy Conser- Athukorala, P., 2010. Production Networks and Trade Pat-
vation), n.d. Energy Efficiency in the Industrial Sector. terns in East Asia: Regionalization or Globalization?
Available at <www.anme.nat.tn/index.asp?pId=157>. Asian Economic Papers, 10(1), pp. 65–95.
APERC (Asia Pacific Energy Research Centre), 2006. Ayres, R.U., 1998. Technological Progress: A Proposed
APEC Energy Demand and Supply Outlook 2006: Pro- Measure. Technological Forecasting and Social Change,
jections to 2030, Economy Review. Tokyo. 59(3), pp. 213–233.
221
———, 2010. If Industrial Energy Efficiency Pays, Why Is Bernstein, L., Roy, J., Delhotal, K.C., Harnisch, J., Mat-
It Not Happening? Background paper prepared for the suhashi, R., Price, L., Tanaka, K., Worrell, E., Yamba,
2011 Industrial Development Report. Vienna: United F., and Fengqi, Z., 2007: Industry. In Climate Change
2007: Mitigation of Climate Change. Contribution of
References
References
Washington, DC.
try. IEA Deployment of Demand Side Technologies, Chandler, W., and Gwin, H., 2008. Financing Energy Effi-
8–9 October, Paris. ciency in China. Washington, DC: Carnegie Endow-
———, 2010. Efficient Electric Motor Systems. International ment for International Peace.
Developments. Presentation at the Austrian National Chenery, H., Robinson, S., and Syrquin, M., 1986. Industri-
Efficient Motors Conference, 2 March, Vienna. alization and Growth. A Comparative Study. New York:
Bulgaria, Republic of, 2004. Energy Efficiency Act. Sofia. Oxford University Press.
Available at <www.mi.government.bg/eng/norm/ Ciccozzi, E., Checkenya, R., and Rodriguez, A.V., 2003.
rdocs/mdoc.html?id=190688>. Recent Experiences and Challenges in Promot-
Cantore, N., 2010. Social Preferences and Environmental ing Cleaner Production Investments in Develop-
Kuznets Curve in Climate Change Integrated Assess- ing Countries. Journal of Cleaner Production, 11(6),
ment Modeling. International Journal of Global Envi- pp. 629–638.
ronmental Issues, 10(1–2), pp. 123–142. Clark, A., 2000. Demand-Side Management Investment in
———, 2011a. Synthesis: Energy Efficiency in Developing South Africa: Barriers and Possible Solutions. Energy
Countries for the Manufacturing Sector. WP 15/2011. for Sustainable Development, 4(4), pp. 27–35.
Vienna: United Nations Industrial Development Clarke, L., Wise, M., Placet, M., Izaurralde, R.C., Lurz, J.P.,
Organization. Kim, S.H., Smith, S.J., and Thomson, A.M., 2006. Cli-
———, 2011b. Factors Affecting Energy Efficiency Adop- mate Change Mitigation: An Analysis of Advanced Tech-
tion in the Manufacturing Sector in Developing Coun- nology Scenarios. PNNL-16078. Richland, WA: Pacific
tries. In Synthesis: Energy Efficiency in Developing Northwest National Laboratory.
Countries for the Manufacturing Sector, ed. Cantore, N. CLASP (Collaborative Labeling and Appliance Stand-
WP 15/2011. Vienna: United Nations Industrial ards Program), 2009. Energy-Efficiency Labels and
Development Organization. Standards: An Overview. Washington, DC. Available
Cantore, N., and Cali, M., 2011. Profitability and Energy at <www.clasponline.org/GB2ndEdition/Chapter2/
Efficiency: A Firms Fixed Effect Approach. In Synthesis: Chapter2.htm>.
Energy Efficiency in Developing Countries for the Manu- Cleveland, C., Costanza, R., Hall, C.A.S., and Kaufmann,
facturing Sector, ed. Cantore, N.. WP 15/2011. Vienna: R., 1984. Energy and the US Economy: A Biophysical
United Nations Industrial Development Organization. Perspective. Science, 255(4665), pp. 890–897.
Cantore, N, and Fokeer, S., 2011. A Decomposition Analy- Cleveland, C.J., Kaufmann, R.K., and Stern, D.I., 2000.
sis of Energy Intensity for Developing Countries. In Aggregation and the Role of Energy in the Economy.
Synthesis: Energy Efficiency in Developing Countries Ecological Economics, 32(2), pp. 301–317.
for the Manufacturing Sector, ed. Cantore, N.. WP CNPML (Centro Nacional de Producción Más Limpia),
15/2011. Vienna: United Nations Industrial Develop- 2005. Sustainable Industrial Production Stories 2005:
ment Organization. Aceros Industriales. Medellín, Colombia. Available at
Cantore, N., and te Velde, D.W., 2011. Promoting Energy <www.lineadecreditoambiental.org/html/archivos/
Efficiency in Developing Countries – New Evidence Aceros%20Industriales%20Colombia%20-%20Ingles.
Based on Firm Analysis. In Synthesis: Energy Efficiency pdf>.
in Developing Countries for the Manufacturing Sector, Cohen, W.M., and Levinthal D.A., 1990. Absorptive
ed. Cantore, N.. WP 15/2011. Vienna: United Nations Capacity: A New Perspective on Learning and Innova-
Industrial Development Organization. tion. Administrative Science Quarterly, Special Issue:
223
Technology, Organizations, and Innovation, 35(1), pp. Systems. IEEE Transactions on Industry Applications,
128–152. 41(1), pp. 188–199.
Coito, F., Powell, F., Worrell, E., Price, L., and Friedman, De Beer, J.G., 1998. Potential for Industrial Energy-
R., 2005. Case Study of the California Cement Indus- Efficiency Improvement in the Long Term. PhD Thesis.
References
try. Proceedings of the 2005 ACEEE Summer Study on Utrecht University, Utrecht, the Netherlands.
Energy Efficiency in Industry. West Point, NY. De Simone, G., 2010. Industrial Energy Efficiency in Colom-
Cole, D.H., 2008. Climate Change and Collective Action. bian and Peruvian Companies. Background paper
Bloomington, IN: Indiana University Maurer School prepared for the 2011 Industrial Development Report.
of Law, Indiana University School of Public and Envi- Vienna: United Nations Industrial Development
ronmental Affairs, and Indiana University Blooming- Organization.
ton Workshop in Political Theory and Policy Analysis. DeCanio, S.J., 1993. Barriers within Firms to Energy-Effi-
Compton, M., 2011. Industrial Energy Efficiency in Devel- ciency Investments. Energy Policy, 21(9), pp. 906–914.
oping Countries – A Background Note. WP 03/11. Devlin, R., Estevadeordal, A., and Rodriguez-Clare, A.,
Vienna: United Nations Industrial Development eds., 2006. The Emergence of China: Opportunities and
Organization. Challenges for Latin America and the Caribbean. Wash-
Cook, E., 1971. The Flow of Energy in an Industrial Society. ington, DC: Inter-American Development Bank and
Scientific American, 225(3), pp. 135–142. the David Rockefeller Center for Latin American Stud-
———, 1972. Man, Energy, Society. San Francisco, CA: ies, Harvard University.
