Quantifying the Co-benefits of Energy-Efficiency Programs: A Case Study of the Cement Industry in Shandong Province, China

China's cement industry produced 1,868 million metric tonnes (Mt) of cement in 2010, accounting for more than half of the world's total cement production (MIIT 2011). Consistent with the Chinese cement industry's large production volume, total CO₂ emissions from the industry are very high, as are associated air pollutant emissions, including sulfur dioxide (SO₂), nitrogen oxides (NO_X), carbon monoxide (CO), and particulate matter (PM). These emissions cause significant regional and global environmental problems (Lei et al. 2011). The cement industry is the largest source of PM emissions in China, accounting for 40 percent of PM emissions from all industrial sources and 27 percent of total national PM emissions (Lei et al. 2011).

Chinese government policies often focus on reducing energy use, which, in turn, helps to reduce greenhouse gas (GHG) emissions. Other important co-benefits of energy-efficiency policies and programs are reduced harm to human health through reduction in air pollutant emissions, reduced corrosion, and reduction in crop losses caused by surface ozone and regional haze (Aunan et al. 2004). Cost-benefit analysis and energy modeling of the effects of efficiency measures often takes into account only the energy saved, however, and co-benefits of energy efficiency policies and programs, such as reduced harm to human health, are often not included in an impact analysis. There are various reasons for this, including lack of reliable data, uncertainties in co-benefit analysis, and lack of resources. However, it is important for policy makers to understand the overall societal costs and benefits of energy-efficiency technologies, so they can design effective policies with the broader benefits.

This report studies several collateral health and environmental benefits (co-benefits) of energy-saving measures in the cement industry and shows that including co-benefits can significantly affect the cost effectiveness of some energy-efficiency measures. We use a modified cost of conserved energy (CCE) calculation to determine the monetary value of the co-benefits of reduced damage to human health that results from reduced air pollutant emissions.

In 2009, the World Bank's Asia Sustainable and Alternative Energy Unit initiated a study to analyze untapped energy-efficiency opportunities in NSP kiln plants in Shandong Province, China. The study, led by the Lawrence Berkeley National Laboratory (LBNL), evaluated 16 representative cement plants in Shandong Province to identify specific energy-efficiency technology options and evaluate their energy savings and the associated costs for these plants (Price et al. 2009, Hasanbeigi et al. 2010).

The current report aims to quantify the health co-benefits of implementing the energy-efficiency measures analyzed in the prior study of 16 cement plants in Shandong Province. Health co-benefits result from the reduction in air pollutant emissions that in turn results from implementation of the energy-efficiency measures.

For a review of previous research on quantifying the co-benefits of energy-efficiency programs, we refer you to Williams et al. (2012), which contains the results of a literature review performed at the outset of the current study.

This report begins with a brief introduction to the cement industry in China and in Shandong Province. Next, we describe the methodology used in this study, including our data collection efforts, calculation of CCE, air quality modeling, calculation of health benefits, and sensitivity analysis. Finally, we present our results, which include the energy saved by the efficiency measures studied and the associated air pollution emissions reductions, the reduced health impacts resulting from fuel-saving measures, and the CCE including health benefits. We also present an uncertainty and sensitivity analysis.