WH Freeman and Company. Doms, M.E., and Dunne, T., 1998. Capital Adjustment
Cooremans, C., 2009. The Role of Formal Capital Budget- Patterns in Manufacturing Plants. Review of Economic
ing Analysis in Corporate Investment Decision-Making: Dynamics, 1(2), pp. 409–429.
A Literature Review. Summer Study 2009. Stockholm: ECLAC (Economic Commission for Latin America and
European Council for an Energy Efficient Economy. the Caribbean), 2009. Energy Efficiency in Latin Amer-
Dasgupta, S., Lucas, R.E.B., and Wheeler, D., 1998. Small ica and the Caribbean: Situation and Outlook. Project
Manufacturing Plants, Pollution and Poverty: New Evi- document. Santiago. Available at <www.eclac.org/pub-
dence from Brazil and Mexico. Policy Research Working licaciones/xml/2/39412/lcw280i.pdf>.
Paper 2029. Washington, DC: World Bank. ———, 2010. Energy Efficiency in Latin America and the
Davidsdottir, B., and Ruth, M., 2004. Capital Vintage Caribbean: Situation and Outlook. Santiago.
and Climate Change Policies: The Case of US Pulp Economic Times, 2011. India to Set Energy Efficiency Tar-
and Paper. Environmental Science and Policy, 7(3), pp. gets for Industries. 11 January. Available at <http://
221–233. articles.economictimes.indiatimes.com/2011-01-11/
———, 2005. Pulp Nonfiction: Regionalized Dynamic news/28429961_1_energy-efficiency-industrial-units
Model of the U.S. Pulp and Paper Industry, Journal of -industrial-sectors>.
Industrial Ecology, 9(3), pp. 1–21. ECOWAS (Economic Community of West African States),
———, 2008. Changing Stocks and Flows in Industrial Eco- 2003. ECOWAS Energy Protocol A/P4/1/03. Available
systems. Northampton, MA: Edward Elgar Publishing. at <www.comm.ecowas.int/sec/en/protocoles/WA_
Davis, S., and Caldeira, K., 2010. Consumption-Based EC_Protocol_English-_DEFINITIF.pdf>.
Accounting of CO2 Emissions. Proceedings of the EEEP (Equipment Energy Efficiency Program), 2010.
National Academy of Sciences of the United States of Improving the Energy Efficiency of Industrial Equip-
America, 107(12), pp. 5687–5692. ment. Barton, Australia. Available at <www.energyrat-
de Almeida, A.T., Ferreira, F.J.T.E., and Both, D., 2005. ing.gov.au/library/pubs/201009-indust-equip.pdf>.
Technical and Economic Considerations in the Appli- EEPC (Engineering Export Promotion Council) India,
cation of Variable-Speed Drives with Electric Motor 2006. Market Survey Report on China Motor Systems.
224
Engineering Export Bulletin, 8(42), pp. 6–15. Available FEI (Federation of Egyptian Industries), n.d. Environmen-
at <http://eepcindia.org/bulletin/b20061018/FI0842. tal Compliance Office and Sustainable Development
pdf>. Supporting Small and Medium Enterprises. Available at
EIB (Energy Information Bureau), Malaysia, n.d. Energy
References
<www.eco-fei.org>.
Efficiency: Cases on Energy Savings in Manufacturing. Fleiter, T., Eichhammer, W., and Schleich, J., 2011. Energy
Available at <http://eib.org.my/index.php?page=article Efficiency in Electric Motor Systems: Technical Poten-
&item=98,107,109,110>. tials and Policy. WP 11/2011. Vienna: United Nations
Eichhammer, W., and Walz, R., 2011. Industrial Energy Industrial Development Organization.
Efficiency and Competitiveness. WP 05/2011. Fokeer, S., 2010. Industrial Energy Efficiency in Tuni-
Vienna: United Nations Industrial Development sian Companies. Background paper prepared for the
Organization. 2011 Industrial Development Report. Vienna: United
Eichhorst, U., and Bongardt, D., 2009. Towards Coopera- Nations Industrial Development Organization.
tive Policy Approaches in China: Drivers for Voluntary Fokeer, S., Lowndes, I., and Kingman, S., 2009. An Experi-
Agreements on Industrial Energy Efficiency in Nan- mental Investigation of Pneumatic Swirl Flow Induced
jing. Energy Policy, 37(5), pp. 1855–1865. by a Three-Lobed Helical Pipe. International Journal of
Elkington, J., 1998. The ‘Triple Bottom Line’ for 21st Century Heat and Fluid Flow, 30(2), pp. 369–379.
Business. In Companies in a World of Conflict: NGOs, Foxon, T., Makuch, Z., Mata, M., and Pearson, P., 2004.
Sanctions and Corporate Responsibility, ed. Mitchell, J. Innovation Systems and Policy-Making Processes for the
London: The Royal Institute of International Affairs. Transition to Sustainability. In Governance for Industrial
Ellingson, M., and Hunter, L., 2010. Compendium of Best Transformation: Proceedings of the 2003 Berlin Confer-
Practices: Sharing Local and State Successes in Energy ence on the Human Dimensions of Global Environmental
Efficiency and Renewable Energy from the United States. Change, eds., Jacob, K., Binder, M., and Wieczorek, A.
Vienna: Renewable Energy and Energy Efficiency Part- Berlin: Environmental Policy Research Centre.
nership; Washington, DC: Alliance to Save Energy; Freeman, C., and Soete, L., 1997. The Economics of Indus-
Washington, DC: American Council On Renewable trial Innovation. Cambridge, MA: MIT Press.
Energy. Fugazza, M. and Vanzetti, D., 2008. A South-South Sur-
Energy Foundation, n.d. Energy Van Service. Available at vival Strategy: The Potential for Trade among Develop-
<www.ghanaef.org/services/energyvan.htm>. ing Countries. World Economy, 31(5), pp. 663–684.
Enevoldsen, M.K., Ryelund, A.V., and Andersen, M.S., Furubotn, E.G., and Richter, R., 1997. Institutions and Eco-
2007. Decoupling of Industrial Energy Consumption nomic Theory: The Contribution of the New Institutional
and CO2 Emissions in Energy-Intensive Industries in Economics. Ann Arbor, MI: University of Michigan Press.
Scandinavia. Energy Economics, 29(4), pp. 665–692. Galitsky, C., Price, L., and Worrell, E., 2004. Energy Effi-
Etzkowitz, H., and Carvalho de Mello, J., 2004. The Rise ciency Programs and Policies in the Industrial Sector in
of a Triple Helix Culture: Innovation in Brazilian Eco- Industrialized Countries. LBNL-54068. Berkeley, CA:
nomic and Social Development. International Journal Lawrence Berkeley National Laboratory.
of Technology Management and Sustainable Develop- Gallagher, K., Moreno Brid, J.C., and Porzecanski, R.,
ment, 2(3), pp. 159–171. 2008. The Dynamism of Mexican Exports: Lost in
EU (European Union), 1996. Council Directive 96/61/EC (Chinese) Translation? World Development, 36(8), pp.
of 24 September 1996 Concerning Integrated Pollution 1365–1380.
Prevention and Control. Brussels. Garcia, A.G.P., Szklo, A.S., Schaeffer, R., and McNeil,
Eurostat, 2010. Energy Statistics. Available at <http://epp. M.A., 2007. Energy-Efficiency Standards for Electric
eurostat.ec.europa.eu/portal/page/portal/energy/data/ Motors in Brazilian Industry. Energy Policy, 35(6), pp.
main_tables>. 3424–3439.
225
Gardner, D.T., and Elkhafif, M.A.T., 1998. Understanding Results from the NAESCO Database Project. Berkeley,
Industrial Energy Use: Structural and Energy Intensity CA: Lawrence Berkeley National Laboratory.
Changes in Ontario Industry. Energy Economics, 20(1), Golove, W.H., and Eto, J.H., 1996. Market Barriers to Energy
Efficiency: A Critical Reappraisal of the Rationale for Pub-
References
pp. 29–41.
GEF (Global Environmental Facility), 2004. Vietnam: lic Policies to Promote Energy Efficiency. LBNL-38059.
Promoting Energy Conservation in Small and Medium Berkeley, CA: Lawrence Berkeley National Laboratory.
Scale Enterprises: Responses to GEF Council Comments. Gordon, M.J., 1955. The Payoff Period and the Rate of
Washington, DC. Profit. The Journal of Business, 28(4), pp. 253–260.
———, 2010. Good Practices and Lessons. Mitigation: Energy Gough, I., 1996. Social Welfare and Competitiveness. New
Efficiency. Washington, DC. Available at <www.thegef. Political Economy, 1(2), pp. 209–232.
org/gef/node/2202>. Grasso, M., 2004. Climate Change: The Global Public Good.
———. 2011. Improving Small Scale Brick Kiln Efficiency, Department of Economics Working Paper 75. Bicocca,
Viet Nam. GEF Small Grant Project. Washington, DC. Italy: University of Milan.
Available at <http://sgp.undp.org/download/SGP_ Greenwald, B., and Stiglitz, J.E., 1987. Keynesian, New
VietNam.pdf>. Keynesian and New Classical Economics. Oxford Eco-
Geiser, K., 2001. Materials Matter: Towards a Sustainable nomic Papers, 39(1), pp. 119–133.
Materials Policy. Cambridge, MA: MIT Press. Grubb, M., 2004. Technology Innovation and Climate
Georgy, R.Y., and Soliman, A.T., 2007. Energy Efficiency Change Policy: An Overview Of Issues and Options.
and Renewable Energy: Egypt National Study. Mediter- Keio Economic Studies, 41(2), pp. 103–132.
ranean and National Strategies for Sustainable Devel- Guinnée, J.B., Gorrée, M., Heijungs, R., Huppes, G.,
opment. Priority Field of Action 2: Energy and Climate Kleijn, R., de Koning, A., van Oers, L., Wegener
Change. Sophia Antipolis, France: Plan Bleu. Available Sleeswijk, A., Suh, S., Udo de Haes, H.A., de Bruijn, H.,
at <www.planbleu.org/publications/atelier_energie/ van Duin, R., and Huijbregts, M.A.J., 2002. Handbook
EG_National_Study_Final.pdf>. on Life Cycle Assessment: Operational Guide to ISO
Ghosh, D., 2011. Approach to Energy Efficiency among Standards. Dordrecht, the Netherlands: Kluwer Aca-
Micro, Small and Medium Enterprises in India: Results demic Publishers.
of a Field Survey. WP 08/2011. Vienna: United Nations Gupta, S., Tirpak, D.A., and Burger, N., 2007. Policies,
Industrial Development Organization. Instruments and Co-operative Arrangements. In
Gielen, D., 2009. Design of a Financing Instrument for Climate Change 2007: Mitigation. Contribution of
Energy Efficiency and Renewables in Indian SMEs. Working Group III to the Fourth Assessment Report of
Vienna: United Nations Industrial Development the Intergovernmental Panel on Climate Change, eds.
Organization. Metz, B., Davidson, O.R., Bosch, P.R., Dave, R., and
Gillingham, K., Newell, R., and Palmer, K., 2006. Energy Meyer, L.A. Cambridge, UK: Cambridge University
Efficiency Policies: A Retrospective Examination. Annual Press.
Review of Environment and Resources, 31, pp. 161–192. Hamed, M. and Mahgary, Y., 2004. Outline of a National
———, 2009. Energy Efficiency Economics and Policy. Strategy for Cleaner Production: The Case of Egypt.
Annual Review of Resource Economics, 1, pp. 597–620. Journal of Cleaner Production, 12(4), pp. 327–336.
Giuliani, E., and Bell, M., 2005. The Micro-Determinants Hammond, G.P., and Jones, C.I., 2008. Inventory of Car-
of Meso-Level Learning and Innovation: Evidence bon and Energy. Version 1.6a. Bath, UK: University of
from a Chilean Wine Cluster. Research Policy, 34(1): Bath, Sustainable Energy Research Team.
pp. 47–68. Hang, L., and Tu, M., 2007. The Impacts of Energy Prices
Goldman, C.A., Osborn, J.G., Hopper, N.C., and Singer, on Energy Intensity: Evidence from China. Energy Pol-
T.E., 2002. Market Trends in the U.S. ESCO Industry: icy, 35(5), pp. 2978–2988.
226
Hansen, S., Langlois, P., and Bertoldi, P., 2009. ESCOs IAI (International Aluminum Institute), 2008. Improving
around the World: Lessons Learned in 49 Countries. Lil- Sustainability in the Transport Sector through Weight
burn, GA: Fairmont Press. Reduction and Application of Aluminium. London.
IEA (International Energy Agency), 2006a. Energy Tech-
References
Harris, P.G., 2007. Collective Action on Climate Change:
The Logic of Regime Failure. Natural Resources Jour- nology Perspectives: Scenarios & Strategies to 2050. Paris.
nal, 47(1), pp. 195–224. ———, 2006b. World Energy Outlook 2006. Paris.
Hasanbeigi, A., Menke, C., and du Pont, P., 2010. Barriers ———, 2007a. Climate Change 2007: Mitigation of Cli-
to Energy Efficiency Improvement and Decision-Mak- mate Change. Contribution of Working Group III to
ing Behaviour in Thai Industry. Energy Efficiency, 3(1), the Fourth Assessment Report of the Intergovernmental
pp. 33–52. Panel on Climate Change, eds., Metz, B., Davidson,
Hassett K.A., and Metcalf, G.E., 1995. Energy Tax Cred- O.R., Bosch, P.R., Dave, R. and Meyer, L.A. Cam-
its and Residential Conservation Investment: Evidence bridge, UK: Cambridge University Press.
from Panel Data. Journal of Public Economics, 57(2), pp. ———, 2007b. Experience with Energy Efficiency Regula-
201–217. tions for Electrical Equipment. IEA Information Paper.
Hawken, P., Lovins, A., and Lovins, L.H., 1999. Natural Paris.
Capitalism: Creating the Next Industrial Revolution. ———, 2007c. Mind the Gap—Quantifying Principal-Agent
Boston, MA: Little, Brown and Company. Problems in Energy Efficiency. Paris.
Helgerud, H.E., and Sandbakk, M., 2009. Energy Efficiency ———, 2007d. Tracking Industrial Energy Efficiency and
in the Food and Drink Industry: The Road to Bench- CO2 Emissions. Energy Indicators. Paris.
marks of Excellence. Summer Study 2009. Stockholm: ———, 2008a. Energy Efficiency Policies and Measures.
European Council for an Energy Efficient Economy. Paris. Available at <www.iea.org/testbase/pm/index_
Hirsh, R.L., Bezdeg, R., and Wendling, R., 2005. Peaking effi.asp>.
of World Oil Production and its Mitigation. American ———, 2008b, Energy Technology Perspectives 2008–Sce-
Institute of Chemical Engineering Journal, 52(1), pp. narios and Strategies to 2050. Paris.
1–6. ———, 2008c. World Energy Outlook Policy Database. Avail-
Holland, F.A., and Watson, F.A., 1976. Payback Period, able at <www.iea.org/Textbase/pm/?mode=weo>.
Discounted Cash Flow Rate of Return and Added ———, 2008d. Deploying Renewables: Principles for Effec-
Value for Manufacturing Processes. Engineering and tive Policies. Paris.
Process Economics, 1(4), pp. 293–299. ———, 2009a. Cement Technology Roadmap 2009: Carbon
Holliday, C., Schmidheiny, S., and Watts, P., 2002. Walk- Emissions Reductions up to 2050. Paris.
ing the Talk: The Business Case for Sustainable Develop- ———, 2009b. Energy Technology Transitions for Industry:
ment. Sheffield, UK: Greenleaf Publishing. Strategies for the Next Industrial Revolution. Paris.
Howells M., House J., and Laitner J., 2005. Beyond the ———, 2009c. Key Energy Statistics 2009. Paris.
Baseline – Large Scale Climate Friendly Development. ———, 2010a. CO2 Emissions from Fuel Combustion. Paris.
Paper presented at the Annual Meeting of the Interna- ———, 2010b, Energy Technology Perspectives 2010: Sce-
tional Energy Workshop, 5–7 July, Kyoto, Japan. narios and Strategies to 2050. Paris.
Hughes, K.S., 1993. The Role of Technology, Competition ———, 2010c. Extended World Energy Balances. IEA
and Skill in European Competitiveness. European Com- World Energy Statistics and Balances. Paris.
petitiveness. Cambridge, UK: Cambridge University ———, 2010d. RD&D Database 2010. Paris.
Press. ———, 2010e. World Energy Outlook 2010. Paris.
IAC (Inter Academy Council), 2010. Climate Change ———, 2011. IEA & Business: Partnering to Deliver Results.
Assessments: Review of the Processes and Procedures of the Paris. Available at <http://www.iea.org/publications/
Intergovernmental Panel on Climate Change. New York. free_new_Desc.asp?PUBS_ID=2280>.
227
IFA (International Fertilizer Industry Association), 2009. ———, 1999b. ISO 14043 Environmental Management—
Energy Efficiency and CO2 Emissions in Ammonia Pro- Life Cycle Assessment—Life Cycle Interpretation.
duction 2008–2009. Summary Report. Paris. Geneva.
IISI (International Iron and Steel Institute), 1998. Energy Jaccard, I., 2009. Paradigms of the Costs of Energy Effi-
References
Use in the Steel Industry. Brussels. ciency and Their Policy Implications. Background paper
IMF (International Monetary Fund), 2010. Regional Eco- prepared for the 2011 Industrial Development Report
nomic Outlook for Asia and the Pacific. Washington, 2011. Vienna: United Nations Industrial Development
DC. Organization.
IPCC (Intergovernmental Panel on Climate Change), Jaffe, A.B., Newell, R.G., and Stavins R.N., 2004. A Tale of
1996. Special Report on Methodological and Technologi- Two Market Failures. Technology and Environmental
cal Issues in Technology Transfer. Geneva. Policy. Ecological Economics, 54(2–3), pp. 164–174.
———, 2000. Methodological and Technological Issues Jaffe, A.B., Stavins, R.G., and Newell, R.N., 1995. Dynamic
in Technology Transfer. Available at <www.grida. Incentives of Environmental Regulations: The Effects
no/publications/other/ipcc_sr/?src=/climate/ipcc/ of Alternative Policy Instruments on Technology Dif-
tectran/035.htm>. fusion. Journal of Environmental Economics and Man-
———, 2007. Summary for Policy Makers. In Climate agement, 29(3), pp. 43–63.
Change 2007: Synthesis Report, eds. Pachauri, R.K., and Jenkins H., and Saunders H., 2011. Does Energy Efficiency
Resinger, A. Cambridge, UK: Cambridge University Lead to Increased Energy Consumption? Making It, 6,
Press. pp. 10–14.
IPEEC (International Partnership for Energy Efficiency Jenne, C.A., and Cattell, R.K., 1983. Structural Change
Cooperation), 2010. International Partnership for and Energy Efficiency in Industry. Energy Economics,
Energy Efficiency Cooperation Holds First Global Policy 5(2), pp. 114–123.
Meeting. Available at <www.newenergyworldnetwork. Jochem, E., and Gruber, E., 2007. Local Learning-Networks
com/renewable-energy-news/by-technology/energy on Energy Efficiency in Industry—Successful Initiative in
-efficiency/international-partnership-for-energ y Germany. Amsterdam: Elsevier.
-efficiency-cooperation-holds-first-global-policy ———, 2010. Impacts and Challenges of a Growing Rela-
-meeting.html>. tionship between China and Sub-Saharan Africa. In
———, 2011. Improving Policies through Energy Efficiency The Political Economy of Africa, ed. Padayachee, V. Lon-
Indicators (IPEEI). Available at <www.ipeec.org>. don: Routledge.
IPIECA (International Petroleum Industry Environmental Kahneman D., and Tversky, A., eds., 2000. Choices, Values
Conservation Association), 2006. Increasing the Pace of and Frames. New York: Cambridge University Press
Technology Innovation and Application: Enabling Cli- and the Russell Sage Foundation.
mate Change Solutions. Summary Workshop Report, Kahrl, F., and Roland-Holst, D., 2009. Growth and struc-
27–28 September, Washington, DC. tural change in China’s energy economy. Energy, 34(7),
ISO (International Office of Standardization), 1997a. ISO pp. 894–903.
14040 Environmental Management—Life Cycle Assess- Kanbur, R., and Squire, L., 1999. The Evolution of Think-
ment—Principles and Framework. Geneva. ing about Poverty: Exploring the Interactions. Paper
———, 1997b. ISO 14041 Environmental Management— presented at the Symposium on Future of Development
Life Cycle Assessment—Goals and Scope Definition and Economics in Perspective, 13–14 May, Dubrovnik,
Inventory Analysis. Geneva. Croatia.
———, 1999a. ISO 14042 Environmental Management— Kaplinsky, R., McCormick, D., and Morris, M., 2006. The
Life Cycle Assessment—Life Cycle Impact Assessment. Impact of China on Sub-Saharan Africa. Agenda-set-
Geneva. ting paper prepared for the Institute of Development
228
Studies, Department for International Development, Lall, S., 1998. Exports of Manufactures by Developing
Brighton, UK. Countries: Emerging Patterns of Trade and Location.
———, 2010. Impacts and Challenges of a Growing Rela- Oxford Review of Economic Policy, 14(2) pp. 54–73.
References
tionship between China and Sub-Saharan Africa. In Lall, S., and Albaladejo, M., 2004. China’s Competitive
The Political Economy of Africa, ed. Padayachee, V. Lon- Performance: A Threat to East Asian Manufactured
don: Routledge. Exports? World Development, 32(9), pp. 1441–1466.
Kemp, I.C., 2007. Pinch Analysis and Process Integration— Lall, S., Albaladejo, M., and Zhang, J., 2004. Mapping
A User Guide on Process Integration for the Efficient Use Fragmentation: Electronics and Automobiles in East
of Energy. Amsterdam: Elsevier. Asia and Latin America. Oxford Development Studies,
Kenya Association of Manufacturers, n.d. Energy Manage- 32(3), pp. 407–432.
ment Awards. Available at <www.kam.co.ke/ema/>. Lall, S., and J. Weiss, 2005. People’s Republic of China’s
Keohane, R.O., 1984. After Hegemony: Cooperation and Competitive Threat to Latin America: An Analysis
Discord in the World Political Economy. Princeton, NJ: for 1990–2002. Oxford Development Studies, 33(2),
Princeton University Press. 163–194.
Kerssemeeckers, M., 2002. The Dutch Long-term Voluntary Lall, S., Weiss, J., and Zhang, J., 2006. The “Sophistication”
Agreements on Energy Efficiency Improvement in Indus- of Exports: A New Measure of Product Characteristics.
try. Utrecht, the Netherlands: Ecofys. Working Paper 123. Queen Elizabeth House, Univer-
Kleindorfer, P.R., 2011. Risk Management for Energy Effi- sity of Oxford, Oxford, UK.
ciency Projects in Developing Countries. WP 06/2011. Lawrence Berkeley National Laboratory, Environmental
Vienna: United Nations Industrial Development Energy Technologies Division, International Energy
Organization. Studies, n.d. Industrial Energy Use Analysis. Berkeley,
Koc, E., and Kaplan E., 2007. An Investigation on Energy CA. Available at <http://ies.lbl.gov/node/387>.
Consumption in Yarn Production with Special Ref- Le, H.V., 2010. Industrial Energy Efficiency in Vietnam-
erence to Ring Spinning. Fibres & Textiles in Eastern ese Companies. Background paper prepared for the
Europe, 15(4), pp. 18–25. 2011 Industrial Development Report. Vienna: United
Korevaar, E., Farla, J., Blok, K., and Schulte Fischedick, K. Nations Industrial Development Organization.
1997. A Preliminary Analysis of the Dutch Voluntary Lefley, F., 1996. The Payback Method of Investment
Agreements on Energy Efficiency Improvement: The Appraisal: A Review and Synthesis. International Jour-
Energy Efficiency Challenge. Proceedings from the 1997 nal of Production Economics, 44(3), pp. 207–224.
European Council for an Energy Efficient Economy Lempert, R.J., Popper, S.W., Resetar, S.A., and Hart, S.L.,
Summer Study Conference, 9–14 June, Splinderův 2002. Capital Cycles and the Timing of Climate Change
Mlýn, Czech Republic. Policy. Arlington, VA: Pew Center on Global Climate
Kosonen, K., and Nicodème, G.J.A., 2009. The Role of Fiscal Change.
Instruments in Environmental Policy. Working Paper Lenzen, M., 2008. Life Cycle Energy and Greenhouse Gas
2719. Munich: CESifo Group. Emissions of Nuclear Energy: A Review. Energy Con-
Krarti, M., 2000. Energy Audit of Building Systems: An version and Management, 49(8), pp. 2178–2199.
Engineering Approach. Mechanical and Aerospace Levine, M.D., and Liu, X., 1990. Energy Conservation Pro-
Engineering Series. Boca Raton, FL: CRC Press. grams in the People’s Republic of China. Berkeley, CA:
Krausmann, S., Fischer-Kowalski, M., Schandl, H., and Lawrence Berkeley National Laboratory.
Eisenmenger, N., 2008. The Global Sociometabolic Levine, M.D., Price, L., Zhou, N., Fridley, D., Aden, N.,
Transition: Past and Present Metabolic Profiles and Lu, H., McNeil, M., Zheng, N., Qin, Y., and Yowar-
their Present Trajectories. Journal of Industrial Ecology, gana, P., 2010. Assessment of China’s Energy-Saving and
12(5–6), pp. 637–656. Emission-Reduction Accomplishments and Opportunities
229
During the 11th Five-Year Plan. Berkeley, CA: Law- Petten, the Netherlands: Energy Research Centre of
rence Berkeley National Laboratory. the Netherlands.
Linares, P., and Labandeira, X., 2010. Energy Efficiency: ———, 2009. Industrial Energy Efficiency in Nigerian Com-
Economics and Policy. Journal of Economic Surveys, panies. Background paper prepared for the 2011 Indus-
References
References
4706-PRC: Energy Conservation and Resource Manage- Mapping the Governance of Energy Finance. The Gov-
ment Project. Manila: Asian Development Bank. ernance of Clean Development Working Paper 010.
Mostert, W., Johnson, K., and MacLean, J., 2010. Publicly Norwich, UK: University of East Angila.
Backed Guarantees as Policy Instruments to Promote New York Times, 2011. When Energy Efficiency Sul-
Clean Energy. New York: United Nations Environ- lies the Environment. Available at <www.nytimes.
ment Programme, Strategic Environmental Framework com/2011/03/08/science/08tier.html?_r=1>.
Alliance. Newnan, D.G., 1969. Determining Rate of Return by
Motegi, N., and Watson, D., 2005. Enterprise Energy Man- Means of Payback Period and Useful Life in the Engi-
agement System Installation Case Study at Food Pro- neering Economist. A Journal Devoted to the Problems
cess Plant. Berkeley, CA: Lawrence Berkeley National of Capital Investment, 15(1), pp. 29–39.
Laboratory. NSW (New South Wales) Government, 2010. Introduction
MOTIVA (Energy Information Centre for Energy Effi- to the Energy Savings Scheme. Sydney, Australia. Avail-
ciency and Renewable Energy Sources, Finland), IFE able at <www.ess.nsw.gov.au/documents/syn6.asp>.
(Institute for Energy Efficiency, Norway) and CRES Nuijen, W., 1998. Long Term Agreements on Energy
(Center for Renewable Energy Sources, Greece), Efficiency in Industry. In Industrial Energy Efficiency
2000. The Guidebook for Energy Audits, Programme Policies: Understanding Success and Failure, eds. Mar-
Schemes and Administrative Procedures. Avail- tin, N., Worrell, E., and Sandoval, A. Proceedings of
able at <www.motiva.fi/en/areas_of_operation/ a Workshop Organized by the International Network
projects_and_campaigns/save_ii_-projects/audit_i>. for Energy Demand Analysis in the Industrial Sector,
Murphy, L.M., and Edwards, P.L., 2003. Bridging the Val- 11–12 June, Utrecht, the Netherlands.
ley of Death: Transitioning from Public to Private Sector Nyboer, J., and Jaccard, I., 2011. Case Studies and other
Financing. Golden, CO: National Renewable Energy Information on Technology Efficiency. Background paper
Laboratory. for the 2011 Industrial Development Report. Vienna:
Myatt, D.P., 2006. Collective Action: Current Perspectives. United Nations Industrial Development Organization.
Prepared 18 December for the New Palgrave Dictionary OECD (Organisation for Economic Co-operation and
of Economics, eds J. Eatwell, M. Milgate, and P. New- Development), 2002. Sustainable Development: Indica-
man. London: Palgrave Macmillan. tors to Measure Decoupling of Environmental Pressure
Nadal, S., 2002. Appliance and Equipment Efficiency from Economic Growth. Paris.
Standards. Annual Review of Energy & the Environ- ———, 2007. Instrument Mixes for Environmental Policy.
ment, 27(1), pp. 159–192. Paris.
Nakhooda, S., and Ballesteros, A., 2010. Investing in Sus- Ohshita, S. 2006. Cooperation Mechanisms: A Shift
tainable Energy Futures: Multilateral Development Toward Policy Development Cooperation. In Coop-
Banks’ Investments in Energy Policy. WRI Report. erative Climate: Energy Efficiency Action in East Asia,
Washington, DC: World Resources Institute. Central Research Institute of Electric Power Industry,
NECA (National Energy Conservation Awards) India, eds. Sugiyama, T., and Ohshita, S. San Francisco, CA:
2009. NECA Awards. Available at <www.emt-india. University of San Francisco and International Institute
net/eca2008/Award2008CD/list.htm>. for Sustainable Development.
Nelson, K.E., 1989. Are There Any Energy Savings Left? Ohshita, S., Wiel, S., and Heggelund, G., 2006. Coop-
Chemical Processing, January. eration Structure: The Growing Role of Independent
231
Cooperation Networks. In Cooperative Climate: Economics of Innovation, Vol 2, eds. Hall, B., and Rosen-
Energy Efficiency across East Asia, eds. Sugiyama, T., berg, N. Oxford, UK: Elsevier.
and Ohshita, S. San Francisco, CA: University of San Price, L., 2005. Voluntary Agreements for Energy Efficiency
or Greenhouse Gas Emissions Reduction in Industry: An
References
References
vey of Project Evaluation Techniques Currently Used in
Industry. International Journal of Production Econom- UK: Cambridge University Press.
ics, 32(1), pp. 103–115. Sandstad, A.H., and Howarth, R.B., 1994. Consumer
Ribeiro, S.K., Kobayashi, S., Beuthe, M., Gasca, J., Greene, Rationality and Energy Efficiency. Proceedings of the
D., Lee, D.S., Muromachi, Y., Newton, P.J., Plotkin, 1994 Summer Study on Energy Efficiency in Buildings.
S., Sperling, D., and Wit, R., 2007. Transport and its Washington, DC: American Council for an Energy-
Infrastructure. In Climate Change 2007: Mitigation Efficient Economy.
of Climate Change. Contribution of Working Group III Sarkar, A., and Singh, J., 2010. Financing Energy Efficiency
to the Fourth Assessment Report of the Intergovernmen- in Developing Countries: Lessons Learned and Remain-
tal Panel on Climate Change, eds. Metz, B., Davidson, ing Challenges. Washington, DC: World Bank.
O.R., Bosch, P.R., Dave, R., and Meyer, L.A. Cam- Sarnat, M., and Levy, H. 1969. The Relationship of Rules
bridge, UK: Cambridge University Press. of Thumb to the Internal Rate of Return: A Restate-
Rietbergen, M., Farla, J., and Blok, K., 1998. Quantitative ment and Generalization. The Journal of Finance, 24(3),
Evaluation of Voluntary Agreements on Energy Effi- pp. 479–490.
ciency. In Industrial Energy Efficiency Policies: Under- Satchwell, A., Goldman, C., Larsen, P., Gilligan, D., and
standing Success and Failure, eds. Martin, N., Wor- Singer, T., 2010. A Survey of the U.S. ESCO Indus-
rell, E., and Sandoval, A. Proceedings of a Workshop try: Market Growth and Development from 2008 to
Organized by the International Network for Energy 2011. Berkeley, CA: Lawrence Berkeley National
Demand Analysis in the Industrial Sector, 11–12 June, Laboratory.
Utrecht, the Netherlands. Saygin, D., and Patel, M.K., 2010. Global Benchmarking
Ritthoff, M., Rohn, H., and Liedtke, C., 2002. Calculating for the Industrial Sector: First Steps in Application and
MIPS: Resource Productivity of Products and Services. Analysis of Competitiveness. Background paper prepared
Wuppertal, Germany: Wuppertal Institute for Cli- for the 2011 Industrial Development Report. Vienna:
mate, Environment and Energy. United Nations Industrial Development Organization.
Rohdin, P., Thollander, P., and Solding, P., 2007. Barriers Saygın, D., Patel, M.K., Tam, C., and Gielen, D.J., 2009.
to and Drivers for Energy Efficiency in the Swedish Chemical and Petrochemical Sector Potential of Best
Foundry Industry. Energy Policy, 35(1), pp. 672–677. Practice Technology and Other Measures for Improving
Roy, J., 2010. How to Make Energy Efficiency in Industry a Energy Efficiency. Paris: International Energy Agency.
Profitable Proposition: the Case of India in Textile and Saygin, D., Patel, M.K., Worrell, E., and Gielen, D., 2010.
Apparel, Food and Beverages and Steel Sector. Back- Global Benchmarking for the Industrial Sector: Applica-
ground paper prepared for the 2011 Industrial Develop- tion and Analysis of Competitiveness. Background paper
ment Report. Vienna: United Nations Industrial Devel- prepared for the 2011 Industrial Development Report.
opment Organization. Vienna: United Nations Industrial Development
SADC (Southern African Development Community), Organization.
2008. Protocol on Energy. Available at <www.sadc.int/ Schäfer, A., 2005. Structural Change in Energy Use. Energy
index/browse/page/147>. Policy, 33(4), pp. 429–437.
Saidur, R., 2010. Energy, Economic and Environmental Schiller, S., 2007. Model Energy-Efficiency Program Impact
Benefits of Using High-Efficiency Motors to Replace Evaluation Guide. National Action Plan for Energy
Standard Motors for the Malaysian Industries. Energy Efficiency. Available at <www.epa.gov/cleanenergy/
Policy, 38(8), pp. 4617–4625. documents/suca/evaluation_guide.pdf>.
233
Schipper, L., Howarth, R., and Carlassare, E., 1992. Energy Climate Change Reasons for Concern. Proceedings of
Intensity, Sectoral Activity, and Structural Change in the National Academy of Sciences of the United States of
the Norwegian Economy? Energy, 1(3), pp. 215–233. America, 106(11), pp. 4133–4137.
Soloviev, M.M., 2009. Enhancing Energy Efficiency of
References
References
Spangenberg, J., Omann, I., and Hinterberger, F., 2002. Policy Options to Promote Energy Efficient and
Sustainable Growth Criteria: Minimum Benchmarks Environmentally Sound Technologies in Small- and
and Scenarios for Employment and the Environment. Medium-Scale Industries. Energy Policy, 31(10), pp.
Ecological Economics, 42(3), pp. 429–443. 977–987.
Sri Lanka SEA (Sustainable Energy Authority), 2011. Thollander, P., and Ottosson, M., 2008. An Energy-Effi-
Renewaable Energy Guideline. Available at www. cient Swedish Pulp and Paper Industry: Exploring Bar-
energy.gov.lk/sub_pgs/events_past.html. riers to and Driving Forces for Cost-Effective Energy
Steinbuks, J., and Foster, V., 2010. When Do Firms Gener- Efficiency Investments. Energy Efficiency, 1(1), pp.
ate? Evidence on In-House Electricity Supply in Africa. 21–34.
Energy Economics, 32(3), pp. 505–514. ———, 2010. Energy Management Practices in Swedish
Stern, N., 2006. Stern Review on the Economics of Climate Energy-Intensive Industries. Journal of Cleaner Produc-
Change. London: HM Treasury. tion, 18(12), pp. 1125–1133.
Stern, P.C., 1986. Blind Spots in Policy Analysis: What Tonn, B., and Peretz, J.H., 2007. State-Level Benefits of
Economics Doesn’t Say about Energy Use. Journal of Energy Efficiency. Energy Policy, 35(7): pp. 3665–3674.
Policy Analysis and Management, 5(2), pp. 200–227. UN (United Nations), 2011. UN Commodity Trade Sta-
Sugiyama, T., and Ohshita, S., eds., 2006. Cooperative Cli- tistics (Comtrade) database. Available at <http://
mate: Energy Efficiency Action in East Asia. San Fran- comtrade.un.org>.
cisco, CA: University of San Francisco and Interna- UNCED (United Nations Conference on Environment
tional Institute for Sustainable Development. and Development), 1987. Our Common Future. Oxford,
Sunstein, C.R., 2007. Of Montreal and Kyoto: A Tale of UK: Oxford University Press.
Two Protocols. Harvard Environmental Law Review, UNCTAD (United Nations Conference on Trade and
31, pp. 1–65. Development), 2008. World Trade Report: Trade in a
Sustainable Energy Authority of Ireland, n.d. Welcome to Globalizing World. Geneva.
the Accelerated Capital Allowance (ACA). Available at UNDP (United Nations Development Programme), 2000.
<www.seai.ie/Your_Business/Accelerated_Capital_ UNDP World Energy Assessment Report 2000. New
Allowance/>. York. Available at <www.undp.org/energy/activities/
Swalm, R.O., 1966. Utility Theory: Insights into Risks Tak- wea/drafts-frame.html>.
ing. Harvard Business Review, 44, pp. 123–136. ———, 2008. UNDP Climate Change Country Profiles.
Syrquin, M., 2007. Kuznets and Pasinetti on the Study of Available at <http://country-profiles.geog.ox.ac.uk/>.
Structural Transformation: Never the Twain Shall ———, 2009. Capacity Development: A UNDP Prime. New
Meet? Structural Change and Economic Dynamics, York.
21(4), pp. 248–257. UNDESA (United Nations Department of Economic and
Taylor, R.P., Govindarajalu, C., Levin, J., Meyer, A.S., and Social Affairs), 2004. Central America: New Develop-
Ward, W.A., 2008. Financing Energy Efficiency: Lessons ment Credit Guarantee to Fund Clean Energy Invest-
from Brazil, China, India, and Beyond. Washington, ment. Division for Sustainable Development. New
DC: World Bank. York. Available at <www.un.org/esa/sustdev/csd/cases-
te Velde, D.W., 2010. Barriers to Investments in Industrial tudies/CAREC.pdf>.
Energy Efficiency. Background paper prepared for the UNECE (United Nations Economic Commission for
2011 Industrial Development Report. Vienna: United Europe), 2010. Financing Global Climate Change Miti-
Nations Industrial Development Organization. gation. Geneva.
235
UN-Energy, 2009. Policies and Measures to Realize Indus- UNFCCC (United Nations Framework Convention on
trial Energy Efficiency and Mitigate Climate Change. Climate Change), 2007a. Climate Change: Impacts,
New York. Available at <www.unido.org/fileadmin/ Vulnerabilities and Adaptation in Developing Countries.
References
References
ground paper prepared for the 2011 Industrial Develop- Nations Industrial Development Organization.
ment Report. Vienna. Verbeken, A., 2009. Low Carbon Energy Technology Trans-
———, 2011. Industrial Energy Efficiency Policies 2011 fer: A Review of GEF Experience. Dissertation. Sussex,
Database, Vienna. UK: University of Sussex, SPRU – Science and Tech-
UNIDO (United Nations Industrial Development Organ- nology Policy Research.
ization) and UNEP (United Nations Environment Vince, F., Aoustin, E., Bréant, P., and Marechal, F., 2008.
Programme), 2010. Taking Stock and Moving Forward: LCA tool for the Environmental Evaluation of Potable
The UNIDO-UNEP National Cleaner Production Cen- Water Production. Desalination, 222(1–3), pp. 37–56.
tres. Vienna. Available at <www.unido.org/fileadmin/ Vine, E., 2003. An International Survey of the Energy Ser-
user_media/Services/Environmental_Management/ vice Company (ESCO) Industry. Berkeley, CA: Law-
Contacts/Contacts/Taking%20stock%20and%20 rence Berkeley National Laboratory.
moving%20forward-November2010.pdf>. ———, 2005. An International Survey of the Energy Service
Upadhyaya, S., 2010. Compilation of Energy Statistics for Company Industry. Energy Policy, 33(5), pp. 691–704.
Economic Analysis. Vienna: United Nations Industrial Vine, E., and Sathaye, J., 1997. The Monitoring, Evaluation,
Development Organization. Reporting, and Verification of Climate Change Mitiga-
Urban, F., Benders, R.M.J., and H.C. Moll., 2007. Mod- tion Projects: Discussion of Issues and Methodologies and
eling Energy Systems for Developing Countries. Energy Review of Existing Protocols and Guidelines. LBNL-
Policy, 35 (6), pp. 3473–3482. 40316. Berkeley, CA: Lawrence Berkeley National
USAID (United States Agency for International Develop- Laboratory. Available at <http://eetd.lbl.gov/EA/ccm/
ment), 2008. Indonesia Energy Assessment. Washing- MonitoringMitigation.pdf>.
ton, DC. Violette, D., 2006. Demand-Side Management: Future Role
USDOE (United States Department of Energy), 2010. in Energy Markets. Presented at the 2007 Energy Futures
Industrial Technologies Program. Washington, DC. Speaker Series: Panel Discussion on Consumer Response
Available at <www1.eere.energy.gov/industry>. to High Energy Prices, Meetings of the National Energy
van Berkel, R., 2007a. Cleaner Production and Eco-Effi- Board, 21 April, Calgary, Canada. Available at <www.
ciency. In The International Handbook of Environ- neb-one.gc.ca/clf-nsi/rnrgynfmtn/nrgyrprt/nrgyftr/
mental Technology Management, eds. Marinova, D., cnslttnrnd1/pnldscssn-eng.html#s3_5>.
Annandale, D., and Phillimore, J. Cheltenham, UK: von Weizsäcker, E.U., 1989. Erdpolitik: Ökologische Realpoli-
Edward Elgar Publishing. tik an der Schwelle zum Jahrhundert der Umwelt. Darm-
———, 2007b. Eco-Efficiency in Primary Metals Produc- stadt, Germany: Wissenschaftliche Buchgesellschaft.
tion: Context, Perspectives and Methods. Resources Wachsmann, U., Wood, R., Lenzen, M., and Schaeffer, R.,
Conservation and Recycling, 51(3), pp. 511–540. 2009. Structural Decomposition of Energy Use in Brazil
van den Akker, 2008. Malaysian Industrial Energy Effi- from 1970 to 1996. Applied Energy, 86(4), pp. 578–587.
ciency Improvement Project (MIEEIP): Final Evalua- Wal-Mart, 2008. Wal-Mart Annual Report 2008. Ben-
tion. Kuala Lumpur: Government of Malaysia; New tonville, AR. Available at <http://walmartstores.com/
York: United Nations Development Programme; sites/AnnualReport/2008/>.
Washington, DC: Global Environment Facility. ———, 2010. Wal-Mart Annual Report 2010. Bentonville,
van den Bergh, J.C.J.M., 2010. Energy Conservation AR. Available at <http://walmartstores.com/sites/
More Effective with Rebound Policy. Barcelona, Spain: AnnualReport/2010/>.
237
Wang, Q., 2008. Basis and Challenges of the Industrial and Lighting. Available at <www.clasponline.org/files/
Transformation of China. Strategic Research on Low- Guidebook_2ndEdition.pdf>.
Carbon Industrialization. Beijing: China Council for Williams, R., 2008. Leadership and Management Prac-
tices in Industrial Energy Efficiency. Vienna: United
References
References
Worrell, E., van Berkel, R., Fengqi, Z., Menke, C., Schaef-
Case Studies on Successful Barrier Removal. WP fer, R., and Williams, R.O., 2001. Technology Transfer
15/2011. Vienna: United Nations Industrial Develop- of Energy Efficient Technologies in Industry: A Review
ment Organization. of Trends and Policy Issues. Energy Policy, 29(1), pp.
Worrell, E., Bernstein, L., Roy, J., Price, L., and Harnisch, J., 29–43.
2009. Industrial Energy Efficiency and Climate Change Xinhua News Agency, 2010. IBSA Countries Sign Agree-
Mitigation. Energy Efficiency, 2(2), pp. 109–123. ments on Scientific Areas. 16 April. Available at <www.
Worrell, E., and Biermans, G., 2005. Move Over! Stock bilaterals.org/spip.php?article17153>.
Turnover, Retrofit and Industrial Energy Efficiency. Yang, M., 2007. Raising China’s Electric Motor Efficiency.
Energy Policy, 33(7), pp. 949–962. Summer Study 2009. Stockholm: European Council
Worrell, E., Galitsky, C., Masanet, E., and Graus, W., 2008. for an Energy Efficient Economy.
Energy Efficiency Improvement and Cost Saving Oppor- Yanjiaa, W., and Chandler, W., 2009. The Chinese Nonfer-
tunities for the Glass Industry: An ENERGY STAR rous Metals Industry: Energy Use and CO2 emissions.
Guide for Energy and Plant Managers. Berkeley, CA: Energy Policy, 38(11), pp. 6475–6484.
Lawrence Berkeley National Laboratory, Environmen- Zeng, S., and Rong, F., 2010. Industrial Energy Efficiency in
tal Energy Technologies Division. Chinese Companies. Background paper prepared for the
Worrell, E., Laitner, J.A., Ruth, M., and Finman, H., 2003. 2011 Industrial Development Report. Vienna: United
Productivity Benefits of Industrial Energy Efficiency Nations Industrial Development Organization.
Measures. Energy, 28(11), pp. 1081–1098. Zhang, J., Baden-Fuller, C., and Mangematin, V., 2007.
Worrell, E., and Price, L., 2000. Barriers and Opportuni- Technological Knowledge Base, R&D Organization
ties: A Review of Selected Successful Energy-Efficiency Structure and Alliance Formation: Evidence from the
Programs. Berkeley, CA: Lawrence Berkeley National Biopharmaceutical Industry. Research Policy, 36(4),
Laboratory. pp. 515–528.
239
Printed in Austria
V.11-86188—October 2011—3,000
“Decoupling economic growth “The Fourth Assessment Report of “Doubling energy efficiency’s
from resource use is a key the Intergovernmental Panel on improvement rate by 2030 is one
opportunity for realizing a Climate Change (IPCC) highlighted of three goals of United Nations
green economy and a sustainable the industrial sector as a key Secretary-General Ban Ki-moon’s
century. UNIDO’s Industrial area for mitigation of emissions Sustainable Energy for All initiative.
Development Report 2011, issued of greenhouse gases. UNIDO’s Energy end-use efficiency in the
on the eve of the United Nations Industrial Development Report 2011 industrial sector must be central
climate convention meeting and provides valuable analysis on to achieving this goal, guided by
seven months before the Rio+20 industrial energy efficiency trends innovative and targeted policies
conference, spotlights the options and assesses policy tools which and measures. UNIDO’s Industrial
and pathways for realizing these are available for bringing about Development Report 2011 is a key
crucial goals.” efficiency improvements. The document to help policy-makers
Report is an extremely valuable foster industrial energy efficiency
Achim Steiner, publication for anyone dealing improvement and thereby achieve
Executive Director, UNEP with industrial energy issues and multiple environmental, economic
mitigation of the emissions of and social co-benefits.”
greenhouse gases.”
Professor Nebojsa Nakicenovic,
R K Pachauri, Ph.D, Deputy Director, IIASA
Director-General, TERI
Chairman, IPCC